War of Talent: A paradoxical situation
Date: Monday , July 31, 2006
Just a few weeks ago I heard the CEO of one of the FMCG majors in India comment and was bemused to hear him talk about the war for talent that is seizing his industry. He spoke about how companies were adopting all possible tricks in the book to retain their employees and recruit top talent from competitors. I was concerned, as clearly the challenge of building human capital that the IT industry has been facing for some years has now become a wider cross-industry debate needing attention from the highest office in an enterprise.
Talent management is now the single most important issue right now bothering the CEOs and Business Leads across sectors. In a rapidly growing economy where the domestic market is looking upbeat, exports have been rising, outsourcing deals are coming in at a brisk pace and companies across the spectrum are making investments and planning their respective expansions, finding talent that can work and accomplish results within this business context has become the most worrisome issue for corporate India. In fact, in a recent McKinsey survey, business executives in India ranked scarcity of quality talent as the biggest constraint for growth, much higher than infrastructure and regulatory issues.
It is ironical that India, the world’s second most populous country, with 375,000 engineers and close to a million graduates and 28 million unemployed workers, is now fretting over hiring and talent scarcity.
The biggest crunch, it is believed, is being felt in the rapidly growing IT industry. The reasons are understandable. Almost all IT companies in India (be it Indian companies or multinationals that have set up operations here) have significant hiring plans and will get only larger in future. IT industry is expected to hire 300,000 workers this year.
What is accentuating the war for talent is that this sizzling growth is coming at a time when the IT industry is facing competition for talent from other sectors of the Indian economy in an intense manner. For very long, with other sectors of the economy sluggish, IT companies remained the most preferred sector for fresh graduates across campuses. Take for example the two emerging and growing sectors like automobile and retail, which till about three years ago weren’t on the growth radar. Society of Automobile Manufacturers estimates that the industry will invest $6 billion and create over 6 million direct and indirect jobs in the next two-three years. Retail sector, similarly, is expected to invest $18 billion in the next five years creating 2.5 million jobs. With other sectors of the economy growing, globalizing and recruiting aggressively, the competition for key talent has only become more intense.
There are other reasons why IT industry is facing an accelerating war for talent. For very long, they were among the best paymasters, offering the best work environment and opportunities to work globally for young graduates. With staid and old world manufacturing sector focusing on downsizing, most services sectors - still at a nascent stage - there was little competition. That has changed. Other sectors of the economy including automobile, consumer durables, and telecom are willing to pay and provide a world-class environment even as they hire in big numbers. Yet, IT industry continues to be one of the biggest recruiters - out of the 370,000 engineers passing out of colleges this year, it is believed that that around 200,000 will be employable and IT industry would be hiring close to 140,000.
This bring to bear another key issue that the IT industry and corporate India at large is grappling with is - employability. According to industry estimates only 25 percent of the Indian engineering graduates are directly employable by the IT industry and only 10 percent of close to 1 million graduates are employable by the BPO industry. Hence despite so many graduates and engineers, challenges related to employability are growing as well. Nasscom Mckinsey report forecasts that if things continue the way they are the industry will fall short of 500,000 workers by 2010.
The IT industry, being one of the progressive industries, is tackling the issue from various fronts.
Industry academia partnership is high on agenda. Companies are truly engaging with colleges located not just in the vicinity of metros but also in far flung areas, in training the faculty members, chalking out course content, and teaching as well. Some companies are working closely with the colleges to introduce specialized course modules that the industry may be looking for.
Focus on training – In the IT industry, employees have realized that keeping abreast of the latest in the industry is imperative to success. Companies are addressing this need of the employee by setting up strong training infrastructure. Most big companies - Indian as well as multinational - are setting up elaborate and comprehensive training programs and most of their employees undergo specified learning modules every year.
Widening the talent pool – On the back of strong training programs, companies are casting their net wider by hiring non-engineers like BSc graduates and putting them through training programs that enable them to take on IT roles.
Another idea, which is starting to germinate, is job rotation within the organization. One of the primary drivers to engage people is to ensure they have no ‘white space’ on their resumes and are involved in cutting edge work. To curb attrition, companies are exploring on-the-job training and are open to cross functional shifts within the organization to retain and grow their employees – from BPO to consulting to IT – companies of all shades are experimenting with it.
Better demand management - Amid all this, some companies are taking employee forecasting as seriously as they do business forecasting. Companies are crystal gazing their business deals and mapping skill sets, specialization and number of people they are going to need in future. Based on these forecasts, recruitment and hiring plans are worked out well in advance, at times even four quarters ahead. Many companies, flush with business orders, are open to keeping benched employees so that they can ramp up easily and deliver.
Going forward for India’s IT industry good economic growth will bring cheer. But it will also mean significant opportunities for an industry to grow talent that is its biggest asset.
Everyday as I come into work the conundrum we need to solve as HR professionals is the paradoxical situation that the IT industry is in and how the triumph in this war for talent will depend on how successfully we, collectively as an Industry, are able to find innovative solutions.