Cognizant plans job cuts: Mid-level employees to be worst hit

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US-listed IT Giant Cognizant recently indicated that its headcount growth has surpassed its revenue growth in the past two quarters; hence the company is planning job cuts as a part of its realignment program.

Cognizant‘s job cuts will be focused on the middle levels, as the US-listed IT services company tries to cut costs and restore growth. Analysts lay the blame for its problems at the feet of activist hedge fund Elliott Management.

CEO Brian Humphries, April 1, said Cognizant would strive to bring the cost of delivery down through “pyramid actions”. This would make the higher-level executives more accountable for revenue and profitability as well as keep a stricter control over pay increases and bonuses.

Cognizant slashed its 2019 growth target to 3.9-4.9% in constant currency from 7.0-9.0%. In a filing with the US Securities and Exchange Commission, the company said it had factored in disruption as a result of changes made by Humphries.

“Potential disruption of our operations related to our new CEO transition, including any disruption from the diversion of efforts of the executive management team and possible departures of senior personnel,” the company said describing factors that would impact its business in 2019.

Cognizant’s head of digital Gajen Kandiah has already left the company and has been replaced by its former chief of strategy Malcolm Frank. Prasad Chintamaneni, President of Global Industries and Consulting, is now heading its banking business on an interim basis.

“Humphries is a professional manager that may be able stabilize Cognizant but the game has changed as the US economy grows. While the politics take place, his top folks are leaving, and the rest of the market will be cherry picking talent just as you need more and better talent,” Ray Wang, Founder of Constellation Research, said.

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