HR as rocket fuel for growth

Human Resource – The Rocket Fuel for Growth : Human Resource – The Rocket Fuel for Growth

Key Challenges faced by HR today : Key Challenges faced by HR today Operating Cost Rising salary costs HR Cost & Service Delivery Talent Retention Engage Retain Develop Talent Availability Complex skill requirements Saturating talent catchments Middle-Management Low maturity Fast growth Empower

Spending Too Much Time on the Wrong Activities? : Spending Too Much Time on the Wrong Activities? Even as HR costs continue to rise, HR staff are spending 56% of time on program delivery and transactional activities. They are only spending about 32% of time on Strategy and consulting Source: HR Analyzer Benchmark Database. Hewitt Associates. Strategic Tactical

Slide 4 : How Effective is Human Resource? High Low FutureImportance Low High Current Effectiveness

HR fraternity are having to adopt a multi-part strategy in order to.. : HR fraternity are having to adopt a multi-part strategy in order to.. …serve as a “Rocket Fuel for Growth” - If Only It Were So Simple!!!

Summary : Summary HR Transformation The need for HR to be more strategic The need to find ways to significantly reduce costs The need to improve service and quality The need to minimize or avoid capital investments in HR The need to cater to the “Millenials” There are a variety of approaches to this transformation: Establish a shared vision Process redesign Greater use of technology — to more efficiently execute HR transactions and enable self-service Greater scale leverage (e.g., shared service centers) HR business process outsourcing.

Appendix I : Appendix I

Talent Availability : Talent Availability

Talent Pool Shortage : Large Demand for Talent in ‘Sourcing’ Market Shortage of ‘mid-skilled’ workers in developed economies Technology, offshoring, Wage cost arbitrage Large Demand for Talent in ‘Domestic’ Market High annual GDP growth and Consumption -led growth High growth in services sector Burgeoning of Retail and Hospitality sectors Manpower in India is increasing at a faster rate vis-à-vis other growing economies India contributes around 18% of global workforce; only China contributes more Talent Pool Shortage Despite huge labor pool, rapid economic development is resulting in an increasing war for talent..

..which is most evident for the highly qualified work-force : ..which is most evident for the highly qualified work-force Strategic Value Added Manual/Semi-skilled workforce Involved in manufacturing and shop floor operations Graduate, English speaking workforce Involved in routine jobs in outsourcing, customer service Technically qualified, multi-lingual workforce Involved in engineering, hi-tech sectors and manufacturing Management Graduates, Chartered Accountants, multi-lingual Involved in marketing, supply chain, HR, Banking & Financial sectors Employable talent is high on demand and low on supply Highly mobile Has many choices Comp cost almost in line with global levels Relatively large in supply Size of employable talent pool is a concern Mismatch between fresh and experienced talent pool Relatively large in supply Needs significant investment in training and polishing

Fuelling the Rocket by: Effective Talent Sourcing : Fuelling the Rocket by: Effective Talent Sourcing Need of the Hour Strong SLAs and metrics to manage the sourcing vendors A market benchmarked and consistent compensation philosophy Monitoring and Control systems to ensure adherence to recruitment process Industry level initiatives to enhance the talent pool* Current Scenario Low process adherence Abysmally low conversion rates High reliance on Search firms for sourcing Willingness to overpay for attracting Talent

Operating Cost : Operating Cost

Talent cost is increasing at a high rate : Talent cost is increasing at a high rate India salary increases among the highest in the world Shrinking size of employable talent pool puts pressure on hiring, and increases training costs Salary Increase (2006) Eroding Competitive advantage Economic Intelligence Unit Figures for India (2001-08)

Fuelling the Rocket by: Lower HR cost and enhance Service Delivery : Fuelling the Rocket by: Lower HR cost and enhance Service Delivery Need of the Hour HR becoming more metrics-driven and customer-oriented Technology Investment Employee Self Service Accurate, nimble information availability Shared Services Current Scenario Employee expectations on HR administration are rising Processes are expected to be simple and employee-friendly

