Coping with attrition in the worldâs fastest-growing economy
ï¿¼By Michael Switow
With the eurozone sputtering and Chinaâs era of double digit growth a distant memory, the main bright spot in the global economy has been the United States, which experienced 3.7 per cent growth in the second quarter. But thatâs not considered sufficient by most analysts to keep the whole world on trackâan insight that has businesses and economists alike taking a fresh look at one of Chinaâs western neighbours.
âThe world economy today is too enormous to run on a single engine. It needs other drivers,â the World Bankâs chief economist Kaushik Basu recently told The Hindu, one of Indiaâs most prominent newspapers. âInterestingly, the country that looks best placed to provide the second engine for the world economy is India.â
Indiaâs economy is currently growing at 7 per cent and is expected to end the year as the worldâs fastest-growing major economy, which would be a first for the sub- continent. In the eyes of many, India is also becoming the favourite âBRICâ, an acronym coined nearly 15 years ago for âBrazil, Russia, India and Chinaâ, four countries that cover a quarter of the worldâs land mass and currently account for about twenty per cent of global trade and GDP.
The BRICs are out-of-favour though. Chinaâs stock and currency movements have rocked global markets. Brazilâs debt rating has been downgraded to junk status and tumbling oil prices have sparked a severe recession in Russia. India, on the other hand, is an oil importer and Basu believes that with the right policies the country could enter an era of sustained 8 per cent annual growth. He drove this message home in a meeting with Indiaâs prime minister.
âIndia is on the cusp of a major take-off and we must not miss this opportunity. It is possible for India to vastly step up its exports, be a hub of global education, and take major strides in the manufacturing sector,â he said.
Talent at the Top
Like a number of high-profile Indians, Basu was educated in India before going overseas for a masters degree and career. At least half a dozen Fortune 500 companies have Indian-born CEOs, including Google, MasterCard, Microsoft and PepsiCo. Ajit Jain, who has been tipped to succeed Warren Buffett, may join the list at Berkshire Hathaway.
The prominence of so many Indians in the international business world is both a source of pride and consternation back home.
âIt is a cause for celebration that so many Indians have made it to the very top of some of the worldâs most valuable companies,â The Times of India notes in an editorial. âAt the same time, however, it should make us pause and ask an obvious question – why is it that they make their mark in the US but not in the land of their birth? Clearly, the conditions here are not ripe for the best entrepreneurial and managerial minds to achieve their full potential . . . Successive governments have promised much on this front, but sadly delivered at best a fraction of the promise.â
The Employment Churn
Indiaâs economic growth is a double-edged sword for employers. Whilst an expanding economy is almost always good for business, itâs also bringing to the fore an age-old human resources problem: employees leaving their posts for better offers.
Attrition issues, which have long been a sore spot for some of Indiaâs largest companies, have been particularly noticeable recently in the fast moving consumer goods (FMCG) space. In early September, for example, the jobs portal iimjobs.com listed some 150 employees from Coca- Cola and PepsiCo, each with at least ten years experience, looking for another job.
âThere is a sudden deluge of resumes from employees of a couple of FMCG companies that have not been performing well globally,â iimjobs founder Tarun Matta told Indiaâs Economic Times, adding in a conversation with HRO Today Global that these mid-to-senior level executives are âmaking a beeline for high-growth start- ups and e-commerce companies.â
Sales at the beverage giants have been sluggish in India – the second quarter of the year was the worst in several years – leading PepsiCo to undergo a corporate restructuring and Coca-Cola to cut production for the first time in a decade. Coca-Cola also instituted new budget and reporting rules. Employees who switch jobs are receiving significantly higher salaries and often equity if they join a start-up or e-commerce company.
The New Economy
Firms like Flipkart, which competes with Amazon and aims to be the âAlibaba of Indiaâ, have money to spend. Venture capitalists invested nearly US$3.3 billion in the top five Indian online companies last year. Flipkart alone received funding of nearly $2 billion.
Money is only part of the equation, though, argues Matta, who started iijobs as a blog seven years ago, before transforming it into a portal for management talent that is used by more than 30,000 recruiters and half a million job seekers. The self-professed math geek launched a second niche job-board for the I.T. sector a couple years ago.
âExecutives move because of many reasons, such as more responsibility and impact, opportunities to lead, culture, monetary and other rewards, and most importantly being a part of something much bigger than the job at hand,â Matta notes.
A Risky Business
Switching to an e-commerce company or tech startup is hardly a sure thing, though, nor is the sector immune to employees seeking greener pastures. Some companies in this space appear to have scaled up too quickly and are now cutting labour costs. Take the case of Housing.com, a trail-blazing property portal that uses data analysis and map-based mobile technology to make house-hunting easier in a chaotic market. The company raised more than US$100 million last year, but is now planning to lay off 600 employees, or nearly a quarter of its workforce.
âThere is no doubt that Indian startups have gone overboard with hiring in the last few years and that has happened because they raised so much money and they had to spend it in some way,â Head Hunters India chairman and managing director Kris Lakshmikanth told Quartz India. âNow as funding starts getting slower . . . these companies need to cut costs and then may look at layoffs or freeze hiring.â
The fast pace and high demands of start up companies has generated job turnover as well. Some employees burn out, whilst others – like Snapdealâs Chief Technology Officer – quit to set up their own firms.
