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Performance and Pay – The Changing Curve

25 May 2015 by  Speakers at the Aon Hewitt's 7th Annual Rewards Conference

Time to Take Some Risks 

Q. How do you see India's position changing in the global offshoring industry?

A. India is poised today to play a much bigger role in the talent landscape. The reason is demographics. Demographics are shifting globally but in India, they are shifting in favor of the youth. Having said that, there is a huge danger that unless we take risks and evolve our infrastructure faster, we will get left behind. I think in the last 10 years, we already have been left behind. There is a chance today that we can try catching up, but I think that is an area of opportunity many other countries are also striving for. It has become far more competitive, and we need to be very aware of the risks and initiatives we have to demonstrate to be able to establish our position in the world. 

Q. Trends are changing quicker than they did in the past. How are you as a business changing with it? 

A. Economies and the world are changing faster than it did before and I honestly don't think India is keeping pace. The world is still not saying that Indian companies are taking risks. We are still not seeing them make new products, or invest in R&D. We are not even seeing them invest in training or take risks with their people that they need to, in order to succeed. So, there is a danger that we will get left behind, because we are doing the same old thing that we were doing 15 years ago. As a result of that, you won't see many Indian companies in the list of the world's best known companies. For a country of a billion people and with a very large GDP, that's unacceptable. If you look at countries like Brazil, Canada, Taiwan, Korea – much smaller countries than we are, they have got so many innovative companies. I think if we don't make such similar investments in new thinking technologies, etc., all of which are at our doorsteps, we will not be able to keep pace and will stay at the bottom of the economic ladder in terms of the kind of work that comes to us. 

Q. In light of India's changing value proposition, how do you think India can maintain and strengthen its competitive edge?

A. As an offshore destination, yes India is strengthening its competitive edge, but as a solution provider, I'm not so sure. While organizations are still looking to offshore the lower rung of the jobs, they still don't want to offshore the high value work. Looking at manufacturing as an analogy, all of Apple's parts are manufactured in China because manufacturing there has gone to a level and technology which allows China to produce some of the world's greatest products. We are not there yet in the offshoring space. There may be some exceptions, which are often quoted, but they are far too few. We are still going to be the offshoring destination in the world. But the question I am trying to ask is, will we be moving higher in the value chain. 

Q. What are the three top expectations that business leaders have from HR?

A. My expectations from HR are huge. I think, it is the most fundamental role, more than the CFO or any functional head. I would ask them to do a few things: 

  1. Take risks with people. HR in India is far too conventional or docile or risk averse. We are a country of a billion and we still complain of skill shortages. Let's examine how the IT-BPO solved this problem. We setup training centers, universities, residential centers, etc. Industries can't say it has skill shortages because it can always train people. But, HR very often stops you from hiring people from all dimensions, demographics and different backgrounds. They hire people like us. You must be a graduate from a specific set of colleges, etc. Those are meaningless yardsticks in a country of the demographic range as India. The fact still remains that 5 to 6 hundred million people live in the villages. There are enormously capable people in these places doing enormously amazing things! Look at healthcare, microfinance and other industries which have sprung up in these places. We must embrace them.

  2. Help build cultures. HR must build strong tangible cultures. Cultures that help define strategy, performance and help to build an institution for the long-term.

  3. Focus on middle managers becoming great leaders. Our middle management talent isn't as good as it needs to be. They are not as innovative, they are not taught how to lead and they are thrown into situations where they have to manage a lot of people without necessarily getting the background and the training for it. This then, consequently, starts tying the organization down.

  4. Stop focusing on cost in the short-term. All innovation will die in order to save that last 500 rupees in the cost. Too often we pay total lip service to the saying that 'people are our greatest asset'. Actually people are our greatest asset as long as they come at the cheapest cost. That's the mantra we follow and this must change. 

Q. In an industry plagued by high attrition rates, Genpact has managed to achieve high employee retention. What according to you are the key differentiators of Genpact's EVP?

A. We are very proud of the fact that we have managed to solve some of the attrition problems that plague many companies. We haven't solved it completely. It is still too high but yes, I think we are significantly better than most. This has been done by taking two approaches. One is a six sigma data-driven approach. We have tried to understand why people leave, where they go once they leave, what kind of work they like to do or not do, the demographics of the people who leave and the demographics of the people who stay. We then framed our hiring around this data and created programs which allow people to fulfill their ambitions. A lot of our people were leaving for higher education so we decided to create educational programs at work. Employees can get degrees from reputed institutes like IIMs, etc. while they work with us. We help them pay tuition fees, etc. We have 8,000 people enrolled in this program currently.

