Skilled workers exploit talent crunch, impede growth story

Skilled workers exploit talent crunch, impede growth story
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First Published: Wed, Aug 22 2007. 01 10 AM IST

Agashe (left) and Manjit Singh at a cafeteria in Bangalore. Both have changed jobs at the rate of almost one a year. Agashe and Singh are prime examples of the way the whole job market is churning in
Agashe (left) and Manjit Singh at a cafeteria in Bangalore. Both have changed jobs at the rate of almost one a year. Agashe and Singh are prime examples of the way the whole job market is churning in
Updated: Wed, Aug 22 2007. 01 10 AM IST
Karthik Agashe, a 27-year-old software salesman, has changed jobs four times in his four-and-a-half-year career. Manjit Singh, 29, who met Agashe in 2005 when they worked for US software maker Oracle Corp. in India’s technology hub Bangalore, has had three job changes in three-and-a-half years.
Agashe (left) and Manjit Singh at a cafeteria in Bangalore. Both have changed jobs at the rate of almost one a year. Agashe and Singh are prime examples of the way the whole job market is churning in India today
Each switch boosted the men’s salaries by an average of 40%, to about $20,000 (Rs822,000) apiece. Both are ready to jump ship again if their current employer, whom they decline to name, doesn’t transfer them to the US so they can get more sales experience—and another raise.
Is their job-hopping mercenary? “Absolutely,” says Agashe, seated in the coffee shop of the Taj Residency hotel in Bangalore. “I get into a job, I expect certain things,” he says. “If it doesn’t happen over a period of time, this is not the place for me to work. I’ll search for a better company.”
Agashe and Singh—young, educated and mobile—are the faces of India’s boom. They’ve helped spur the fastest growth in more than five decades—an average of 8.6% a year during the past three years. They invest in stocks, hang out at malls and catch such movies as Live Free or Die Hard, fostering an image of India as a rising economic power.
With 54% of India’s population of 1.1 billion made up of people age 24 or younger, outsiders view the country as flush with English-speaking workers who can fill advanced jobs in technology, medicine and finance and attract foreign investment, says T.V. Mohandas Pai, director of human resources at Bangalore-based Infosys Technologies Ltd, India’s second-largest software services firm. That perception is wrong, he says. “The demographic dividend theory in India is bogus,” Pai says. “They are not trained people.”
Agashe, Singh and others with the know-how employers require are rare. And their successes are masking a potentially crippling shortage of skilled employees that threatens India’s economic growth, Pai says. “This is the single biggest factor that is going to hurt India,” says Pai, 48, who wants to hire 26,000 people during the year that will end on 31 March 2008, to add to Infosys’ 76,000 employees.
“It is not the lack of power, because you can set up a generator. It is not lack of roads, because it will take you an hour more. It will not be an airport, because you can fly from many places. It is lack of qualified people.”
Along with Infosys and other Indian companies, scores of international firms such as Citigroup Inc., General Electric Co. and Google Inc. are looking to India for engineers, accountants and programmers and coveting people like Agashe and Singh.
India’s expansion—and the expectation that it will continue—has lured asset managers such as Janus Capital Group Inc. Its $8.7 billion Overseas Fund jumped 55% in the year ended on June 30, ranking it first out of 1,024 funds that invest in stocks outside the US, according?to?the firm’s website.
Goldman Sachs Group Inc., the world’s most profitable securities firm; Morgan Stanley, the No. 2 securities firm; and JPMorgan Chase & Co., the third-biggest US bank, are all buying shares of Indian companies, pushing the Sensex to a record 15,794.92 on 24 July.
Manpower shortage threatens to dampen the frenzy. Underneath the growth is a gap between India’s haves and the larger percentage of have-nots.
The number of Indian millionaires rose 20.5% in 2006, the fastest pace after Singapore’s 21.2% gain, according to the 27 June World Wealth Report by Cap Gemini SA and Merrill Lynch & Co. At the same time, about 40% of adults in India are illiterate. Only 10% of Indians aged 18-24 are enrolled in higher education compared with 45% in developed countries, Prime Minister Manmohan Singh said in a June speech marking the 150th anniversary of the Mumbai university.
Precious people
In-demand job-hoppers such as Agashe and Singh are increasing firms’ attrition rates to more than 20% a year, according to the Associated Chambers of Commerce and Industry of India. Twenty-four per cent of India’s IT workers left their firms in 2005, says human resources consultant Hewitt Associates Inc.
India’s middle class, which consulting firm McKinsey & Co. defines as people with monthly disposable income of between Rs15,000 and Rs75,000, has more than doubled to 50 million in the past decade. At the same time, 54% of the population earns an annual household income of less than $1,970 a year, or $5.40 a day—putting Agashe and Singh and their $20,000 salaries ahead of most.
To keep skilled employees, firms in India are boosting salaries at the fastest pace in Asia. Wages are likely to surge an average of 14.5% in 2007 after a 14.4% rise last year, Hewitt predicted in March. Companies may start investing elsewhere—such as in China or the Philippines—where average wage increases are 8-9% a year, Hewitt said.