Talent Retention : Talent Retention

Talent Retention : Increased competition leading to spiraling attrition Star Performers are scarce in Talent is increasingly becoming more mobile Majority of the organizations have 10 – 20 % of their total workforce identified as high performers Attrition rates for high performers have doubled in 2006 since the previous year The average executive changes job every 2-3 years, changes company every four years Source: Annual Attrition and Retention Survey 2006, Hewitt Associates Percentage Annual Total Attrition Annual Total Attrition Across Levels Talent Retention In comparison to other sectors, attrition has been the highest in ITES organizations followed by IT companies

Fuelling the Rocket by: Addressing Retention : Fuelling the Rocket by: Addressing Retention Need of the Hour A strong Employer Brand that differentiates: A Total Rewards Strategy that extends beyond compensation to focus on L&D, People skills of line managers, Employment experience, Work life balance, Work environment. Industry collaboration to curtail early stage attrition due to poaching Current Scenario Retention Strategies have over reliance on Compensation Expectation mismatch of candidates when they join due to overselling at time of hiring Jobs not being positioned as long-term career options

Middle Management : Middle Management

Fuelling the Rocket by: Mid Management Development : Fuelling the Rocket by: Mid Management Development Need of the Hour A robust competency framework and development planning for middle managers Focus on People management, coaching and mentoring skills of Managers Ongoing Learning & Development Current Scenario Promote from within (is being used as retention strategy!) Due to rapid growth and relatively new industry, lateral hiring is also a challenge Little importance to skills and competency mapping

Appendix II : Appendix II

Paradigm shift in the work environment and workforce preferences : Paradigm shift in the work environment and workforce preferences Highly centralized Very Vertical Structure Culture predominantly hierarchical, formal Mainly a ‘9 to 5’ job Promotions based on seniority than merit Very Decentralized Flat Organization Structures Culture more relaxed, friendly, informal Promotions tied to not just seniority but merit as well Concepts of ‘flexi-time’ & ‘mobile office Increasing emphasis in variable pay/ performance linked pay Emphasis on fixed pay Move from job security to job satisfaction Increased focus on learning & development to increase professional skills “If you don’t engage me, somebody else will” Labour market boom Opportunities across sectors for talented workforce are immense

Need for Focus: Building Organization Brand/Culture : Need for Focus: Building Organization Brand/Culture Need of the Hour Creating a strong Employer Brand which is consistent with the parent organization and differentiated vis-à-vis market practices Creating the right ‘culture migration’ practices Career Vs Employment Concept of long term association pride at work Current Scenario Most policies are short-term focused Little focus on creating a strong Employer Brand Too much emphasis on employment frills rather than a strong employment promise Alignment with the parent organization poses a challenge

Hewitt World : Hewitt World DallasDenver Detroit Lincolnshire Los Angeles Mexico City Milwaukee Minneapolis St. Albans Stockholm 92offices 35 countries 19,000 associates 3,000 clients Singapore Sydney Beijing Shanghai Montréal New York Newport Beach Djakarta AtlantaBedminsterBostonBuenos AiresCharlotteChicagoCincinnatiCleveland Philadelphia Phoenix Pittsburgh Richmond Rowayton St. Louis San Antonio San Francisco San Juan Santiago São Paulo Tokyo Stockholm Wellington Gurgaon Melbourne Utrecht Vienna Warsaw Wiesbaden Zürich Bangalore Bangkok Hong Kong Mumbai New Delhi Making the world a better place to work Mission

Hewitt in India : Hewitt in India 18+ years of operational experience in this market, with around 300 Associates across 3 offices in NCR, Mumbai & Bangalore. Largest and most experienced people solution consulting firm Global Sourcing Center of Excellence based in India Clients include the private, public and government sector enterprise, multinational corporations, regulatory authorities and not-for-profit organizations Deep research expertise – Best Employers Survey, NASSCOM-Hewitt Total Rewards study, Top Companies for Leaders study with Fortune and RBL Group Emphasis on Quality, Performance, Ethics and Technology and most importantly MARKET REALITY

