| Shyamal Majumdar: Talent at a premium | |
| India Inc ignores equal treatment approach to reward its top performers with handsome hikes | | Shyamal Majumdar / Mumbai June 11, 2009, 0:13 IST | |
India Inc has ignored the equal treatment approach to reward its top performers with handsome pay hikes.
India Inc seems to be taking good care of its top performers — even in bad times. The annual report filings by leading Indian companies show most have been quite generous in rewarding the top management in 2008-09, the year when the downturn was setting in and cost reduction was a key focus area.
Take a look at some of the pay packages. Infosys’ top brass collectively got a much higher pay increase of over Rs 10 crore during 2008-09. The interesting thing was that the fattest pay package has not gone to its Chief Mentor and Non-Executive Chairman N Narayana Murthy, Co-Chairman Nandan Nilekani or CEO and MD S Gopalakrishan.
That honour went to CFO V Balakrishnan who got a hike of Rs 1.73 crore. But even he wasn’t the highest paid employee. That position went to B G Srinivas, head of European operations. Srinivas received a total compensation package of Rs 4.67 crore.
In Wipro, the total remuneration paid to Chairman Azim Premji dipped by about 10 per cent (Rs 14 lakh) to about Rs 1.4 crore, but many other senior management personnel got a handsome hike. The package for CFO Suresh Senapaty, for example, went up to around Rs 1.92 crore from Rs 1.49 crore in the previous year. Similarly, the package of Pratik Kumar, executive vice-president (HR) rose to Rs 1.36 crore from Rs 1.08 crore.
India’s largest software firm, Tata Consultancy Services, increased the total pay packages of its top management personnel and board members by over Rs 1 crore in the previous financial year. Some like Executive Director Phiroz Vandrevala got the highest pay hike of 41 per cent among the company’s board members as his remuneration rose from Rs 1 crore to Rs 1.41 crore. The MD & CEO-designate N Chandrasekaran saw his remuneration rise to Rs 1.92 crore from Rs 1.41 crore in the same period. The hike in their remuneration exceeded the increase in the company’s total employee cost of about 25 per cent. Traditionally, however, the pay packages of the TCS top management has been less than its competitors.
IT firms weren’t alone in being so generous. Take Shoppers Stop, the retail giant that has slipped into losses. The K Raheja group company has sought to increase the pay packages for its Managing Director B S Nagesh and CEO Govind Shrikhande to Rs 4 crore and Rs 3 crore respectively.
At a time when several companies reduced their increments to the general pool of employees by almost half what was planned before September 2008, the numbers may seem odd. But top HR experts feel that may not be a correct assessment. Money may be tight for most companies, but that doesn’t mean that companies can do without the skills and talent they need to better navigate a depressed economy.
The top brass in these companies are usually the best performers and no company can afford to lose critical talent, who are in demand at all times. That, HR experts, say explains it all — a one-size-fits-all strategy just won’t work.
To be fair, India Inc’s generosity isn’t limited to just the top management. Maruti Suzuki, for example, has identified the top 20 per cent of its talent pool and rewarded them generously while others got much less. While Dabur is giving stock options to top performers, LG India is giving out bonuses equivalent to 90-100 per cent of its key performers’ fixed annual salaries.
In any case, HR experts say, base salaries will stagnate for even the top performers this year as more and more companies are using variable pay as the key differentiator to retain talent. Infosys CEO Kris Gopalakrishnan, for example, has already gone on record to say that his company would pay a lower variable pay to its senior management this year and the executive board “can lead by example”.
HR consultancy firm Kelly Services says vanilla incentives covering a group or level of employees is giving way to more employee-specific profit or productivity-linked incentives. So even while the overall salary cost is kept low, sign-on bonus for senior-level hires and anniversary increments to reward longer tenure will all be used by companies to attract and retain talent even during such times.
That’s precisely in line with what Dr John Sullivan said in his path-breaking essay in Human Resources magazine. Asking the HR departments not to behave like social workers, Sullivan said no company can prosper with an equal treatment approach. “The net result of not having a robust performance differential system is that bottom performers are overpaid, average performers are paid accurately and the top performers are underpaid. This is management to the most common denominator, not management to increase performance,” Sullivan wrote.
It’s a good sign that India Inc is listening to what Sullivan said despite the obvious temptation of not doing so to avoid dissatisfaction among certain groups of employees.
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