Wipro initiates mid-level staff downsizing amidst organizational challenges

Excess staff at the middle level of its organisation and slow growth have prompted Wipro to start downsizing its mid-level staff. Analysts believe this will help the firm improve its margins, even as the process will see hundreds losing their jobs.

Wipro, the country’s fourth largest IT firm, this week said aligning its business and talent to the changing market environment is a critical part of its strategy to build a resilient organisation.

About 43.2% of Wipro’s employees are in the 30-50 age group. In contrast, Infosys has about 38% of employees in the same bracket. IT companies leverage their pyramids as one of the main tools to get higher margins. For the most optimised pyramid, the base — employees in the category of below 30 years — needs to be widened.

About 43.2% of Wipro’s employees are in the 30-50 age group. In contrast, Infosys has about 38% of employees in the same bracket. IT companies leverage their pyramids as one of the main tools to get higher margins. For the most optimised pyramid, the base — employees in the category of below 30 years — needs to be widened.

As per analysts, Wipro which used to have an operating margin of more than 20% before FY17, had 60% of its employees below 30 years at the time. Today that group has shrunk to 53%. Mid-rung employees were at about 35% during FY17.

Pareekh Jain, founder, Pareekh Consulting, said, “Growth has been slow and fresher hiring in Wipro in last three years was less compared to other companies. Wipro derived growth more inorganically because of many acquisitions like Capco, Edgile and other small companies. Thus, on the one hand, while the pyramid base didn’t grow, acquisitions fattened the middle level of its pyramid.”

He said acquisitions also increased its onsite headcount, which mostly comprised of experienced employees. This is one of the reasons for margin pressure. According to analysts, today Infosys has the highest percentage of employees in the under-30 bracket at 60% and thus has the most optimal ratio relative to its peers.

Aparna Iyer, CFO, Wipro, said during a recent earnings call, “Our margins have remained resilient as we executed on three counts: one, maximising our revenue performance; two, realising savings from structural improvements of pyramids and fixed price productivity; and three, reducing discretionary spend.” Financial Express