Thursday, May 24, 2007
IT-BPO firms beat wage inflation blues
| Despite rising salaries, the country can sustain the cost advantage for another 10-15 years. |
| The domestic IT-BPO firms have devised many strategies to counter the 12-15 per cent annual rise in wages. |
| Apart from hiring freshers and students with non-engineering backgrounds, they are moving to tier-II and tier-III cities, increasing billing and employee utilisation rates, besides improving the business mix to increase productivity to beat the heat of the rising salaries. |
| In fact, analysts and industry players say that with these strategies, coupled with an indexed wage differential, the IT-BPO firms should be able to retain their competitive edge in outsourcing for at least another 10-15 years. |
| Wages comprise around 70-75 per cent of the total expenses of an outsourcing firm. |
| Wages are increasing not only in India, but across all the low-cost offshore markets, including Romania, Poland, China, Vietnam and the Philippines. At a macroeconomic level, despite a higher wage inflation in low-cost nations, the indexed wage differential would still be considerably lower due to the low-base wages in such countries. |
| “Although there is an increase in wages at around 15-20 per cent a year, it is unlikely to sustain the same rate for more than 3-4 years. Even if the hike continues, India still has the cost advantage for 15 years over the US and the UK (our largest markets), where wages are increasing at the rate of 4 per cent,” asserts Pradeep Udhas, global partner-in-charge, sourcing advisory, KPMG. |
| “The wage inflation in the country is mostly seen at the middle- and the higher-levels and not at the entry level (fresh graduates). It is these graduates that form the bulk of the engine for IT and BPO work and hence the final impact on firms is much lesser than the oft-quoted 15 per cent number. It will be at least 10 years before India loses its cost advantage,” corroborates Siddharth A Pai, partner, TPI. He adds: “There will continue to be margin pressures, but that is in the nature of this business.” |
| V Balakrishnan, CFO, Infosys Technologies, notes the offshore wage increase is not a new phenomenon but has been happening for quite sometime now. “The competitive position of countries such as India will remain for many more years. Most large IT players are improving their business mix by becoming end-to-end players and also using a lot of tools to improve productivity.” |
| Though most industry players agreed to this line of thinking, they cautioned the Indian firms against getting complacent. “If we are not able to offset the rising wage inflation through productivity gains and evaluate smarter ways of addressing the issue, the impact will be significant,” says Prateek Kumar, executive vice-president, HR, Wipro. |
| Companies can look to make larger use of fresher talent and hire alternative talent pool from non-engineering backgrounds, including talent from smaller cities. It’s already happening. For FY07, Tata Consultancy Services (TCS) did around 30 per cent of the campus hiring from tier-I cities, while close to 15-20 per cent from tier-II and the rest from tier-III cities. Satyam also plans to recruit close to 15,000 employees this financial year with over 45 per cent of them being entry-level employees. Tech Mahindra is planning to recruit nearly 90 per cent of its new additions (around 10,000) from the fresher levels. |
| Achutan Nair, vice-president (resourcing), Wipro, says the company is planning to recruit about 7,000 non-engineering graduates in the ongoing financial year. The company, which targeted to add about 20,000 personnel in the current financial year, says just 5 per cent of the new additions will be people with 10 years of experience. |
| Moving to smaller cities also reduces infrastructure cost. “Infosys, however, feels that moving to smaller cities is not the answer to negate the effect of wage inflation since we pay similar salaries to all our employees across India,” said Balakrishnan. |
| “From operations perspective, service providers are industrialising few services that would reduce human intervention and thereby save cost. This is evidently seen among BPO providers too. Automation leads to resources made available for other high margin businesses,” adds S Sabyasachi, senior director, neoIT. Prateek Kumar of Wipro says: “One of the ways to address wage inflation is to use tools and technique to work smarter with lesser number of people and deliver the work in shorter period of time.” |
Wednesday, May 23, 2007
Excel at work, and see the world
| TRENDS: Firms are rewarding top performers with offsites abroad. |
| 'Celebration parties' are now passé. Top performers are nowadays rewarded with what's known as 'international offsite' a conference abroad, with ample sight-seeing and entertainment thrown in. |
| Mixing work with pleasure has caught the fancy of the Indian corporate world, particularly the Indian operations of global firms, as a way of rewarding their employees. It helps companies ensure bonding among employees. Many companies also see such meetings as retention tools. |
| A few weeks ago, Adecco PeopleOne took as many as 100 permanent employees fully 20 per cent of its staff strength to Bangkok for a conference, later visiting Pattaya, the popular tourist destination off Thailand. |
| The company, the world leader in human resource solutions, sees it as worth the effort. "It is only part of the overall framework of the organisation," says Ajit Isaac, Managing Director, Adecco-India and Middle East. |
| Those who showed promise of good leadership qualities and performed well above the average, and who the firm cannot afford to lose, were an automatic choice for the offsites, he said. Apart from helping team building, it is also seen as being part of the company's development process. |
| HTMT Global Solutions, the BPO arm of the Hinduja Group, is one firm that is planning international offsites for its Indian employees (it has already had them in India for its employees from elsewhere in the world). HTMT, which has delivery centres in the US, Canada, Philippines, India and Mauritius, had conducted an offsite in India for its employees from India and abroad. |
| "We have had proposals for holding an international offsite for the Indian employees. We have operations in Philippines and Mauritius, and we could have an international offsite for Indian employees there," says Malini Deekshit, Vice-President, HR at HTMT Global. |
| It is a break from the routine, and allows senior managers to interact with employees in an informal setting and hence to understand them and their needs better something that could have been difficult in the hurly-burly of the office. "It is a means to keep the good performers motivated and to retain talent too," adds Deekshit. |
