Talent crunch tops companies' cup of woes

THE YEAR THAT WAS

Galloping growth triggered mass hiring and salarys levels soared in its wake.

India's top seven IT companies are due to add 150,000 engineers in 2006-07, of which Infosys Technologies alone will account for 25,000.

And staffing solutions company TeamLease Services expects its headcount to go from 56,000 in November to 100,000 by March 2007, making it India's single largest private sector employer.

Or take commercial pilots, of which India has a pool of about 2,000, while some 300 new ones pass out with basic licences from training schools every year.

With 250-odd new aircraft to be inducted over the next five years, at least 2,500 more pilots will be needed merely to meet the regulatory requirement of five pilots for every aircraft that a carrier owns.

In the year gone by, galloping growth triggered mass hiring across sectors, the talent shortage sky-rocketed, salaries shot through the roof, and spoilt-for-choice employees took attrition to new highs. Training programmes increasingly focused on developing leadership pipelines to facilitate smooth succession at all levels.

Says strategic HR adviser Hema Ravichandar: "High recruitment targets, limited pools to hire from, cross-sectoral movements and soaring compensation packages were some of the key challenges faced by the HR professional in 2006."

Anita Ramachandran, head of Cerebrus Consultants, identifies the talent crunch as the year's top trend, with rising salary and attrition levels as logical corollaries: "Mass hiring is taking place across sectors such as IT, BPO and retail."

Soumen Basu, chairman of Manpower Services India, adds, "organisations have begun to feel the shortage of talent at the middle-to-senior levels, and in the ITeS/BPO space, even at the agent level."

E. Balaji, chief operating officer of Ma Foi Consultants Ltd, which has been hiring 4,000 people a month mainly for the banking, financial services and insurance (BFSI) vertical, estimates that the hiring boom led to an unprecedented wage escalation of 23-24 per cent across industries and geographies, with attrition at 21-22 per cent nationwide.

"Compared to the West, these are mind-boggling figures. There, annual wage increases are only a little higher than the inflation rate," Balaji notes. Companies willingly pay a premium for proven managers who can enable quicker start-ups, Ramachandran points out.

However, the incidence of frauds by employees took its toll, and the last four months of the year saw the pace of hiring in the BPO sector slackening to the high single digits, as companies put in place multiple filters to verify the backgrounds of job applicants and scrutinise their certificates, says Balaji.

J K Agrawal, who heads Manpower India's telecom search practice, says, "one key trend is that people are moving from one sector to another." Ramachandran endorses this: "There is a lot of lateral hiring, so the talent crunch is being felt all across."

The year saw the rise of sunrise sectors such as BPO, retail, telecom and insurance, and a corresponding outflow of talent from such mature industry sectors as FMCG, pharmaceuticals and manufacturing.

The new entrants bid high for talent employed by other companies because they did not have the luxury of being able to wait for talent to present itself on their doorsteps, says a Hewitt Associates practice leader.

Companies found themselves in a dilemma: The inability to retain people eroded competitive advantage, but, as Mohinish Sinha, associate director at Pricewaterhouse Coopers points out, competition for talent sent salaries so high that competitiveness was hit anyway.

Ashok Reddy, managing director of TeamLease, notes another dimension of the talent issue: "Many industry segments have just started off and are evolving, creating a mismatch between the required skill sets and the available skill sets." This, he points out, has increased the emphasis on training.

Focusing on home-grown talent through training and management development, companies have concluded, is a cheaper way of sourcing manpower.

At one level, organisations such as Reliance Industries, Infosys, Wipro, Accenture, Genpact, Future Group and NASSCOM are either setting up institutes or working with existing institutes to develop courseware, sponsor courses and source manpower. At another, the emphasis is now on long-term incentives such as stock options, deferred pay and loyalty bonuses.