Another company making Indian headlines is mobile app food ordering startup TinyOwl. Despite an active social media presence and catchy ads like âBond over Biryaniâ (the fragrant Indian rice) and âGreet. Eat. Repeatâ, TinyOwl is laying off over a hundred employees. Company officials say the cuts are part of a restructuring exercise, though, and that TinyOwl is actually hiring a similar number of people in different departments. The layoffs are reportedly in Sales, Marketing, Business Intelligence and Data, whilst the hires are for Customer Experience, Design, Technology and a home-cooked food division.
HR Professionals Are Not Immune
The job churn is not limited to the sales and tech teams; itâs even prevalent among those responsible for hiring!
After working with PepsiCo for fourteen years, the beverage-makerâs Chief People Officer Samik Basu has left the company, as has Vodafone Indiaâs Director of Human Resources, Ashok Ramchandran. Ramchandran exits after six years for a post with the Aditya Birla Group, a large conglomerate with 120,000 employees worldwide. (PepsiCo sourced internally to replace Basu; Vodafone India poached the HR head of consumer-goods manufacturer Reckitt Benckiser to fill Ramchandranâs spot.)
Basu and Ramchandran are among top Human Resources officials in at least some twenty companies that have quit their posts. The list cuts across sectors and includes companies like Accenture, Adobe, Dell, FlipKart, PepsiCo, Phillips, Reliance Industries and Vodafone, among others. Another prime target of new economy companies meanwhile is the management consultancy McKinsey India. Over the past year and a half, McKinsey India has lost more than forty consultants, including several directors, to high-growth start-ups. Ananth Narayanan, who led McKinseyâs product development across Asia as well the companyâs Indian automotive practice division, has left to become the CEO of fashion portal Myntra, while another director, Saikiran Krishnamurthy is the new COO of Flipkartâs commerce division.
The Attrition Conundrum
Whilst the number of high-profile examples is eye- catching, attrition has been the bane of Corporate India for some years, prompting headlines, hand-wringing and academic discourse. In 2007, for example, Samir Chatterjee – an Emeritus Professor at the Curtin Business School in Perth – wrote that Indiaâs young professionals were âbecoming extremely mobileâ and that the impact was most severe in offshore services like call centres, where the average retention period for an employee was just six to eight months. In the book âHuman Resource Management in India: âWhere Fromâ and âWhere Toââ, Chatterjee also noted that retaining senior level executives was challenging as well.
Replacing staff that leave is made more difficult by Indiaâs skills gap. Whilst nearly thirteen million youth join the workforce every year, only about 1 in 3 are considered âemployableâ. Companies routinely provide extensive training to new hires to meet this challenge.
Attrition rates vary by sector, job level and even time of the year – the second quarter, after annual assessments, is the busiest; the last quarter which coincides with the Deepavali holidays is the most stable – but whilst the exact rate at which employees leave their jobs is hard to come by, estimates often range from 10 per cent for the energy sector to as high as 1 out of every 2 junior level employees in some tech companies.
The job losses occur in spite of rising remuneration. The average salary increase in India was 10.8% this year, the highest in Asia Pacific, according to a survey conducted by Towers Watson.
So how do businesses deal with this?
The top three ways to retain talent in India, according to a 2015 study by Deloitte Consultingâs Human Capital practice, are long-term incentive plans, performance based variable pay and recognition awards (which could be cash or not).
âTreat your existing employees extremely well,â sums up iijobsâ Matta. â(This) goes way beyond just paying fat salaries and having a swanky office. It is about providing opportunities to the employees so that they can grow much faster than they would in any other organisation. Itâs about investing in your employeeâs career.â
High-tech companies and consultancies like Capgemini, HCL Technologies and Wipro meanwhile are turning to analytics and algorithms to predict which current and potential employees are likely to stick around. Whilst still in their infancy, executives hope these tools will allow for data, rather than gut, driven decisions.
Some firms also routinely hire more people than needed, so that when one person leaves, there are others to pick up the slack.
Good Times Ahead for HRO
The churn keeps HR professionals busy. Indiaâs growing economy – coupled with the countryâs culture of attrition and the âdemographic dividendâ of the sub-continentâs young population – is also good news for the recruitment industry.
âWe estimate the current talent acquisition spend to be upwards of US$3 billion a year by Corporate India,â says FutureStep Indiaâs managing director Sreeni Yadavilli.
âA majority of the spend is on in-house recruitment organisations and local (small-scale) recruitment partners. This is about 85 per cent of the market now.â
âWe are seeing a trend by corporate India and MNCs to adopt global processes, practices and partners for talent acquisition, as companies become larger and more globalised in their business models,â Yadavilli adds. âWhilst the RPO market is in its infancy, it is poised for a huge growth, year on year, for the next decade or more. If the Indian economy grows at 7.5 – 8 per cent over the next decade and a half, the recruitment industry should be three to four times of what it is today.â