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“Even the darkest night will end and the sun will rise.” Victor Hugo, Les Misérables
In mid-2012, India’s economy grew the slowest in a decade, business leaders and economists were shocked to say the least. At a time when growth was projected at 6.1 per cent, India’s GDP growth grew just 5.2 per cent. In 2013, for the quarter ended June, GDP was recorded even lower at 4.4 per cent. In August 2013, HSBC’s Manufacturing Purchasing Managers’ Index (PMI), a gauge of factory activity, dipped to 48.5. A reading below 50 indicates that output shrank and it was the first time in 21 months since March 2009 that the index contracted. India was in the thralls of a slowdown akin to the one seen in the last recession in 2002-03, with some economists even describing the economy as a “gasping elephant”.
So are Indians optimistic about the economy? Inflation, which had been soaring for the past few months, has moderated after fire-fighting measures adopted by the Reserve Bank of India over the past year. The wholesale price index (WPI), the price of a representative basket of wholesale goods, is the measure of inflation and recorded 5.05 per cent at the end of January 2014. Though it is lower than the high of 7.52 per cent in November 2013 and 6.16 per cent in December 2013, persistent high inflation weakened consumer demand and lackluster capital goods production points to stalled investment demand. Industrial activity is still in contractionary mode, mainly on account of manufacturing notwithstanding slowing demand, higher borrowing costs and delayed government approvals for projects.
But, even the gasping elephant managed to pick itself up. Not only is the economy looking up, but the hiring trends for the year look very optimistic. Finance Minister P. Chidambaram projected the GDP growth for FY14 at 4.9 per cent while presenting the Interim Budget. The manufacturing sector is also looking up, with the HSBC’s India PMI rising to 51.4 in January 2014 against 50.7 in December 2013, the highest since March 2013.
Employment rose for the fourth month in January, with all three broad areas of the manufacturing economy posting job creation. As FY13 draws to a close, many sectors are planning to ramp up their headcount or at least keep hiring – be it via campuses or laterally— according to trends available in the first quarter of 2014. So, is 2014 the Year of Turnaround? People Matters spoke to HR heads and several experts and found out that there is an overwhelming positive bias towards hiring this year compared to last year. If the news from campus placements is going to be any indication, the numbers are significantly better this year as hiring is back on track.
It’s sunshine all around
India had the weakest job outlook for the Asia Pacific region in the past eight years. According to Manpower Employment Outlook Survey based on interviews with nearly 71,000 public and private employers worldwide for July-September 2013, 26 per cent of the respondents (5,265) expected staff strength to increase, while 54 per cent anticipated no change. However, the Manpower Group improved its outlook for the January-March 2014 quarter and said in its research report that despite continuing economic challenges and widespread uncertainty, majority of hiring managers will continue to add to their workforces in the first quarter of 2014.
India’s first-quarter hiring pace is expected to remain robust despite quarter-over-quarter declines in all seven of the country’s industry sectors and in three of its four regions. Forecasts are strongest in the wholesale & retail trade sectors and the mining & construction sectors where job seekers are expected to benefit from aggressive efforts to improve infrastructure throughout the country. The hiring pace is also expected to remain brisk in the services sector where IT talent continues to be aggressively recruited by both national and multi-national firms.
Middle and senior level managers are the most optimistic about the economic situation in 2014, says Randstad India’s latest global WorkmonitorWave 2013, a quarterly review that tracks jobseekers’ confidence. Randstad India offers HR services like staffing, search & selection, HR solutions and in-house services. The survey indicates that 84 per cent of the respondents are hopeful about the economic situation in 2014 and 86 per cent are expecting a higher pay raise in comparison to previous year. About 93 per cent of the respondents believed that they had taken the effort to develop their skills and competencies and 80 per cent agreed that their employer provided opportunities for their development.
