The fountain of youth

India's workforce is growing young. What are the benefits?

If free tickets for the latest box office hit and parties at the most "happening" discotheques aren't your idea of heaven, this article is not about you. It's about the younger crowd entering the workforce today, for whom these perks are motivational tools that work.

A recent study by international executive search firm EMA Partners shows that the age profile of employees across sectors "" including manufacturing, banking, FMCG, technology and software services "" has moved down several rungs in the past few years.

And it's not just the entry level. The top positions in many industries are now being occupied by people who are several years younger than their predecessors.

Consider the numbers. In 2001, the average CEO in the banking and financial services sector was around 49 to 52 years old; he's now between 42 and 45. IT leaders in any case tend to be younger than their counterparts in other industries, but they've become even greener: from 40-42 years earlier, CEOs of infotech companies are now more likely to be between 36 and 40 years old.

Manufacturing "" the traditional preserve of the greybeards "" is perking up, too. In 2001, most CEOs were in the 56-62 age band; that's now down to 48-53 years.

And it's not just the CEO. The EMA survey found that HR heads and CFOs, too, are getting younger (see table). Why is this happening and what are the implications for HR strategy? the strategist takes a look.

Options unlimited

A strong GDP growth means more jobs that are being filled by increasingly younger people, which makes the average age drop. In its Employment Outlook Survey for the second quarter of 2006, HR consultancy Manpower Services India found as many as 42 per cent of the 4,515 Indian companies surveyed expected employment at their locations to increase. Adds Manpower's Executive Chairman Soumen Basu, "The rate of expansion is so high that companies are forever short staffed."

There are obvious advantages in hiring younger workers. Higher energy levels in the organisation, for one. "They are willing to work for longer hours and can take a lot more stress," agrees Anita Ramachandran, CEO, Cerebrus Consultants. Aventis Pharma, for instance, has hired over 360 people, all between 24 and 26 years old, in just the past four months.

In comparison, last year, the pharmaceutical company took on board only 100 people. It's not just entry-level appointments, either: the average age of business managers and area sales managers at Aventis has dropped from 37 to 31 years in the past five years.

The company's HR head Pradeep Vaishnav points out that marketing and on-field jobs are high-pressure careers, which is why when Aventis went on an expansion drive two years ago, "we chose to hire younger people and continue to do the same."

Then, most jobs require employees to unlearn a part of their previous experience. By hiring a fresher, you've already got a headstart. Besides, "younger employees are more open to change and have fresh ideas," says Vasant Sanzgiri, senior vice president and head, HR, South East Asia, ICICI Prudential.

Perhaps the most obvious advantage of hiring freshers is lower employee costs "" experience comes with its own price tag, after all. Going by that logic, companies should "" and several do "" encourage a healthy level of attrition in their workforce.

Says Ramachandran, "When experience doesn't bring value to a job, an experienced employee actually increases costs, which is why some industries don't mind a certain rate of attrition."

Anil Sachdev, founder and CEO, Grow Talent Company, substantiates with another example. For some years now, many electrical manufacturers have been relocating from Mumbai to smaller towns.

Cheaper labour in non-metro locations is an obvious reason, but equally importantly, older employees in these firms command higher salaries, which can be avoided by moving out. "A 45-year-old worker earns Rs 20,000, while a 25-year-old is willing to do the same job for Rs 5,000," says Sachdev.

The flipside

Hiring youngsters is not without its minus points, the biggest being instability. "Healthy" attrition can all too easily degenerate into an exodus. In October 2005, in its Asia Pacific forecast for 2006, HR consultancy Mercer estimated India's voluntary attrition at as high as 12.8 per cent a year, behind only Taiwan and New Zealand. This despite the fact that at 12.3 per cent the salary growth over last year is slated to be the highest in Asia.

In its study, EMA Partners found that young managers are no longer ready to go through the grind of serving on the shopfloor at remote factory locations or working in difficult markets, and prefer high-growth, emerging businesses.

Also, the quality of intake at entry level for FMCG and traditional manufacturing industries has suffered in the past five years; and they are losing talent to emerging businesses.

A recent white paper by Manpower on confronting the talent crunch suggests that in the "talent-poor future", "Employers will need to encourage older individuals to stay on and offer retirees retraining to return to less stressful and time-consuming roles,such as sharing their institutional knowledge and training new generations in the skills they have acquired."

The takeaway? Organisations may be offering sweeties to younger employees to bring them on board and keep them there, but they aren't quite ready to boot out their veterans.