The face of business education will change in the days to come, and it will be better aligned with the new realities of the world.
Optimism in the job market is back, finally. Recruiters are back in droves in business schools. Salaries on offer are looking good once again. And the optimism is visible not only at the business schools but also at the offices of your friendly neighbourhood placement agencies. Everyone seems to be back in hiring mode — companies led this time by infrastructure, construction and equipment industries (termed the new ICE by Stanton Chase MD R Suresh) are filling up vacancies in a hurry. The slowdown that started in mid-2008 is truly a thing of the past. For the quarter ended June 2010, the country's gross domestic product grew a robust 8 per cent.
So, if companies like L&T Power are recruiting by the hundreds, State Bank of India advertised for 4,000 probationary officers (half of them for rural areas). Even retired bureaucrats, former judges and vice-chancellors are in demand. The impact is predictable. Human resource managers in companies, who were joking till the other day that they could easily open their own recruitment agencies going by the number of unsolicited resumes they were receiving, are now going back to the basics and brushing up once again on terms such as talent management and hiring best practices.
Examples such as these should bring cheer to a workforce that has had a tough time in the last two years or so. But here’s a reality check — you would be completely off track if you thought things are back to those good old boom years when you could negotiate a better pay package from your existing employer with three job offers in your pocket. India Inc is now wiser after the lessons learnt during the slowdown. True, companies have begun to hire once again, but their hiring patterns are vastly different from what was witnessed in the boom years of 2006, 2007 and the first half of 2008.
The concept of productivity was sacrificed in the last boom. Even marginal contributions were tolerated and ignored. But companies have learnt that they can do with less people and achieve far better productivity through better training. In any case, many companies, which had sacked people in large numbers earlier, will wait and watch for a few more quarters before stepping on the accelerator. Experts thus see more replacement and quality hiring this time round, rather than growth hiring, and say the days of real growth in jobs will still take a while.
On increments, India Inc has become generous one more time. India will see the highest rise in salaries among Asia-Pacific countries this year, led by sectors like engineering, procurement & construction, banking, finance & insurance, retail & information technology, Hewitt Associates had reported earlier this year. Indian wages will rise 10.6 per cent this year, up from 6.6 per cent in 2009, said the Hewitt India Salary Increase Survey 2009-2010. The salary hike will be at all levels. The survey covered 465 companies across 20 primary industries. The findings showed that domestic companies could outperform multinational corporations so far as increments are concerned with an average salary increase of 11.4 per cent, against 10.2 per cent by the latter. The reason for this, as in the past, is that the base of Indian salaries is still low. Once it catches up with other countries, the high increments will begin to taper off.
Nevertheless, the slowdown has brought a definitive change in compensation philosophy. Salaries in 2010 will see a rise in the variable component, Hewitt had cautioned. Variable pay as part of total compensation will increase to 24.8 per cent in case of top executives, from 20.8 per cent in 2009. In case of senior management, the variable component is expected to go up to 20.5 per cent, from 17.1 per cent last year. India Inc also saw sharper performance differentiation. Those employees, who exceeded expectations, received a salary hike of 13.4 per cent in 2009 when the industry average was 6.6 per cent. Clearly, remuneration has got closely linked to performance.
Some of the information technology companies have also started giving increments. This sector was badly mauled in the recession and financial meltdown in the West, especially the United States. Information technology budgets got slashed as several banks went kaput and others tightened their belts. Slowly, the sector has begun to revive. Most information technology companies have found greener pastures in the domestic market. Hence the increments. But look at the quantum of the increase: Just 8 to10 per cent. The single-digit nudge in salaries is great considering that until a few months ago most employees were happy just to retain their jobs, but is a far cry from the quarter to one-third salary hikes IT staffers were used to until last year.
The other key change is that companies are now more focused on the difference between performers and non-performers, and are spending more time on the screening process. Some companies are even seeking third-party assessments of capabilities of soon-to-be-hired executives. Most companies are laying emphasis on employee referral programmes so that the chances of making mistakes in hiring are minimised. The human resources department of most companies scans the social networking sites to check out prospective employees. The variable component in executive salaries has gone up to 30 per cent-plus against earlier levels of 10-15 per cent.
All these indicate one thing: What is certain is that the days of gloomy messages of pay cuts and salary cuts are over. But it would be a mistake to get carried away and think that the days of unlimited salary increase and hiring are back again.
The slowdown has also taught companies the need to retain talent. Surveys done by Hewitt have shown compelling evidence that better talent management pays for an organisation. For example, employee turnover in Indian firms doing a better job of attracting, developing and retaining highly talented people is 45 per cent less than that of others. The monetary implication of this is huge as a frontline employee in a top company costs 40 per cent of salary to replace and a top management one costs 150 to 200 per cent of salary to replace.