Overview : Overview The Indian economy – supported by strong fundamentals, sizeable talent pool and increasing foreign investment is witnessing high growth However, this dynamic growth environment is resulting in an increasing war for skilled talent Organizations are therefore increasing focusing on their work-force and re-inventing HR practices and policies pertaining to attracting, retention and development of talent

This is applicable to offshoring organizations as well which, along with operational issues.. : This is applicable to offshoring organizations as well which, along with operational issues.. Strategize Design Operate Implement Improve How do we know if offshoring is right for us? How can we get key leaders to buy in? How can we design the right offshoring model? How much can we save? Realistically? No, really . . . How can we soften the impact on current employees? Should we have our own center or 3rd party? Who reports to whom? Where in the world should we set it up? How will we attract, motivate and retain the workforce? What about company registration, compliance, tax structuring? How do we ensure seamless migration? What kind of HR programs & policies do we need? Where will we find the people? What do we do on Day 1? How will global teams work together? Conf. calls at midnight? How can we manage performance for someone sitting 8,000 miles away? (How) can we sustain 15% salary increase every year? Where are we going to find 200 new staff very month? How will we demonstrate success? How will we grow 5-fold? 10-fold? How do we sustain productivity? When does it stop being an “offshore center”? Where should be our next location? Actual client questions

Government and other agencies have started realizing the importance of talent, and have initiated various programs with industry partnership as well as independently : Government and other agencies have started realizing the importance of talent, and have initiated various programs with industry partnership as well as independently Andhra Pradesh AP State Council for Higher Education with industry leaders, training institutes, NASSCOM have set up Institute for service management (ISM) to improve the employability through appropriate skill enrichment Jawahar Knowledge Centers at identified engineering colleges in collaboration with the IT Industry to improve the quality of technical education Training institute to train manpower on accent neutralization called “IITEST” in collaboration with Linguaphone of UK, other partners are NIIT, Hero Mindmine, Genpact, HSBC, Deloitte Incentive to the training centers, for each candidate that gets successfully trained and gets employed in a reputed IT & ITES companies The State has set up a Virtual Institute for ITES training Chandigarh Training the youth of Chandigarh in the use of computers and in the use of spoken English right from the primary school level C-TOSS, a programme has been launched to upgrade the soft skills, for urban and rural areas enhancing employability of students under PPP model “Catching Them Young” programme by Infosys, Intel IT training programme for teachers has been launched to provide increased exposure to IT in school going children Chandigarh IT reach out programme (CITROP) is an umbrella programme combining the various separate initiatives taken by leading technology companies for empowering the youth in rural areas and slum areas through IT knowledge

Government and other agencies have started realizing the importance of talent, and have initiated various programs with industry partnership as well as independently : Government and other agencies have started realizing the importance of talent, and have initiated various programs with industry partnership as well as independently Karnataka Mahiti Sindhu : Computer Education Programme for the Government High School Children The Board for Information Technology Education Standards (BITES): Autonomous non-profit society set up by the Government of Karnataka, IT industry and academia Project INVITE (Initiative to Nurture a Vibrant IT Ecosystem) created jointly by BITES, IBM and supported by the Government to fuel academic excellence in the State BITES has organized, with the support of industry, several faculty development programs An IT training scheme called Yuva.Com to establish training centers for training the rural youth Gujarat In their IT Policy they have proposed training of graduates to meet the manpower needs of the ITES sector by providing specialized training provided in domain specific skills required by the ITES companies Infosys BPO (formerly Progeon) are working with Universities to run customized programmes aimed at preparing talent to cater to industry requirements Project INVITE created with IBM enables both the faculty and students to gain knowledge of Open Source and Open Standards based technologies The government has collaborated with Microsoft and TCS to provide students with training in Software Development in a College-to-Career Program. This program is run through BISAG SATCOM facility to the students of various Engineering/MCA Colleges in the State. This program on Java Technology & .Net Technology, managed by coordinators at college level

