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Goodbye, appeasement

As the reality of a slowdown bites the hitherto fast-growing IT industry, employees and employers need to realign their goals.

Rahul Sachitanand | Print Edition: August 24, 2008

The last few months have been busy for Venkat Sastry, Partner and IT Practice Head for Bangalore-based executive search firm Stanton Chase, for two diametrically opposite reasons.

Leaner times: IT companies
Leaner times: IT companies
In the midst of a war for talent, Sastry’s clients kept him busy with near non-stop demand for people 8-12 months ago. The same clients have now changed tack and are, instead, asking him to spend more time per candidate, verifying employment antecedents and weeding out unsuitable candidates from the search process. What used to be a one- or two-month search has now become an intensive six-month process. That’s not all. His clients aren’t as generous with their offers as earlier—recruiters are offering a maximum 40 per cent hike to prospects, a far cry from the heady 50 per cent or more offered barely 12 months ago. For their part, employees, too, are taking their time deciding, hunting for the best deal before signing on the dotted lines.

IT’s slowdown

The reduction in growth, from a breathless 40 per cent annually to a relatively sedate 25 per cent across the IT industry, has had its ripple effect on people working in it. As external factors such as a sharp rupee appreciation (which has reversed somewhat in recent months), a slowdown in the US (and other key markets) and inflation at home begin to take effect, companies across the spectrum are beginning to tweak their people policies to adapt to leaner times.

For starters, companies are beginning to hire smaller numbers (Wipro, for example, reported a net negative headcount addition over the last quarter) and are also reducing bench strength and increasing utilisation to work around current economic uncertainty. “In a challenging macro environment, it is crucial for any IT organisation to retain high performers. We have embarked on a strategic programme to retain high performers in TCS. This will ensure retention of top talent in the organisation, and also reduce the cost of replacement and cost of sourcing,” says Ajoy Mukherjee, VP and Head (Global HR), Tata Consultancy Services.

 The dos and don’ts of staying afloat

Companies are no longer offering massive hikes and perks. Be prepared for a maximum of 15 per cent hike going forward

Your variable pay component is likely to be significantly higher as companies look to cut costs

Carefully verify the standing of companies you've applied to. If it?fs a captive unit, find out how important the centre is in the global set-up

Don't hop jobs too often; it is increasingly a black mark in your CV

Enhance your skills; it will help once the market improves

TCS is, in fact, looking to expand its employee pyramid to optimally manage its cost per person. “At least 60 per cent of our new hires will be freshers from campuses in 2008-09,” says Mukherjee. The firm is also focussing on its employee referral programme to attract and retain high quality talent.

“People join TCS for a global career and for the training that we offer for future growth and development,” he says. This has helped TCS remain an employer of choice; it has the lowest attrition rate in the industry of only 12.8 per cent, he claims. While TCS hasn’t reduced salaries yet, it has reduced its non-salary expenditure on heads such as travel, power, IT and communications.

On the ground, companies (and their employees) have slowly begun to get used to this new reality. “The days of 50 per cent and higher pay hikes and seemingly limitless bonuses are now over.

Companies have realised the challenges in the market and only want to retain the best talent. We have heard of delayed increment cycles and single-digit hikes,” says Stanton Chase’s Sastry. According to industry estimates, large IT companies are beginning to weed out the bottom 10 per cent of their staff, conducting more frequent employee assessments and restricting pay hikes in the range of 5-15 per cent. At the same time, the percentage of variable pay has gone up from around 10-15 per cent 6-12 months ago to 30-40 per cent today.

Change is in

T.V. Mohandas Pai, Director (Human Resources), Infosys Technologies
T.V. Mohandas Pai, Director (Human Resources), Infosys Technologies
Says T.V. Mohandas Pai, Director (HR), Infosys Technologies: “Yes, this transformation is happening right now. Most companies are unable to match the high aspirations of employees and some companies have resorted to lower salary hikes this year and are prepared to manage an increase in attrition that may result from this move. I expect this to last this year and a part of the next year.”

Companies are taking longer to finalise each hire and are spending this time closely examining the employment background of each prospect. According to HR consultants, firms could take as long as six months (and six interviews or more) to finally recruit some people. Even when a switch happens, the candidate, on average, is offered no more than a 20 per cent salary hike. “This is because there are lots of people in the market who have been laid off by their previous employers for poor performance. Companies and recruiters need to be wary about them,” says Sastry.

Beyond salaries

Bhaskar Das, VP (HR), Cognizant Technologies
Bhaskar Das, VP (HR), Cognizant Technologies
While switching jobs, people will now closely examine the job description (JD in industry-speak) to make sure they fit into the organisation. If you’re on the management side, you need to consider how much larger your role will be (is it really worth taking a 15 per cent salary hike to manage 250 people rather than the 100 you handle now?) and most importantly, if you can fit into the new work culture.

Pratik Kumar, EVP (HR), Wipro, agrees that employees are looking beyond their salaries, especially in these tough times. “Employees view their engagement with the organisation more comprehensively. They consider the nature of work, and learning and growth opportunities.

Venkat Sastry, Partner and IT Practice Head, Stanton Chase
Venkat Sastry, Partner and IT Practice Head, Stanton Chase
It’s not the salary and benefits alone that satisfy an employee today,” he says. Cognizant Technologies believes that there isn’t one broad brush to cover all employee requirements.

“At the junior level, the focus is on increasing the cashin-hand component; at the middle level, the focus shifts towards asset creation; and finally, at the senior management levels, the priority is wealth creation, primarily through performance-linked ESOPs,” says Bhaskar Das, VP (HR), Cognizant.

However, following the stock market correction, the lure of stock options may be limited, other industry executives argue. “Companies need to look beyond stock options as an employee retention tool and adopt global HR practices,” says Stanton Chase’s Sastry.

Improving employability

As the market continues to be uncertain, companies believe that there must be regular training sessions and free exchange of ideas to keep people informed about the latest developments in the business environment. “We are all part of the same changing environment and a significant thrust of leadership training and communication is on experiencing and managing change.

Ajoy Mukherjee, VP & Head (Global HR), TCS
Ajoy Mukherjee, VP & Head (Global HR), TCS
To help employees manage it better, Wipro keeps up with regular updates and interactive forums where focus is on transparent and open dialogue,” says Wipro’s Kumar.

Pratik Kumar, EVP (HR), Wipro
Pratik Kumar, EVP (HR), Wipro
On the other hand, Cognizant’s Das argues that employees need to focus on the positives in a decelerating market, rather than fret over smaller pay hikes and even (the possibility of) pink slips. “(Employees must) focus on learning and competency building.

Instead of asking a question like ‘is my job secure?’, employees and potential recruits must use this time to address the more pertinent question of ‘how can I become employable?’.” When you are not riding a wave, it is best to invest in yourself so that you are fully equipped to ride the next wave.

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