Moorthy K Uppaluri, CEO, Randstad India & Sri Lanka, said, “The optimistic sentiment that 2014 will be a year of turnaround has been in the air for some time. With the sentiments of the market looking positive, it is anticipated that employees will expect a better hike in their salary than compared to the last couple of years. These demands could have an impact on the attrition rate. So, companies must start focusing on building strong HR practices that will not only address employee salary expectations but also focus on necessary training programs and offer great career opportunities. This will help organizations to stay ahead of the race and capitalize on industry growth.”
That is not all. After six successive declines, the Monster Employment Index India released in January 2014 charts an 11 per cent growth in annual recruitment activity. Retail and IT (Hardware & Software) sectors record the maximum growth in opportunities between January 2013 and January 2014, while consumer goods/ FMCG, food & packaged food registers the steepest decline. Online demand for software, hardware, telecom professionals continue to exhibit the most notable growth, year-on-year. The Monster job index is a monthly gauge of online job posting based on a real-time review of job opportunities culled from a large selection of websites and online job listings.
“Monster Employment Index exhibits upbeat hiring trends vis-à-vis the previous year. IT (Hardware& Software) and Retail are among the top growth sectors. Even though the rate of long-term growth achieved is much lower than what was witnessed in 2010 and early 2011, the situation has certainly changed for the better. Basis feedback received from various corporates across industry sectors and HR consultants, it’s is estimated that 2014 will be a promising year on the job front. IT, healthcare, education, infrastructure and BFSI sector are likely to drive the job market in 2014. Both World Bank and IMF are optimistic about India’s economic growth in 2014,” said Sanjay Modi, Managing Director, Monster.com (India/ Middle- East/ South East Asia).
So, who’s hiring and why?
Banking and Financial Services Sector (BFSI) is leading the pack. The banking sector may create up to 20 lakh new jobs in the next five to 10 years, as the central bank Reserve Bank of India readies to issue licences in a bid to expand the financial services into rural areas. According to Randstad India, the banking sector will create 7-10 lakh jobs in the coming decade and will be among the top employment generators of 2014. Besides direct hiring in the wake of the possibility of new banks opening up and branch expansion of existing banks, the trend will get a boost as many staff retire from public sector banks. Nearly half their workforce is scheduled to retire in the next few years.
Large corporate houses like Larsen & Toubro, Bajaj, Religare, IDFC, Edelweiss and JM Financial are in the fray for the new banking licences. Companies, which bag licences, would get about 18 months to launch operations.
Kamal Karanth, MD, Kelly Services India, said a high percentage of hiring is taking place in the banking sector, which is being attributed not only to branch expansion by existing banks but also to the new banking licences that are expected to be issued. With new job openings, the challenges that can be seen in this space are: Getting a specific skill set for the right position; a shortage of women employees; significant rise in poaching within the industry; and getting the training and development processes in place.”
Citigroup is planning to hire 2,500 more professionals this year. The hiring will be across businesses and functions, including consumer banking, investment banking, transaction services and treasury business. The proposed hiring will mostly be at the entry level or within a year or two of experience. Apart from lateral hires, Citi also plans to hire about 200 students from campuses.
HDFC Standard Life Insurance is planning to hire around 500 people per month for 2014-15, mostly as replacement hiring in the sales function. Rajendra Ghag, Executive Vice President – HR, HDFC Standard Life Insurance, said, “For 2014-15, we are specifically looking at strategic expansion, not just in terms of geographical locations, but also the macroeconomic conditions, the regulatory environment and what kind of channels to expand into. We want to create young leaders for the future and so we normally go to B-schools for hiring. Last year, we hired 50 students from B-schools. This year, it was 55.”
Talking about his company’s retention plans, Ghag said, “For the entry level, we have made an out-of-the-box performance management process and tweaked our compensation strategy to ensure that the good performers are getting rewarded. Since compensation alone is not enough to retain talent at the middle and senior levels, we ensure that we provide an all-round experience with growth opportunities and talent development initiatives.” Compensation benchmarking is undertaken every year as part of the performance management. One example is: At the start of the year, every employee knows what amount of Variable Pay for Performance (VPP), s/he is going to get at the end of the year subject to the organization’s and the individual’s performance.
