Case Study: Consequences of Favoritism in HR Practices in Indian Corporates

 

Case Study: Consequences of Favoritism in HR Practices in Indian Corporates

 

Abstract

This case study explores incidents where favoritism in HR practices led to organizational disruptions in major Indian companies such as Wipro, ICICI Bank, Cognizant, Tata Motors, and Jet Airways. Through real-world examples, it highlights the consequences of biased HR decisions, organizational responses, and lessons for management. The case also provides teaching notes, discussion questions, and actionable recommendations for students and professionals in HR and management studies.

 

Introduction

Favoritism in HR practices undermines trust, disrupts organizational harmony, and can even lead to legal challenges. India, with its dynamic corporate landscape, has witnessed several cases where biased HR decisions caused significant disruptions.. Favoritism in HR practices undermines the core values of fairness and meritocracy, leading to diminished employee morale and potential legal ramifications. In India's fast-evolving corporate ecosystem, where competition and efficiency are paramount, such practices can have severe implications. From unjust promotions to recruitment biases, favoritism can disrupt workplace dynamics, especially when HR, the custodian of organizational ethics, is involved. This study delves into some notable examples, examines the organizational responses, and offers insights for preventing similar issues in the future

 

Case Studies

Ø  Wipro (2018): Allegations of Favoritism in Promotions

Ø  Facts:
Harish Tiwari, a senior HR executive at Wipro, was accused of unfairly favoring certain employees for promotions and salary hikes. This favoritism reportedly led to low morale among other employees and complaints of bias.

Ø  Outcome:
Wipro conducted an internal investigation and subsequently removed Tiwari. To prevent recurrence, Wipro implemented an AI-driven performance appraisal system and institutionalized employee satisfaction surveys.

 

Ø  ICICI Bank (2018): Nepotism Allegations Against Chanda Kochhar

Ø  Facts:
Although Chanda Kochhar, then CEO, was involved in broader nepotism and ethical violation allegations, HR practices under her tenure also faced scrutiny. Promotions and key positions were allegedly influenced by personal connections.

Ø  Outcome:
Kochhar stepped down following the controversy. ICICI Bank revamped its HR policies and formed an independent ethics committee to ensure fairness and transparency in promotions and hiring practices.

 

Ø  Cognizant (2019): Biased Retention Practices

Ø  Facts:
Rajeev Mehta, President of Cognizant at the time, faced allegations that HR shielded underperforming but personally connected employees during layoffs. This resulted in inefficiency and dissatisfaction among the remaining workforce.

Ø  Outcome:
Cognizant introduced third-party audits of HR practices and enforced transparent evaluation criteria for all HR decisions.

 

Ø  Tata Motors (2020): Disparities in Employee Recognition

Ø  Facts:
Suresh Dutt Tripathi, VP of HR at Tata Motors, faced criticism for favoring certain employees in recognition programs. High-performing employees felt ignored, resulting in complaints and reduced motivation.

Ø  Outcome:
Tata Motors revamped its employee reward system, focusing on data-driven metrics and external validation for HR practices.

 

Ø  Jet Airways (2019): Favoritism Amid Restructuring

Ø  Facts:
During Jet Airways’ financial crisis, HR decisions reportedly retained less productive employees with connections to HR while laying off more skilled workers. This favoritism exacerbated employee dissatisfaction and operational inefficiency.

Ø  Outcome:
The company established an independent HR oversight board to ensure unbiased restructuring in the future.

 

Ø  Flipkart (2020): Recruitment Biases Under Sameer Nigam

Ø  Facts:
Sameer Nigam, Flipkart’s HR head, faced allegations of hiring based on personal recommendations. This practice sidelined external candidates and caused internal unrest among employees.

Ø  Outcome:
Flipkart introduced mandatory external validation for key hiring decisions and launched a transparent recruitment policy.

Ø  Tata Consultancy Services (TCS) – Disparities in Onsite Opportunities (2018)

Ø  Facts:
In 2018, TCS employees filed grievances alleging favoritism in selecting candidates for onsite opportunities abroad. HR managers were accused of giving preferential treatment to individuals with personal or regional connections. This created regional biases within the workforce.

Ø  Outcome:

Ø  TCS introduced a points-based system for selecting candidates for onsite roles, factoring in merit, performance, and tenure.

Ø  The system was regularly audited to ensure fairness.

 

Ø  Reliance Retail (2021) – Favoritism in Retail Store Management

Ø  Facts:
An HR manager in Reliance Retail’s Bangalore operations faced allegations of unfairly promoting store managers who shared similar cultural backgrounds, leading to a regional imbalance in management. This practice caused discontent among employees from other regions, impacting store efficiency.

Ø  Outcome:

Ø  Reliance conducted an internal investigation, leading to the dismissal of the HR manager.

Ø  The company established a cultural sensitivity training program for its HR personnel.

Ø  Jet Airways (2019) – Layoffs During Crisis

Ø  Additional Facts:
Jet Airways’ financial crisis exposed favoritism in layoffs. Reports revealed that certain employees retained their positions despite low performance metrics due to personal connections with HR leaders, while others were let go despite better records.

Ø  Outcome:

Ø  Jet Airways set up an HR oversight committee, but the long-term impact of these biased decisions contributed to employee distrust and operational inefficiencies, eventually worsening the airline’s collapse.

 

Ø  Paytm (2020) – Bias in Appraisals

Ø  Facts:
An HR executive at Paytm faced internal backlash for manipulating performance appraisals to favor employees from their alma mater. This led to disputes among teams and damaged the company’s appraisal credibility.

Ø  Outcome:

Ø  Paytm introduced a multi-layered appraisal review system with cross-department oversight.