| Rewarding high-performing employees is usually the main objective of such an effort, though. Companies find that it is more cost-effective and time-saving than recruiting new people and training them. Finally, it is an effort to enable employees to understand the objectives of the company in a relaxed environment, said a HR consultant. |
Vision must be aligned with biz goals
| Developing a people function strategy and running specific HR sub-functions are two different activities that require different approaches. |
| Q. I am a 37-year-old senior manager of a newly set up bank. I have been brought in with the mandate of developing a forward looking and robust HR function for the organisation, including building the HR team. While I have more than 10 years of solid experience in HR operations and team management, I can’t seem to get a grip on how to go about defining the HR function for my organisation. How do I go about setting a direction and defining the specific focus areas for a new HR function? |
| A. This is a commonly faced situation for managers who are transitioning from an operational role to a leadership role in organisations. A good starting point is to realise that developing a people function strategy and running specific HR sub-functions are two different activities which require different approaches. While senior business managers are expected to develop a vision for organisations to build the business strategy, the HR vision stays a mere document. It is important to begin with a blue-sky vision of how the HR function will address the ‘employee lifecycle’. The key focus is on defining a vision which is achievable, and supports in making the business idea successful. |
| HR managers also need to take precautions to ensure that their vision is aligned to specific business objectives; that it is not defined on the basis of an HR leader’s overzealous attempt to have best practices learnt in previous experiences applied to the ‘new organisation’. |
| To be able to build an HR infrastructure which is completely focused on business success, HR managers need to ensure focus on some key rules from the initial stages: |
| Lastly, the HR function needs to develop specific programmes to create a definitive culture in the organisation at the time of starting up. That is the best time to ensure desired behaviours are institutionalised before these can be cascaded over a larger workforce. |
How not to let culture issues defeat mergers
| Business Standard - 23rd May 2007 BEST PRACTICE: Eight months after acquiring the semi-express carrier Speedage, mail company TNT India is still integrating the two entities. |
| It was in September 2006 that global express logistics major TNT, one of the world’s leading business to business express delivery companies, acquired the Indian semi-express carrier, Speedage. |
| This acquisition added 514 depots, 26 transit hubs, 730 vehicles and 1,195 employees (and about 1,300 sub-contracted staff) to TNT’s existing resources. The current staff strength of TNT in India is 2,500 people. |
| Eight months later, Abhik Mitra, managing director of TNT India, feels that they have reached a comfortable position as far as transformation and integration issues are concerned. At the time of the takeover the TNT management was clear that it would not implement its own processes from the very next day. |
| Being in a service industry, explains Mitra, the company did not want to walk in and paint everything in its own colours; this may have alienated both employees and customers. |
| Says Mitra: “Our immediate concern is not to change Speedage to TNT but to allay the doubts of our people.” After the acquisition, TNT has charted out a detailed plan on how to fully integrate the domestic player with the multinational. |
| The real work, adds Mitra, started once the deal was sealed. Speedage and all its 1,300 employees were put through to a phased transformation and integration process. |
| The first few months were all about communication and sharing. The TNT culture and values programme was shared with the Speedage employees, as were the short-term goals of the merger and the long-term ambitions from it. |
| The second and third months were dedicated to making the changes within the organisation and sharing the TNT value system with them. Then began the cultural training, continuing until the fifth month. |
| Certain worldwide practices of TNT— such as the tele-answering policy where the phone has to be picked up within three rings, how to answer the phone, the importance of information sharing — was shared with all the employees. |
| In the eight-month process, communication is what Mitra identifies as a major hurdle. “Understanding the expectations and needs of Speedage employees and coming up with communication that is relevant to them was our biggest challenge.” |
| Allaying fears and doubts of the employees was a daily chore as the process of transformation was underway. Deriving synergy between the two companies was no mean task. TNT began by introducing Speedage to the processes of the multinational. |
| Speedage has a young culture that was not process or structure driven. “We had to change the structure and establish clear accountability and reporting time.” It boiled down to how quickly TNT processes could be inculcated. |
| Performance, policies and process-driven standardisation was brought into the core functions of sales, customer care and operations. As a result, on-time arrival and departure of vehicles at the hubs has recorded more than 70 per cent improvement. |
| TNT has earmarked Rs 18 crore for the transformation process and invested about 5 per cent of the total amount on IT, training, infrastructure and customer services. TNT also plans to invest another Rs 5 to 10 million on Speedage before the integration process is complete. |
| Extensive communication exercises like an open house with the MD and the CEO were carried out with Speedage employees. These still happen regularly. Employees were free to ask questions and clear doubts. |
| “Interestingly, one of the biggest fears that came up was “would I need to know English to carry on with TNT”, Mitra points out. TNT was questioned at all points in the transformation process. |
| Though Mitra agrees that the long-term goal is to brand Speedage as TNT, the company has been judicious in identifying and retaining some of the best practices of Speedage, such as customer-retention and IT functionality, which was found to be very high. |
| He says he has seen attitudes change in Speedage: “While earlier the employees would fear downsizing or question their abilities to work in a MNC, the concerns have now changed to how soon they can become TNT.” Mitra is betting on early next year. |
Monday, May 21, 2007
The enigma of employee relationship
The Hindu - 15th May 07
Technology and capital can be accessed and acquired but the workforce needs to be nurtured as it is the most critical asset for an organisation.