Coming a close second after BFSI in terms of hiring is the IT and ITeS sector. Software industry body NASSCOM said the IT sector is likely to grow by 12-14 per cent in dollar terms. In the first quarter of 2013, net hiring by two IT majors Infosys and Tata Consultancy Services (TCS) dropped to the lowest in last four years. Analysts attributed the drop to developments on the US immigration Bill and other internal issues. A slower US market, frequent management changes in Infosys who also had to face a million-dollar suit involving alleged misuse of H1B visas, and slow movement in the European market also contributed to the low figures.
This year, it is an entirely different story. Recently, TCS revised its overall hiring target from 50,000 to 55,000 for 2013-14 and also won a major deal to handle nearly 1,000 offshore jobs – much of it customer service and back office – for the British energy giant NPower as part of its restructuring. On the other hand, Infosys plans to hire 16,000 engineers in 2014 and has begun an off-campus recruitment drive after a two-year gap. For the current fiscal, the company had stated that it would get on board around 6,000 freshers through campus recruitment.
NASSCOM said hiring for IT graduates could witness a difference this year as companies not only recruit from the campuses but also do just-in-time hiring as priorities shift to soft skills and domain-based specialization. Som Mittal, who was the past president of NASSCOM, told reporters, “The numbers will not be as big as it used to be... Though, we will be hiring in 2014-15, they will actually be for 2015-16, so that they can go through their training. We spend over 2 per cent of our revenue for training.”
Consulting majors like KPMG, Deloitte and The Boston Consulting Group made a beeline for premier B-schools in the country like the Indian Institutes of Management. Though a lot of consulting companies have made many job offers at B-schools, experts said that they didn’t forsee a boom in the sector. Rather, they said that companies have just ramped up the hiring.
Global consultancy company KPMG is looking to double hiring from 100 last year driven by a need to strengthen advisory. It is also planning to increase its headcount in India’s Eastern region five-fold to 750 over the next two years. Capgemini, an IT and consulting company, plans to shift nearly half its overall business to India over the next three to five years. Over the last five years, Capgemini’s India headcount has increased from a few thousand to about 47,000.
Manufacturing sector breathes easy
JK Organisation, a large industrial group with a global presence in manufacturing activities, hires management and engineering trainees every year. Dilep Misra, President & Head Corporate Human Resources, JK Organisation, said, “Even though the deep economic slowdown and delay in implementation of projects did hurt the jobs in several sectors last year, particularly in manufacturing, this year we definitely see an upsurge in the economy. The GDP is also showing a positive go ahead. There will be demand in the manufacturing sector but the percentage of hiring might not be high. Overall, we see a steady growth in the job market.”
Thanks to Chidambaram, the sector can breathe easy. CII President Kris Gopalakrishnan says, “The Finance Minister has highlighted the importance of the manufacturing sector, which is key to reviving the economy. I must thank the Finance Minister for recognizing this need and reducing excise in some of the most affected subsectors of manufacturing.” The reduction in excise duty on sectors such as automobiles, capital goods and consumer electronics is indeed welcome, as this will help revive demand in these sectors, the CII President added.
The National Manufacturing Policy has set the goal of increasing the share of manufacturing in GDP to 25 per cent and to create 100 million jobs over a decade. Eight National Investment and Manufacturing Zones (NIMZ) have been announced along the Delhi-Mumbai Industrial Corridor and nine projects have been approved by the DMIC Trust.
Larsen & Toubro plans to hire almost 4,000 engineering trainees with degrees and diplomas for its various business verticals this year in all entities, including L&T Infotech. Yogi Sriram, Senior Vice President (Corporate-HR), L&T, said, “The job outlook is not at a euphoric high, but one step better than last year. Some companies will have requirements for specific domain-related jobs. MBA graduates will have more opportunities this year but companies, especially those in the manufacturing sector, are not hiring as many as they did when the economy was at its peak. I think it is a “wait-and-watch” period.
