EVA and Compensation Management System at Tata Consultancy Services

The mission statement of HR division at TCS states, "The role of HR is to provide the context for energizing and developing people to play effective roles in ensuring that TCS becomes one of the top global consulting firms. Towards achieving this we will identify, develop, facilitate, and measure the human and technological processes in the pursuit of excellence. We will foster the values of the TATA group." (Refer Exhibit II for Vision, Mission and Values of TCS).

In TCS, the HR division acted as a facilitator. The company had institutionalized all HR processes. TCS firmly believed that recruiting the right people was the secret of success of any organization especially when the supply of talent was much below the demand...

EVA measured operating and financial performance of the organization and the compensation of all employees was linked to it. TCS went in for the EVA as during that time, the company was not a public limited company and hence could not have a stock option plan. There were several people who played an important role in the success of the organization, who needed to be recognized. As there was no wealth sharing mechanism in place, EVA was adopted to focus on continuous improvement rather than short term goals and also to motivate employees. Commenting on this, S Mahalingam (Mahalingam), CFO and Head Global Finance for TCS said, "We wanted to construct a defined incentive system, which would reward on the basis of profitability...