India lacks great technical talent

while attrition has always been high IT industry, the current level of churn is about 30% higher than before. Many factors have contributed to this, the abundance of opportunities all around being one of them. I’m talking massive white-collar technology and managerial talent here. It is interesting to see how the great startup carnival in India has created a huge talent crunch. 200. with more than unicorns And as ‘soonicorns’ (soon to be unicorns) thirsty for talent, and thousands of smaller startups are also on a hiring spree, companies outside this hallowed ecosystem are gasping for breath. And since most of these startups are well funded and scaling rapidly, it has become extremely difficult for traditional companies to compete – both to hire as well as to retain talent. And, not surprisingly, industries that were not long ago considered disruptive of the new age have increasingly faded away from being part of the traditional sector, struggling for rent, and perhaps being disrupted. are waiting for.

As if that wasn’t enough, the pandemic has completely changed some paradigms that were taken as a given, making it even more difficult for companies that follow the same engagement model with their employees. Look for the one they’ve been using for so long.

sense of déj vu

For those who have seen similar cycles in the past, this is a bit strange. The Y2K bug and the resulting wave of outsourcing triggered the first huge wave of entrepreneurship in India, pulling talent out of every industry and college campus. Early signs of this phenomenon were visible even during the making of Y2K. Companies with in-house IT functions were bleeding and struggling to recover lost talent from new age IT services companies.

In the 1980s and even the early 90s, construction area will command the Day 1 slot in premium engineering schools, and Hindustan Unilever Ltd and Procter & Gamble Company will enjoy similar privileges in premium B-schools; But all this changed rapidly at the turn of the century.

Outsourced services upstarts were rapidly replacing these traditional giants on campuses. Companies in banking, healthcare, travel and other domains were also losing talent to IT/BPO companies, which were building domain capabilities in these industry sectors. Banks themselves were predators when regulations were liberalized to enable the creation of private banks. ICICI Bank, Axis Bank, HDFC Bank and many other new age private banks developed gangbusters and siphoned off talent on salary from public sector banks and other financial services companies, which was then considered quite reprehensible.

It was not always a battle of talent between new age companies and their old counterparts, but between different new age companies themselves. These days companies were messing with the ‘no-pouch’ agreement. Sometimes they worked but mostly they failed. These were in principle not much different from companies of an elite class engaging in pricing. While pricing and other anti-competitive actions were a violation of the law and had to be done stealthily, ‘no-poach’ agreements were more of an ethical violation and were discussed openly.

Companies are also engaged in all kinds of innovative ways of accessing and hiring talent from their competitors – some ethical and some not so ethical. Non-compete and non-solicitation clauses became part of employment contracts, but they were rarely enforceable, and the courts, to a large extent, took employee-friendly positions in the case of disputes. So they were used more as a deterrent. A legal notice from a law firm appointed by the company, and the risk of lengthy and costly litigation, was enough to strike fear in the minds of most employees.

stock options boom

In large and mature companies there was little or no risk to the employees and job security was assured. The same was not true for startups, and for a long time, they struggled to attract talent. However, startups had a secret weapon in their arsenal, namely stock options.

In the early 90’s, employee stock options Novel and tests were not done, but in 1993, when Infosys enlisted and unlocked thousands of employees—including, according to myths, some early-stage blue-collar employees—this form of compensation gained attention. This demonstrated for the first time that if you were talented and took the risk of joining a startup in a key position at an early stage, you could probably make enough money that traditionally looked poor compared to looking rich. In addition to the opportunity to become rich, cash salaries at all levels far exceeded those paid by other industries. Winning wars in history has been mostly about better weapons- iron over bronze and guns over swords. This battle for talent was no different. companies like Infosys A traditional knife was a gun brought to the fight and taking advantage of this advantage quickly developed into multi-billion dollar enterprises. Over time, many were strategic takeover And the listing created wealth for the employees who were part of these firms.

Many traditional firms complained that some of these new-age service firms did not do work that was intellectually challenging. In Maslow’s hierarchy of needs, for most people, intellectual challenge lies at a higher level than physical needs and so, even if that argument was true, which most were not, it did not cut the ice with his employees. The reality was that these new-age service companies were solving some real problems for their customers, and that’s what mattered. No problem is small or big. If products and talent were paid for or compensated for how useful they were, clean water and healthy food would probably be the most expensive things in the world, and the people who produced them would be paid the best. But that’s not the way economics works. It was Brian Tracy who once said, “Your earning potential today depends largely on your knowledge, skills and your ability to combine that knowledge and skill in a way that you contribute value to. customers are willing to pay for it”.

