Thinking HR in good times

The war for skilled talent is back, but lessons from the past are helping organisations shape themselves intelligently

India was not as battered by the financial collapse and global recession as were the larger Western economies. Prudent financial and banking policies, initially viewed as the work of a weighty, bloated and self-important bureaucracy, ultimately served to protect the economy reasonably well. A couple of years after the fall of one of the world’s largest investment banks jump-started the terrible global meltdown, the Indian economy is showing signs of growing scale, slowly but surely.

The trends indicate that while there had been some workforce reduction during these two years, companies are buoyant on resuming hiring to normal levels. The war for skilled talent in India has made a strong comeback. It is estimated that the cost of losing one employee is equivalent to seven months’ worth of compensation, once you factor in salary increases required to attract a replacement and the time it takes to train them to reach a similar level of productivity. However, companies are also looking at this as a time when they can learn from the past to set a more stable, manageable course for the future.

In this context, the significant talent management trends are:
# Sizing up, shaping up: Organisations will, after the lessons from the recession, strive to right size, be in the right shape and obtain the necessary skills to succeed. A number of leaders are especially concerned about the challenges of structures and levels in their organisations. There is consequently focus on role clarification and position evaluation. Indeed, due to the overheated years before the recession, companies had created bloated structures with multiple layers that added little value.

The demand to level these structures and to consequently build stronger, more robust career paths is a trend that is likely to continue. To succeed in a hypercompetitive environment, it may not always be enough for companies to acquire best-in-class assets and talent. It is not how good the assets are in silos, but rather the pattern in which they all come together as moving parts of the organisational engine, that drives successful business outcomes.

# Skills for a changed world: In addition to becoming leaner and fitter, companies are continuing to ensure that their pipelines at all levels are unclogged and well stocked. At the junior and mid levels, companies are increasingly looking at objective measures of assessment to ensure that they are able to test their employees not only against their current requirements, but against their future requirements. India’s young workforce too wants to be challenged and is attracted to career dynamism. It wants to acquire new skills. (A small number of companies have learnt the value of employees having the skills to see the company through harrowing times. That said, the effort to do something to build adversity quotients is not yet focussed, and can be called a micro trend at best.)

# The right rewards package: Companies have shown interest in developing sustainable and affordable rewards and retention packages. During the boom, companies showed interest in the reward systems for obvious reasons: They needed to retain and reward talent. During the recession, the trends were more pointed: How, for instance, could a company help employees when stock options went under water? The demand now is a little more cautious, and is more oriented towards having a sustainable compensation strategy that can withstand the inevitable economic fluctuations.

As an additional consequence, employers are looking to re-scope their performance management systems. They are looking at this period as a time during which they can build and use systems that are objective and sustainable. During the boom, stable systems were fractured. Curves were skewed, employees were pandered to, good money was often thrown after bad. Companies are seeking more balance now: While they need to get and retain talent, they are increasingly adhering to the idea that right people are essential for success, as opposed to the old maxim that “people are the key to success”. Companies are increasingly looking at long-term incentive instruments such as stock options to retain executive talent. From an employee perspective, the new Gen Y employees have very different needs compared with, say, baby boomers, and as such they are attracted by flexible benefits schemes which provide them with more choices than standard rewards. For example, they are more likely to be impressed by gym memberships and car allowances than pension plans, given that retirement is a long way off for them.

# If not married, then at least get engaged: Companies are beginning to refocus on employee engagement. During the high, engagement was an area of furious focus because the chances of employees leaving were high. Ever since India took a sharp turn towards liberalisation and globalisation, both companies and employees have begun to reframe the employment agreement. Organisations have steadily begun to look at contribution as opposed to only loyalty, and employees have increasingly begun to take responsibility for managing their own careers, and began to hop jobs for better prospects.

During the recession, employees looked to stay, while companies began to differentiate more sharply. Now, since the war for talent has started afresh, companies are increasingly beginning to relook at what they need to do to get the right employees to stay. Employees, on the other hand, seem to be looking at job stability and reasonable security as an important component in building a career, given that they faced a lot of turbulence in the past two years. This turbulence affected both younger and older employees.

Younger employees were seeing their first recession, which burst the euphoric bubble they were living in. Older employees began to face sharper differentiation systems and began to focus on learning new skills and taking advantage of all the learning opportunities that their companies offered. Either way, both employers and workers have changed mindsets and are looking to understand and redefine the rules of engagement. The changing drivers of engagement also mean the way companies measure employee engagement and relate it to productivity and business outcomes may change over time.

# The task of leadership: A number of companies are continuing to show increasing interest in ensuring that they have a steady supply of top leadership talent. While assessment centres are a popular method to spot and assess talent in junior and senior levels, companies are now becoming a little more willing to look at different kinds of blended learning programmes for their senior leadership.

These programmes could include a combination of workshops, coaching as well as specific stretch assignments. However, this trend is still nascent but is likely to only become stronger. The other challenge is that given the predominantly younger workforce, most employees at the mid-management level often lack the maturity, experience and exposure to business cycles required to take on more responsibility. This means companies have to pay closer attention to embedding leadership development as part of organisational culture and succession planning.

# The role of HR in governance: Finally, at least some companies are beginning to appreciate and understand the role that a strong HR function plays in governance of the company. Some of the areas identified are: Role of HR in executive pay, board selection as well as ensuring fair performance management systems. India has not been immune to corporate governance scandals that have affected the lives of thousands of employees and other stakeholders. Some companies have been far sighted enough to begin preventative action. Besides, the compliance required with IFRS next year would mean more discernible disclosures on executive pay and employee benefits liabilities.

India as an economy is still on the cusp of great possibility. Its potential will be realised, if, along with sound economic policies, its human resources continue to be channelised so that organisations can take strong, steady steps in the climb to prosperity and sustainability.

Padmaja Alaganandan is India business leader, Mercer Human Capital