Quality, not quantity, is the problem for IT firms

Troubled by a rising rupee which increases wage costs and reduces profit margins, IT firms have begun hardening their stance by weeding out "non-performers".

Major IT firms in India like Tata Consultancy Services (TCS) and IBM (India), for instance, recently asked "non-performers" to leave the organisation. TCS, in fact, even effected a marginal cut in the variable component of employees for not meeting targets which did not go down well with its employees if blogs are anything to go by.

Monisha Advani, MD, Randstad India, says: "Some leading IT firms with their recent actions have demonstrated that there will be consequences for non-performers. A company that demonstrates consequence does not create insecurity. On the contrary, it creates an environment where people are far more appreciated for their performance and achievement as they become the focal point."

Analysts also feel that salary hikes for 2008 will be lower than in past years. An Emmay HR, a leading recruitment firm and a part of European Ranstad Group, report states that IT salaries will go up by just 10 per cent for 2008. The move gains importance, point out analysts, as IT firms are increasing their hiring in smaller towns and cities. In such a scenario, Indian firms have to increase their utilisation and productivity levels without losing employee goodwill.

Market experts feel that instead of hiring huge numbers companies should focus on retention. While some of the large firms are putting systems in place many feel enough is not being done.

"India does not have problem of quantity. Quality is the issue. Three to four years back, the interview to hiring ratio was 1: 2 or 3. Today the ratio is 1:16. For one job there are at least 14 to 16 people to choose from. Sorting out the right candidate becomes a humongous task. If the skillsets are not right, it will affect the productivity of the company," asserts Partha Iyengar, Head Research India, Gartner. On an average, the top IT firms' employee utilisation rates hover in the range of 70-80 per cent. This implies that almost 20-30 per cent of employees are on the bench at any given point of time.

Till date, companies were hiring in excess so that they could have access to talent when the need arises. But with the current scenario, there needs to be change in the way processes are being run, note analysts.

"Firms should get visibility in the orderbook. Besides they can always reduce the people on bench," feels Harit Shah, research analyst, Angel Broking.

Sudin Apte, country head, Forrester Research, concurs: "Companies should allow resource visibility and HR processes need to be revamped. Besides if an organisations is hiring at a faster rate the access to right resource needs to be dynamic."