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The human capital challenge

Q&A: Deepak Gupta & David Everhart

Amit Ranjan Rai  |  New Delhi 

one of the biggest concerns for companies. Attrition continues to be high and hard to check.

According to estimates, the is witnessing an attrition rate of 40 per cent, the pharma industry about 30-35 per cent and manufacturing over 20 per cent.

How is your company dealing with the situation — is it making a compromise on talent? Further, does it have enough leaders to drive future growth? Leading executive recruitment firm Korn/Ferry International has been involved with global companies in developing employees internally and retaining their top talent.

David Everhart, Korn/Ferry’s Asia Pacific head for leadership development solutions, and Deepak Gupta, the firm’s country head and managing director in India, spoke to Amit Ranjan Rai on the best practices to attract, retain and develop the “right” talent. Edited excerpts:

How has the human capital landscape changed in the last two-three years?

David EverhartDavid Everhart (DE): Overall, we are seeing that sophisticated companies are realising that human capital can no longer be looked upon as a zero-sum game, where you end up chasing the tail that everyone else is trying to hire. Companies will have to identify exactly what they need.

Generally, we see two types of companies operating in the human capital space — traditional HR consulting companies, which are often focused a lot on comp and benefits, and executive recruiting companies, which are typically focused on the recruiting side.

But what companies need is something in the middle — perhaps a strategic partner who can help them decide, do they need to look outside for talent, do they need to develop it inside, or do they need to do both.

In the war for talent, a situation that Indian companies very much face today, the answer is they need to do both. There is not enough talent externally to fill all your positions.

Unless you are also strategically developing the talent you have, you cannot sustain the growth levels that Indian companies currently have. One of the things that is changing in companies is that human resource used to be a separate function. Now it’s being looked upon in a very strategic way.

Often the HR director played a functional role, and was rarely seen at a senior executive’s table. But companies are now realising that unless this person is a strategic member of the executive team, it’s hard to execute a long-term

We are now seeing titles such as chief human officer (CHO), or even chief talent officer (CTO) being offered. Their job is not the daily comp and benefit stuff, but to ensure things such as if the company has the executive talent it needs to hone, the challenges it faces on this front and how can they be addressed.

Deepak GuptaDeepak Gupta (DG): In the past few years, we’ve seen attrition levels in Indian companies soaring really high. In some sectors it is as high as 40-50 per cent. In the IT/BPO sector it is about 40 per cent, in pharma it’s about 30-35 per cent, in manufacturing it’s about 20 per cent, and so on.

At the same time, the compensation levels are going through the sky. Combine the two and it’s a huge crisis. An external study estimates the cost per year associated with the cycle of human capital for India at $10.8 billion.

What are the main reasons for such high attrition levels?

DG: There are two or three important reasons. Compensation levels have gone up rapidly in the country, obviously that is a very strong reason. No matter how well a company pays an individual, there will always be someone who is willing to pay more. Companies are in a growth mode, they find it hard to get the right talent and thus are ready to pay more.

But we often hear that compensation may not be as big a reason...

DG: It’s nice to hear such things, but in reality, every individual is trying to climb up the ladder. This game started at the top when CEOs were able to lift up their compensation to a higher level, those below them followed, and the trend caught on. Now, everybody is trying to get to global levels. Compensation definitely is a very strong reason.

The second big reason is cultural mismatch. Many a time, one makes the mistake of joining a company where culturally one is not able to adapt, feels claustrophobic, and is soon on his way out. These are the two biggest reasons for high attrition.

The dearth of good leaders is another challenge. How should companies go about building an internal leadership pipeline?

DE: Part of the issue is identifying who the high potential leaders are in the organisation. We see a lot of companies now focused on identifying high-potential young managers within the mid-ranks.

So who are these people? These are managers with strong learning agility. For instance, a traditional manager may look for a solution to a problem in similar problems in past and go for a solution that comes closest.

But a true high-potential leader may actually look at the problem, think about all the past experience, ask people around, and come up with a solution unique to the problem, not just going for yesterday’s solution.

Companies need to identify such people and invest in them. These high potentials are the ones who, if nurtured, can become the general managers of tomorrow.

But the issue is also how to retain them for a longer term?

DE: There are some very specific things that companies need to do. If a high-potential worker has been identified, chances are other companies, too, are pursuing him. Probably, he’ll have two-three offers in hand while working for you.

He might not be particularly interested in those offers, but a bad week and you never know he might just pull out that offer file. So how does the employer make sure that he doesn’t pull out this file?

That could happen if the employee sees the organisation is committed to his development. It can’t just be words, there needs to be concrete action. The organisation will have to see he’s been recognised, sent to special training programmes, mentored by seniors, and so on.

Equally important is that this employee is able to clearly visualise his next two or three years in the company. He should know what in store for him.

For instance, if he knows in the next six months he’ll be sent to a training programme in London, and in another two years, trained for general manager’s post, it’s more likely he will stay. But his company also needs to ensure that he doesn’t have to wait too long for these.

At the same time, his compensation has to be fair. If all these things are taken into consideration, it would be easier to retain people.

Why are HR companies and HR departments so important when it comes to the hiring process?

DG: While business heads thoroughly test the business skills of the talent to be hired, only, say, 50 per cent of success of these individuals is based on the actual skill sets.

The other 50 per cent is based on the softer skills, which is what the business guys easily tend to overlook. That’s where the HR guys combined with somebody like us, who can help them use the competency-based methodologies can zero in on things like, say, what’s the leadership style of this person, what’s the thinking style of this person, what’s his emotional style and so on.

DE: Another important issue here is cultural failure. If I work for, say, TCS and move to a different company, how radically can I adapt to that new environment, and is there someone in that new organisation who can explain all the implicit roles to me that aren’t written down anywhere.

That’s a huge derailing factor for people coming in at the executive level. Often, even people who are very qualified don’t know what the rules are and they make mistakes because they are using the rulebook from the previous organisation —it’s like they used to play cricket and now they are expected to play football. That’s where we can play a significant role.

First Published: Tue, September 16 2008. 00:00 IST