Explaining that L&T’s business is an informal barometer of the Indian economy, Sriram said the company’s growth aspirations are robust. “We are also making concerted efforts to build our footprint in the Middle East and internationalize our business in a selective manner in certain geographies. In spite of the challenging business environment in India, we believe that we should not be deterred by the temporary blips in the economy. L&T does not want to make the mistake of reducing or stopping the recruitment of young graduate and diploma engineering trainees, who are an important part of the basis of the emerging leaders pipeline. For us, it is an important inflow of young talent for the future.”
The company is hiring senior-level talent selectively at strategic levels for meeting growth needs and also the company’s leadership succession needs, more so because the company has entered new business verticals such as real estate, power, ship building and railways. Also we need leaders in certain niche business domains to run P&Ls in the Middle East. “Finding leaders who have handled large P&Ls is not particularly easy.”
As to whether the forthcoming Lok Sabha polls would have any effect on the hiring plans, Sriram said, “If the polls result in a government, which is perceived as more stable and there is better unity of command in decision-making on policies concerning infrastructure, at the highest levels in government, then it will affect the economy positively in general and the employment scenario also, as a result. If the new government will promote and encourage measures for the infrastructure sector with clear policies, then definitely it will be positively helping L&T and affecting L&T’s performance.”
The availability of talent is a key challenge for L&T since it is an EPC (project management) company. “It is difficult to find P&L leaders with EPC contractor experience in sectors such as ship buildings, railways, power and others that have opened up in the last seven to eight years. Talent at the leadership level, who have successfully grown businesses and multiplied value for shareholders, or who have taken the company to new heights in international geographies is also hard to find. Therefore, availability of external leadership level talent is going to be one of the major challenges in our pursuit of growth.”
With the Lok Sabha elections coming up, some companies for whom public policy matters are in a wait-and-watch mode, while others are going ahead with their investment and expansion plans.
Premlesh Machama, Managing Director, CareerBuilder India, said there have been no job losses. Companies have retained their headcount in their core areas of business. The impact was mostly on the creation of new jobs. New jobs have not been created over the past four to six quarters as businesses held back their expansion and investment plans. In fact, steps taken by the Union Finance Minister P. Chidambaram have started finally yielding results and the economy is showing green shoots of recovery and this started happening sometime in October-November last year. The momentum for the turnaround of the economy has begun and it is going to get more stronger post elections. Whichever government comes to the Centre will have no option but to stimulate growth.
Most businesses had held back investments for a very long time as they did not provide good returns. Post elections, that will change as companies would be eager to get going on their expansion plans. This, in turn, will lead further impetus to new job creation, Machama added.
Conclusion
All these facts and figures point to just one thing – The war for talent has just begun. The first indication of this trend is that many prestigious B-Schools have reported good placements this year. Secondly, with new players entering the banking sector and old players expanding their operations, the talent pool for finance professionals would suddenly shrink. Even if all companies don’t start out at the same time, there will be a need for experienced professionals notwithstanding the demand for entry and junior-level people as well. This could also push the compensation for such professionals along the lines of the boom times for the IT and ITeS sector previously. The sectors that are going to witness high growth will see a massive shift of talent. This is because majority of the workforce in recent times comprise the Generation Y. Attracting the best and the brightest with high compensation packages alone will not work. They will also have to ensure that their employee retention and employee engagement programs are doing their job.
So, are companies geared up to meet the challenges head on? If the HSBC report is to be believed “India is still stuck in a rut”. According to the global financial services major, 2014 could thus prove to be a tale of two halves. In the latter half of the year, there would be some economic recovery and return to normal business conditions. But, if one were to believe Chidambaram, India is the 11th largest economy in the world.
Whether 2014 will turn out to be a golden year in terms of growth is something that only time will tell. In the meantime, the sun is shining bright on the recruitment sector.