Government and other agencies have started realizing the importance of talent, and have initiated various programs with industry partnership as well as independently : Government and other agencies have started realizing the importance of talent, and have initiated various programs with industry partnership as well as independently West Bengal The state has launched an aggressive IT literacy program in schools and colleges in collaboration with IBM, Wipro, NIIT and others Provision of hardware and software to schools Training of school and college teachers. Organizations like TCS, Sun Microsystems are training college teachers Set up 10 polytechnics for courses in IT, computer science and technology Ensure adequate engineering talent by increasing seats in existing colleges and setting up new colleges Webel will assist support services to develop industry-specific training institutes for IT & ITES They have setup finishing schools to improve the employability of engineers The state has sponsored a one year course in animation that provides 100% employment. The name of the institution is Toon WEBEL Other major initiatives BEC Certification for engineering students in Kerala Government owned job-site for higher talent visibility Central assessment and certification program for by NASSCOM (NAC and NAC-Tech)

Moreover, a changing value system for Indian society is resulting in.. : Moreover, a changing value system for Indian society is resulting in..

Global factors such as dollar devaluation and increase in crude oil prices are impacting business dynamics : Global factors such as dollar devaluation and increase in crude oil prices are impacting business dynamics The Indian rupee’s strong appreciation against the U.S. dollar has been a thorn in Indian firms’ sides for the past three quarters, as the rupee has soared to a nine-year high against the dollar The Indian rupee’s appreciation is going to continue, but consensus estimates have pegged rise to be within a band of 3%-5% per year over the next 3 years The four factors contributing to the rise (and these factors will continue to hold good in the medium-term) are: Foreign Direct Investment continues to boom (between ’06 and ’07, FDI approximated $16 billion, or 3X the figure for the prior year) External Commercial Borrowings are likely to continue their strong growth of the past several years, as Indian firms continue to borrow money overseas to finance investments and acquisitions at home and abroad (between April and December 2006, ECB borrowing was $12.1 billion, reflecting growth of 33%) Foreign Portfolio Inflows will continue into the Indian stock market Investments and Remittances, which were $3.8 billion for ’06/’07 were (a 35% increase)

Companies are doing whatever it takes to improve business : Companies are doing whatever it takes to improve business Multi location strategy – ‘lets not put all eggs in one basket’ Multi-geography model taking advantage of language, client proximity among others Re-negotiating SLAs with vendors to bring in increased economies Strong employer branding exercises Talent availability and retention, however, remains THE problem to tackle

Focus is also shifting from Tier I locations to smaller cities : Focus is also shifting from Tier I locations to smaller cities IT/ ITES Tier I Locations Tier II Locations Emerge Develop Tier III Cities Growth primarily focused in established metro & IT oriented cities such as Bangalore, NCR and to some extent Mumbai Chennai & Hyderabad were 2nd generation, Tier I Incidence of increasing competition for talent; rising salary costs; high attrition in Tier I locations Tier II cities such as Kolkata & Bhopal/Indore, among others offer untapped potential Hyderabad & Chennai to offer growth potential in future due to continuous infrastructural improvements Mumbai expected to become highly disadvantageous for low end, high scale processes due to rising cost levels Kolkata & Bhopal/ Indore offer significant talent pool; however scalability of same would be a concern 1995 - 2000 2001 - 2005 2006 - 2010 Mumbai Chennai Hyderabad Chennai Hyderabad Kolkata Mumbai Bhopal/ Indore Hyderabad Kolkata Bhopal/ Indore Chennai NCR & Bangalore NCR & Bangalore Bhubaneswar, Vishakapatnam Source: Hewitt Analysis

Operating expenses are on the rise fueled primarily by spiraling cost of real-estate : Operating expenses are on the rise fueled primarily by spiraling cost of real-estate Spiraling office rent The rate of growth of office rentals in India is far higher than many of its counterparts in APAC Organizations are struggling with the increase in operating expenses through increase in occupation costs On the other hand, while there has been a significant boom within the real estate industry in India across Tier 1, Tier 2 & Tier 3 cities, urban/ social infrastructure has not been able to keep pace with this development especially in Tier 2 & Tier 3 cities Organizations, therefore find it difficult to attract suitable talent in cities other than the large metro centers, which adds to operating costs