So, are companies doing enough to build organisation capabilities such as leadership development or talent management? Nearly 60 per cent of respondents in China and 20 per cent in India (versus 10 per cent overall) to a McKinsey global survey done in January said that building capabilities, such as leadership development and talent management, was a top priority for their companies. That’s the good news, but the bad news is that only a third of these companies actually focused their training programmes on building the capability that adds the most value to their companies’ business performance. This is where the business schools can fit in. What companies cannot do, they can perform. For this, it is essential for them to understand what do companies want, and are they delivering that? Of course, it calls for closer and more frequent interaction with the industry. But this is something which will make management education more relevant for the current times. Business realities are changing fast. Indian companies cannot afford to perform in silos, they need a dynamic worldview. But are the business schools alive to this challenge?
Consider this. The server of State Bank of India (SBI) crashed last year when two million candidates applied for 20,000 clerical posts. The written examination had to be conducted over four shifts as the bank just could not find enough venues where the tests could be held. A year on, the country’s largest bank faces an even bigger dilemma. It has 11,000 clerical posts on offer, but has received 3.4 million applications. That’s about 300 applications for every vacancy. The bank can afford the luxury of being extremely choosy — a vast majority of the candidates who have applied for the Rs 8,000-a-month job are engineering graduates and MBAs, even though the job specified only Class 12 as minimum qualification criterion.
It’s not that there aren’t enough suitable jobs for good-quality engineers and MBAs. There are countless stories of how leading Indian companies are visiting engineering and MBA colleges in the interiors of the country to add to their basket of employable graduates but are returning empty-handed.
The main problem is that of employability. Studies have indicated that only one in four graduates from India’s colleges is employable. A Nasscom study found that India still produces plenty of engineers — 400,000 a year. But most are deficient in the required technical skills, fluency in English or ability to work in a team and deliver basic oral presentations. As a result, those engineers or MBAs who manage to become SBI clerks may still consider themselves lucky. Listen to what Sandip Mukherjee (name changed) — he is an engineering graduate from one of the middle-rung private institutes in Kolkata- has to say. He came to Navi Mumbai to join a windmill company which has its headquarters in Europe. The quality of the job, however, he says, was only slightly better than that of a security guard. Mukherjee, who was lucky enough to find another job within four months, says his ex-boss had asked him to prepare a project report on the security system in the company’s godowns.
Apparently, the company suspected that a lot of pilferage was taking place in one of its godowns. The engineer was asked to station himself in the security office to figure out the lacunae in the system. One of his observations was that some people left the godown unchecked during lunch hour when the security guard would go to the canteen to bring food. Impressed with this finding, the boss then asked him to find out whether this was happening during tea break or at dinner time also, or whether the security guards went to the toilet often, leaving the gate unmanned. “I didn’t pursue engineering to observe people’s tea and toilet habits,” Mukherjee wrote in his resignation letter.
Companies say this mismatch between qualification and quality of job is inevitable in a country where everybody and his uncle is either an engineer or an MBA. The quality of teaching in most of the second-rung institutes is poor and companies often have to pay through the nose to train them.
Indian Institute of Technology alumni have repeatedly expressed serious concern over the mushrooming of engineering colleges that are being run as “business ventures” by contractors, builders, coal dealers, brick-kiln owners and sweetmeat sellers. In Uttar Pradesh alone, 250 such engineering colleges have come up in the last decade with an intake of about 60,000 students.
Two years ago, an assessment of India’s higher education system by the University Grants Commission (UGC) found that as many as 25 per cent faculty positions in universities remained vacant; 57 per cent teachers in colleges did not have either an M Phil or PhD; and there was only one computer for 229 students, on an average, in colleges. The assessment was conducted on 123 universities and 2,956 colleges across India — an estimated 60 per cent of these institutions were private, the rest government-run.
Now, look at a couple of rungs further down in the job market pyramid. India’s vocational training institutes produce six million students every year. That’s a minuscule number considering that an estimated 88.5 million people in the 15-29 age group need such training. And industry says less than half of the six million people who have received vocational training are in the employable category.
A Planning Commission assessment shows 80 per cent of the 12.8 million new entrants to India’s workforce every year have no opportunity for skills training. Even more worrying is the fact that only 2 per cent of the workforce has skills training and 80 per cent of the rural and urban workforce does not possess any “identifiable” market skills.
What is also worrying are the findings of the India Labour Report prepared by TeamLease — it has found that over half of employed youth suffered some degree of skill deprivation, while only 8 per cent were unemployed. In all, 57 per cent of India’s youth suffered from some degree of “unemployability”. The good news is that some companies have decided to take the bull by the horns in their own limited ways to bridge the skills gap. Infosys Technologies, for example, has launched the Campus Connect initiative with engineering institutions in Mysore, Bangalore, Pune and other cities. Under this, workshops and seminars are held for students to provide them with industry-specific exposure. ICICI Bank is working in order to upgrade curriculum in areas like wealth management and credit relationship sales with institutes like Management Development Institute, Narsee Monjee Institute of Management Studies and so on.
Clearly, the face of business education will change in the days to come. It will be better aligned with the new realities of the world.