“If you don’t fill the gap— and I mean today, because the problem is already becoming pressing—it will cause companies, multinationals and others to think twice about setting up operations,” says William Nobrega, president of the Conrad Group Inc., a Miami-based firm that advises US and European companies on investing in India and Brazil.
Pai says India’s greatest calamity is the government’s failure to improve education. India, which gained independence from British rule in 1947, still hasn’t succeeded in providing universal elementary education. The percentage of first graders who continue to the fifth grade was 78.5% in 2003, according to the South Asia Economic Report by the Asian Development Bank. The global average is 86%.
“Excessive control on education by government has been one of the biggest flaws,” says Ajit Gulabchand, managing director at Hindustan Construction Co., a Mumbai-based engineering and construction firm. “The numbers being educated are far too low compared to what India would normally require.”
One reason is that the salaries set by the University Grants Commission, an arm of the government, discourage teaching as a profession. Without a college degree, an employee at a call centre can make Rs30,000 a month after a few years—twice as much as a university lecturer.
“We are not getting faculty,” says Kalyani Gandhi, chairman of the Nadathur S. Raghavan Centre for Entrepreneurial Learning at the Indian Institute of Management (IIM) in Bangalore, one of the country’s premier management schools. The college has positions for 110 teachers. There haven’t been more than 80 for the past few years, she says.
The country’s six IIMs turn out a total of about 1,500 graduates a year, making the students with their master’s-level degrees prized hires.
In 2007, the 235 graduates of IIM-Ahmedabad received 493 offers from 91 firms, according to its website. Of the offers, 120 were from overseas, up from 86 in 2006. Students accepted 64 of the foreign offers at salaries as high as $300,000. Lehman Brothers Holdings Inc., the fourth largest US securities firm, made the most offers at 17. It got 14 acceptances.
Permitting foreign universities to operate in India would improve quality and enable more students to attend, Conrad Group’s Nobrega says. Singh’s government deferred introducing a law to allow international universities to open campuses after its communist allies opposed the idea.
Arjun Singh, minister for human resource development, didn’t respond to requests for an interview.
Strapped for employees and with the government at a standstill on foreign universities, Indian firms are courting workers from other countries, making training part of the on-the-job experience and trying to hold onto the people they have. Hindustan Construction is bringing in civil engineers from the Philippines. In 2006, it put overseas expansion on hold for three years because that would have stretched it too thin, Gulabchand says.
“There was a time when engineers used to come very cheap,” he says. A civil engineer with 10 years of experience gets about Rs10 lakh a year. Last year, the firm boosted salaries 52% across the organization, the most in a decade. Even so, employees have been hard to land. Hindustan Construction has had three instances in the past year-and-a-half in which candidates accepted a vice-president job, which pays about Rs1.5 crore a year, and then backed out because their current employers agreed to pay more.
Tata Consultancy Services Ltd, India’s largest software services provider, plans to add 5,000 workers in Mexico because people aren’t available in India, says Gabriel Rozman, who heads the company’s operations in Latin America, Spain and Portugal. In April, Tata raised salaries by 12-15% to stem defections.
Some Indian firms are luring employees with the promise that they can gain work experience while they earn a college degree.
As Pai carries out Infosys’ hiring plans, he knows he’ll have to train most of his 26,000 proposed new workers—if he can find them. The firm spent $145 million on training, or 4.7% of its annual revenue, in the year that ended 31 March.
“The information technology industry may be spending $1.5 billion a year on educating and training its people, half of which may not be required if the education system was up to speed,” Pai says.
Because it can’t find enough engineers, Infosys has hired geologists and turned them into software developers.
“We have taken away all the civil engineers everywhere, and we are going to take away more of them,” he says. “We have taken away all the accountants everywhere, and we will take away more of them.”
Mahindra & Mahindra Ltd., India’s biggest maker of tractors and sport utility vehicles, may be one victim of Pai’s talent stealing. Pawan Goenka, president of Mahindra’s automotive unit, wants the company to develop SUVs with as much global brand recognition as Land Rover’s.
‘Grey hair’
A lack of engineers is making that difficult, he says. The company designed and built the Scorpio SUV in 2002. Today, only about half of the 120 engineers who worked on it are still with Mahindra. The rest have moved to other industries such as telecommunications, Goenka says.
“Our biggest problem is we do not have enough experienced manpower to design the last 5%,” he says, referring to the troubleshooting stage. “The last 5% is not something you read in textbooks. It’s what you get after getting grey hair. Unfortunately, before someone gets grey hair, he moves on because of the way the whole job market is churning in India today.”
Agashe and Singh are prime examples of the churn. As they debate yet another job switch, they have their resumes posted on job search website www.naukri.com. They say they’re getting lots of interest from headhunters. A year after quitting Oracle, Singh says, the firm phoned to invite him back to a better job at a higher salary. Oracle wasn’t the only one.
“I get a call from a consultant who offers me the same role, with more money,” says Singh, who shares an apartment with a friend. “I’m in a dilemma: Should I take it, or should I honour my commitment to my present employer?”
Singh’s dilemma is one symptom of India’s talent shortage. Key to its economic future and its attraction to investors is providing the training and education that will produce millions more skilled workers like him. BLOOMBERG
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First Published: Wed, Aug 22 2007. 01 10 AM IST