When we started IDFC Private Equity six years back, we had the flexibility to define infrastructure the way we wanted to. And we, therefore, defined it as the “bottlenecks in India”. One of the bottlenecks we identified way back in 2002 was the lack of skilled people. Every industry we talked to complained about the difficulties they faced recruiting and retaining people.
A couple of years back, one of my professors from the University of Chicago, Marvin Zonis, visited India. He would ask Indian CEOs what was their biggest challenge. And without exception the answer was always “managing growth”, i.e. recruiting and retaining good people.
There is a lot of talk about the demographic dividend that India will enjoy—half the population under the age of 25, 550 million teenagers by 2015, and so on. A study by staffing company TeamLease Services Pvt. Ltd estimates that 57% of Indian youth is simply unemployable because they lack adequate skills—this is a shocking statistic. This demographic dividend could, therefore, end up as a demographic disaster if these 550 million teenagers are not trained to be employable. Imagine the social chaos 10 years later if this was to happen—the current Naxalite problem could pale incomparison.
There are many initiatives across the country that try to address this problem. Some of them are doing an excellent job. Unfortunately, the efforts being talked about—by the government, the private sector, the public sector and non-governmental organizations—only tinker at the edges because they lack scale or proper delivery channels. ICICI Bank Ltd has made a start in this direction by setting up the ICICI Manipal Academy (IMA) with Manipal Universal Learning which is a finishing school for the probationary officers at the bank. The programme teaches new entrants subjects such as English, etiquette, banking and management—subjects that they should have been taught at college. Lower down the skills ladder, Asian Paints Ltd has set up a training institute for house painters. And virtually everyone is aware of Infosys Technology Ltd’s campus in Mysore, which is a bold statement to highlight the importance the company pays to training. But these are just drops in the ocean—India needs at least 100 such initiatives.
One of the biggest problems, however, still remains unanswered. Who pays for this skilling?
Many companies look at this as a CSR (corporate social responsibility) activity, which limits the extent of its scale. The government’s efforts invariably will have delivery problems despite the best intentions of those in charge of the process and delivery—just take a look at many of the government-run schools and Industrial Training Institutes. In my view, if skilling has to be successful in India, it has to be done by the private sector on commercially viable lines— just take a look at who skilled India’s youth to handle computers. Students will pay for this training if they believe that they will get a job that will improve their lives.
But we don’t see this that clearly when we go down the pyramid. We don’t see companies willing to set up large-scale “for-profit” skilling centres for plumbers, carpenters, welders... If all the real estate developers were to actually try to build whatever they have promised to investors, they would not be able to do and the main reason is that there are not enough skilled people around to do it.
Given the enormity of this problem, it is strange that developers and others do not want to pay for this skilling. The fear is that the skilled employees will leave six months later and the training cost will be wasted. Unfortunately, this is a short-sighted approach—the outsourcing and software industries faced the same problem, but they went ahead and still continue to invest in training. Of course, in the short term people will leave, but over time if companies focus on staff retention, fewer will do so.
If one wants to understand the competitive edge of some of the progressive new companies, one has just to look at how these companies are investing in people. A few years back, the GMR Group built up a strong team to develop and operate airports even before they started operating an airport on their own. They invested in sending team members across the globe to understand how world-class airports operate. This enabled the group to virtually overnight deploy a team of around 300 people at the Delhi Airport soon after winning the bid to modernize it. The Hyderabad airport is something that every Indian should be proud of. But again, we need another 25 such airports in India.
Another example is Suzlon Energy Ltd. Suzlon recruits people six months ahead of when they are needed. The company deliberately staffs itself with an extra 25%. This cost or investment is what will give the company the extra edge as it continues to grow its market share. Suzlon also empowers their employees to behave like entrepreneurs.
So unless Corporate India starts actually investing in people, instead of just talking about it, the Indian growth engine will soon run out of steam.
The author is president and CEO of IDFC Private Equity.The views in this article are his own and need not represent those of IDFC Private Equity. Respond to this column firstname.lastname@example.org