Ø  A significant corporate incident in 2023-24 involved Tata Consultancy Services (TCS) uncovering a bribery scandal within its Resource Management Group. The investigation revealed that several employees and vendors were involved in unethical practices, where bribes were allegedly exchanged for job placements. As a result, TCS terminated 16 employees and reassigned three others. Additionally, six vendor entities were blacklisted for their involvement. TCS emphasized compliance with its Code of Conduct and initiated measures like stricter analytics in supplier management and periodic declarations from vendors to ensure ethical practices moving forward​

Ø  This case highlights the critical role of ethics in corporate HR practices. While no key managerial staff was directly implicated, the incident underscores the importance of regular audits, ethical training, and transparency in recruitment and vendor relations.

Ø  Solutions and Preventative Measures

Ø  Enhanced Audit Mechanisms: Regular internal and external audits to identify potential breaches in HR practices.

Ø  Transparent Vendor Policies: Implementation of stricter compliance frameworks and certifications for vendors.

Ø  Ethical Training Programs: Comprehensive training for HR staff on corporate ethics and anti-bribery measures.

Ø  Anonymous Reporting Channels: Secure systems for employees to report unethical practices without fear of retaliation

Ø  A notable corporate example of favoritism in 2024 involves several Indian IT giants, such as Infosys, Wipro, and HCL Technologies. These companies have been criticized for salary disparities between top executives and entry-level employees, as well as issues like delayed onboarding of new recruits. For instance, at Wipro, a CEO’s salary was over 2,000 times higher than that of a fresher. Additionally, many new recruits experienced delays in joining, creating financial hardships for individuals who were depending on the promised jobs to repay education loans​

Ø  Solutions to Address Favoritism and Inequality:

Ø  Transparent Salary Policies: Corporations should standardize salary structures and ensure equitable growth opportunities. Pay scales should be reviewed regularly to minimize disparity.

Ø  Open Communication Channels: Implement anonymous feedback mechanisms to help employees report favoritism or bias without fear of retaliation.

Ø  Training Managers: Conduct regular training programs for leaders to recognize and mitigate unconscious bias in promotions, appraisals, and team dynamics.

Ø  Fair Investigations: Establish clear guidelines to investigate complaints of favoritism thoroughly and impartially. Such measures should include evidence-based assessments to build trust.

Ø  Hybrid Work Benefits: Flexibility in work modes, such as hybrid setups, can improve retention and employee satisfaction. Studies show hybrid work helps reduce attrition​

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This approach fosters a fairer, more inclusive environment, reducing negative workplace dynamics like high attrition and low morale.

Key Lessons Learned

1. Transparency is Crucial:
   Using data-driven and AI-supported systems can eliminate biases in promotions and hiring.
2. Accountability Mechanisms:
   Forming independent ethics committees or oversight boards ensures that HR decisions are fair and aligned with organizational goals.
3. Employee Grievance Systems:
   Establishing robust grievance mechanisms allows employees to report favoritism without fear of retaliation.
4. Third-Party Audits:
   Regular audits of HR practices help identify and rectify biases.

 

Teaching Notes

Learning Objectives

1. Understand the consequences of favoritism in HR practices.
2. Explore mechanisms to ensure transparency and fairness in organizational policies.
3. Analyze real-world examples to derive actionable HR strategies.

Discussion Questions

1. How does favoritism in HR practices impact organizational culture and employee morale?
2. Analyze how AI and data-driven tools can prevent biases in HR decisions.
3. Discuss the role of leadership in setting ethical standards for HR.
4. Evaluate the steps taken by Wipro, ICICI Bank, Cognizant, Tata Motors, Jet Airways, and Flipkart to address favoritism. Were they sufficient?

Classroom Activity

• Divide students into groups and assign a company from the case study. Each group must propose a comprehensive HR policy to address favoritism based on the company’s context.

 

Actionable Recommendations

1. Adopt Technology:
   Use AI-driven performance appraisal and recruitment systems to minimize human bias.
2. Regular Training:
   Train HR professionals on ethics and impartial decision-making.
3. Diversity in Committees:
   Ensure diverse HR and managerial committees to oversee promotions, hiring, and terminations.
4. Feedback Loops:
   Regularly collect employee feedback to identify potential biases or dissatisfaction early.

Actionable Recommendations

1. Leverage Data-Driven Decisions:
   Companies should adopt data analytics to evaluate employee performance and ensure fairness in promotions and appraisals.
2. Independent Audits:
   Regular external audits of HR decisions can identify patterns of bias early and recommend corrective measures.
3. Diversity and Inclusion Training:
   Train HR personnel to recognize and overcome unconscious biases that may influence decision-making.
4. Whistleblower Policies:
   Encourage employees to report favoritism anonymously without fear of retaliation.
5. Transparent Criteria:
   Clearly define and communicate the criteria for promotions, appraisals, and layoffs to employees.

 

Sources of Information

1. News Articles:
• The Economic Times
• Business Standard
• Forbes India
2. Company Reports:
• Annual reports and public disclosures from Infosys, ICICI Bank, Wipro, Tata Motors, and Jet Airways.
3. Industry Publications:
• Insights from Harvard Business Review and SHRM India on favoritism and HR ethics.
4. Employee Testimonies:
• Published interviews and anonymous reports in industry forums.
5. Technology Reports:
• Analysis of AI-driven HR tools in TechCrunch and Inc. India.

 

Conclusion

Favoritism in HR practices is a systemic issue that impacts organizational trust, employee morale, and overall productivity. Indian companies must recognize the importance of fair and transparent HR policies, leveraging technology, training, and oversight to mitigate bias. This case study highlights the consequences of favoritism and offers a roadmap for building ethical and equitable workplaces.