The war for people

When your best brains walk out of the door this evening, are you sure they will come back tomorrow? If chief executives in some of the best Indian companies increasingly seek an answer to this question, there is good reason. For, research studies have shown that as many as 90 per cent of Indian companies have talent retention problems. Every fourth software company and every second manufacturing company have admitted to facing problems related to holding back the people they want. This high rate of employee churn is not restricted to middle- and top-level employees. Consider a recent A C Nielsen ORG-Marg study, which said that as many as 80 per cent of all engineering students in India expect to move out of their first job within two years.

What are companies to do in such a situation? Surveys done by Hewitt show compelling evidence that improved human resource management does make a difference. For example, employee turnover in the Indian firms that do a better job of attracting and developing quality employees is 45 per cent lower than in others. The monetary implication of this is huge, as a frontline employee in a large company costs 40 per cent of his annual salary to replace; indeed, top management slots cost 150 to 200 per cent of the annual salary to replace.

However, there are macro-challenges too. As the business process outsourcing companies try to shed their sweatshop image and scale up to knowledge process outsourcing, the information technology industry needs 250,000 employees every year. Nasscom studies say that there could be a shortage of 500,000 professionals by 2010, unless urgent measures are taken to improve the skill base of graduates. Besides, every fifth Fortune 500 company has already made India its preferred destination, and more are set to join the queue. Companies like these do not want plain graduates, they want people with professional qualifications. The available pool of such people is limited. India produces some 300,000 engineers every year, but a large percentage of these are unemployable. The developing supply-demand mismatch has to be addressed if the country is not to lose its cost advantage when it comes to human resources. Already, for several years running, India has occupied the top spot in Asia-wide surveys on salary increases.

The heartening thing is that major Indian companies are doing quite a bit to retain talent, as The Strategist reported on Tuesday. And McKinsey consultants, who wrote The War for Talent, have explained the core elements that make for a winning employee value proposition (or EVP). An EVP, they say, is like the company's customer value proposition; it's the compelling answer to the question, "Why would a talented person choose to work here?" Each company's EVP will be different, but the core elements that managers look for are exciting work, a great company, attractive compensation and opportunities to develop.