In a free market, each free exchange gives a clear indication of which skills, talents, goods and services are valuable and relevant, or how difficult it is to create and bring them to market, or simply lack them. These signals are captured and communicated through pricing mechanisms, with pay and talent shortage indicators.

After some time, the enthusiasm to work for startups and receive a share of compensation in the form of stock options soon faded as the outsourced services industry expanded and consolidated. Infosys and Tata Consultancy Services Both are now valued at over $100 billion. had grown up. Foreign customers quickly understood the rules of the game and pitted one service provider against another in ruthless bidding wars. IT services firms were under severe cost pressure as the competitive intensity in the sector heated up, and cost-cutting became the norm. Soon, these IT services companies were no longer the employer of choice. Their cost advantage was sustained by keeping entry-level salaries roughly flat year over year and promoting people into roles they were not fully prepared for. Using a strong process orientation, they were able to deliver above-average results with average talent.

Learning from him, several global firms quickly set up shop in India. Some of them were product firms like Google that weren’t under any serious pricing pressure and could offer attractive compensation and have employee-friendly policies for their employees, making these companies really great places to work. Became.

startup revolution

It was until 2008 when fresh tremors struck once again. “Every once in a while, a new technology, an old problem, and a big idea turns into an innovation,” said Dean Kamen, an American engineer and inventor best known for inventing the Segway. That’s exactly what happened when two young Indian Institute of Technology-Delhi engineers Sachin and Binny Bansal founded Flipkart.

A new wave of entrepreneurship had hit the tipping point. For various global economic reasons, the startup ecosystem in India had received an unimaginable boost, and the Flipkart story inspired hundreds, if not thousands, of young Indians to become entrepreneurs. Zomato’s recent listing marked a major milestone in India’s startup landscape for obvious reasons, and the initial public offerings (IPOs) expected in the coming months have once again turned the tide of big talent towards startups. This is once again a signal to companies that are losing talent and ask themselves some tough questions as to whether they really need this kind of talent and whether they should take their institutional knowledge seriously and have a robust process. Must have orientation and work with average people.

One could argue that building a steel or motor car today is far more difficult than delivering groceries at home—whether in 4 hours or 40 minutes. But the market capitalization of companies in these businesses does not reflect this. Nor the wealth-creation opportunities for those employed by companies in these sectors. Why is it like this?

As an industry ages and matures, knowledge about business becomes institutionalized and innovation slows. It doesn’t require a lot of problem solving or critical thinking skills to run a business. Unless, of course, a breakthrough occurs and a Tesla is created, whose market cap is larger than the rest of the automobile industry. Could none of the current global auto companies innovate and build Tesla? Probably yes, but more likely not. Because your success leaves you satisfied with the status quo and deeply loved.

Therefore, the disruptors are mostly from outside the industry. While delivering groceries at home doesn’t require much knowledge, even on a large scale, the value of the model lies in shifting value from existing channels to a new channel. Investors, and therefore talent, allocate a good portion of the anticipated future value (both creation and erosion) to firms, especially in the sunrise and sunset sectors. Therefore, for a short period of time, companies in the sunrise zone get overvalued and companies in the sunset zone get undervalued.

Those who are under the illusion that merit and hard work need to be rewarded at everything, will be disappointed to learn that miners who work underground are probably paid the least. It has been a useful illusion to live by because it forces you to try harder, but awareness of the grim reality of ‘creative destruction’ is a good counter-balance that helps the individual adapt and learn faster. does.

In a blogpost titled Fortune 500 Firms: 1955 vs 2017, Mark Sperry wrote that of the Fortune 500 companies in 1955, only 12% survived in 2017, and the half-life of public companies in the US is just 10 years. In other words, of all the companies that list in any given year, 50% of them disappear in 10 years, either through acquisition or death. Some companies don’t really die. They simply fade into oblivion. Loss of access to talent and other resources ensures their eventual obsolescence.

Geoffrey West, in his seminal book Scale, explains that after booming in their youth, almost all companies float atop the waves of the stock market with their metaphorical noses just above the surface.

I have watched this war for talent over the past two decades – talent of all kinds – and have come to the only firm conclusion that despite the challenges individual companies may face, this war for talent is a macro-level one. Very good indicator of innovation and rebalancing which is an integral part of economic progress.

TN Hari is the Head of Human Resource (HR) at BigBasket