| The attrition rate in Indian capital goods firms has reached an alarming 30 per cent.
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| The hype over the high rate of attrition (30 to 40 per cent) in the information technology industry has pushed into background similar problems being faced by India’s old economy firms.
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| For example, the capital goods industry, which employs more than 2 million people and where the average employment per crore of investment is over 50 times than that of a commodity-based industry, has been facing an attrition rate of over 30 per cent for several years now.
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| The situation is serious, says A M Naik, chairman and managing director of Larsen & Toubro, India’s premier capital goods firm. “It seems engineering and management graduates in India do not want to dirty their hands any more by working for a manufacturing firm,” he adds.
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| Naik should know. His company has been growing at around 20 per cent every year and needs 2,000 fresh engineers to keep up with the pace. The problem is compounded by the fact that a similar number is leaving the company every year.
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| This is despite an AC Nielsen survey last year, which showed that L&T is the most preferred choice for engineering graduates (including IITians). But the catch is that the number of students interested in hardcore engineering is dwindling fast.
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| Naik attributes the problem to what he calls internal brain drain. Almost all multinationals have set up engineering centres in the country.
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| “For them, the engineering man hour in India constitutes only 3 per cent of the cost of a project. They use this to build their own country by creating assets which is 33 times of one engineering hour used. This means that for every $30 million of engineering services that are provided by multinational centres in India, the country is deprived of assets worth over $1 billion, which would have been created if these engineers had worked on Indian projects,” he says, adding that the cost of one engineering hour used being 10 times more in their country, the multinationals can easily pay double or triple of what their Indian counterparts can afford.
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| The chief of L&T, which prides itself as being an Indian multinational, says if the issue isn’t addressed fast, the country will miss the bus again as far as its manufacturing sector’s growth is concerned.
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| “The problem earlier was retrograde government policies, the problem now is talent shortage. The future war will be fought based on who’s got the best talent. Our biggest challenge is to attract talent laterally and to retain our talent pool,” says Naik.
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| Consider just how much this has hurt India. The share of manufacturing in India’s GDP is 17 per cent compared to 50 per cent in China, 45 per cent in Korea and Malaysia and 40 per cent in Thailand.
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| “But we continue to be obsessed with the information technology industry, which contributed only 4 per cent to India’s GDP,” says Naik.
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| Apart from the internal brain drain, the key problem area is availability of fresh talent. While graduates of the top schools prefer either to go abroad or work for consumer goods or IT companies, a minuscule percentage join engineering companies only to be poached by multinationals after being trained by Indian firms. Naik blames the top B-schools for not paying enough attention to this aspect. “They are just adding to the hype by publicising the mind-boggling salaries being offered by the global investment banks. Students are succumbing to peer pressure,” says Naik.
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| HR experts, however, say Naik is just being too emotional and idealistic. The name of the game is simple: if the market is willing to pay higher salaries, the option is obvious. You either join the game or watch from the sidelines.
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| “L&T offers the opportunity to build the nation. Any B-school grad in India would love to do that provided the company pays market-linked salary,” said an HR expert.
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| Naik agrees, to an extent. That explains the company’s focus on HR as a vehicle for change and a tool for transformation. L&T has introduced innovative and niche training like Glopat to train people in terms of country risk management, social and cultural integration. and ability to convert contacts into hard business.
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| The company has also introduced a new cadre of Global Managers who will have the ability to make a success out of the most complex business scenarios in global environments. For potential assessment, employees are assessed by outside experts.
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| For example, senior management staff are expected to manage risk, strategise, have financial acumen, and ability to network. This assessment is carried out during a two-day exercise at the company’s management development centre in Lonavla.
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| Besides, several initiatives like the People Capability Maturity Model (PCMM) have been introduced. L&T is the ninth company in India to have been assessed at Level 5 at three of its development centres. “The time for transformation is now,” says Naik. Are engineering grads listening? |
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