Traditional factors of competitiveness such as technology, product features, and distribution network can be — and often are — duplicated by the competition in business. While such factors are imperative to become a market player, they do not guarantee leadership in the industry. Leadership originates from such organisational strategies as speed, responsiveness, agility, learning capacity, and employee competence.
Successful organisations know how to turn strategy into action, first and fast. They know how to manage processes intelligently and efficiently. They know how to optimise employee contribution and commitment. They know how to create conditions required for accomplishing a seamless change. To achieve the above objectives, they know how to maintain a holistic employee relationship.
It is people who make the difference between an ordinary and an extraordinary company. The workforce is the most vital and critical asset. Technology and capital can be accessed and acquired from a range of players around the world. But the real and sustainable competitive edge has to come ultimately from the manner in which capable and motivated employees apply such resources to work.
The key to creating a capable and inspired workforce is to develop a harmonious band of Human Resource Management systems in the organisation. A sound and profound employee relationship strategy is the answer to achieving an appropriate climate for human resource management. Discussing about and writing on this subject, some management thinkers stress the significance of the "psychological contract".
This term denotes the aspirations and expectations that employers and employees entertain about each other. It is what one segment of human resource in the organisation looks forward to receiving from another segment. It is an equation of mutual and reciprocal demand and supply.
Competitive Pressures
A break in the conventional contract — especially in the case of managerial employees — is considered a major issue in employee relationship. The concern is about increasing competitive pressures — generated mostly in the global marketplace — which warrant continuous changes and extremely tight cost-control measures. The employer can no longer offer job security, promotion opportunities, or regular pay increases — all of which were the quid pro quo element of the earlier era to obtain employee loyalty, commitment, and competence.
The employee relationship is much more than what is contained and conveyed by the above elucidation of the "psychological contract". It has a few other key factors, which need to be understood and effectively handled in order to manage that relationship effectively. First, it embraces an economic exchange factor. Employees make their `contribution' to the realisation of the organisational objectives. In return, they receive a level of remuneration. Putting a price on this `contribution' is a matter of market supply and demand.
Even more significant is to ensure that employees do deliver what they are supposed to, an aspect that often gets management into real difficulties. A variety of control mechanisms must be in place. This is not automatic, but has to be orchestrated. In effect, all that the management can do is buy the right to take advantage of the physical presence of their employees. Beyond that how it motivates them to perform at their best depends on the people-management skills the firm employs.
Second, investment in human capital is intangible. It is difficult to measure and, therefore, difficult to justify. Companies cannot be fully sure that they can capture the returns made on such intangible investments. For instance, any innovation involving performance-upgradation requires upfront investment of both a general and solution-specific nature. The risk element here is that employees so trained can quit even before the returns are realised.
Difficult Questions
Third, there is also a social relationship. Employees gather at the workplace where they interact with one another. When employees are assigned to work in different occupations, the company creates the basis and the context for collective action on the part of employees. For example, questions such as, "What is a fair day's work?" or "What is an acceptable treatment of employees, and what is not?" begin to surface and demand a satisfactory answer. Eventually, all these issues lead to collective bargaining and formation of trade unions.
Fourth, the employee relationship also involves a legal framework. Companies are required by law to give employees a contract of employment. It provides a charter of duties and responsibilities that arise from legislative enactments, which have been refined, redefined, and reinforced by several judicial pronouncements. It is by managing all these key factors in a satisfying manner that a company may be able to clear and demystify the enigma of employee relationship.
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