We also think about hiring, i.e. where we hire from and who is comfortable moving to different locations. Alongside that, we recognize that, people work for vision, people work for a leader. The biggest cause of attrition is a bad manager. We have understood this and tried to build a performance of culture, openness and fairness. Depoliticize. Our aim is to create an apolitical system which allows people to feel that they have a voice in the system, that they are being treated fairly, and that they will be looked after in the long run. Almost all of our senior leaders have been with us for over a decade. They work as a team and the bonds between the teams are enormously strong at this time. If one is going to spend 8 to 10 hours a day at work, he/she needs to like the environment they work in. So we try to create that environment for people. It is not just about salary. Performance and pay and benefits need to be linked together. So we created an environment where people have power, they can take decisions, they are treated fairly and they work very well with each other in a culture which allows them to be entrepreneurial. That mix really holds people and we have found it to be successful.

Pramod Bhasin – Founder and Vice Chairman, Genpact
 

The Balancing Act

Q. Given the current economic environment and the cost pressures, what do you think organizations can do to maximize their compensation spend?

A. Whether we realize it or not, somewhere along the line, the size of the rewards pie is limited. Every time we speak about differentiation, we are actually just tweaking the allocation, so that while the sigma of your total spends is the same as budgeted; we are able to create something new. Therefore, innovation is required not only around the obvious monetary and non monetary plans, but also in creation of long-term deferred incentive plans. 

Q. What are the three top expectations that business leaders have from HR today?

A.There is a phrase that I use, purely at a board level, ‘they are not only looking for people to perform well but they are also looking at organizational continuity in the leadership domain’. So, they expect HR to support the environment and processes which engender and support leadership continuity and reduce the continuity risk. That’s what they expect, at a cost which is optimum and creates social harmony and makes people feel proud to be a part of the organization. Nobody will ask you to change the performance management system but they will continuously ask you for the viability of the performance management system. Is it sustainable and profitable?

Q. What would be the key focus areas for rewards professionals in 2014? 

A. With the new government, there is a sense of optimism in the country today. The system and things on the ground haven’t changed but there is a belief that they will. The increase in commitment is a precursor to the change happening. Thus, very soon, expectations around compensation and rewards will rise and those challenges will trickle in. There is a ‘reason to pay’, ‘willingness to pay’ but the most important part in any compensation decision is the ‘ability to pay’. Hence, while 2015 looks like a positive year, the businesses that are not performing well, their ‘ability to pay’ will not be altered significantly. Hence, your ability to manage that will be a challenge that each C&B person should be geared for. We, at Hinduja, are trying to raise expectations related to performance and create an incremental variable pay plan where an additional bonus payout happens when there is additional revenue. So while the pay remains within the budget, it creates an incentive and sense of optimism in the firm. 

“Nobody will ask you to change the performance management system but they will continuously ask you for the viability of the system.”

Sudhanshu Tripathi – Group President, Human Resources, Hinduja Group
 

High Focus on Culture

Q. As an outsider, the hotel industry has always been a glamorous attraction. From a business perspective, what is the existing paradigm in the hotel industry and do you see it changing?

A. I agree that from the outside the hotel industry might look glamorous but once you enter at the associate level, it’s a low engagement and highly demanding job. You need to stand on your feet for 10 to 12 hours a day and very few people have achieved it once they cross the age of 30. The job is low in engagement, low in financial rewards, physically exhausting and is also on a shift basis. So once the person comes onboard, the biggest challenge is the induction process initially, and in the first year, the expectation of an employee is purely financial. If they pass that one year period (there is a fair amount of iteration at this level), then they go into the second level which is ‘where is my career going’. Hotels due to high attrition have fairly quick growth. There is then, the next level of growth, which is not so much financial, although they do get rewarded well, but it is related to leadership. If a leadership position need is not met in five years, then it again leads to attrition. Basically the whole game for the hotel business is initially to meet the financial aspiration, settle the employee, make them recognize the fact that it is nowhere as glamorous as they thought and then move them through these three distinct steps to retain them and help them grow.

Q. You have some really interesting policies in your organization. What role is your workforce playing in defining the culture for the organization? 

A. Culture is of the utmost importance, especially to the CEO. The CEO sets the culture. If he/she does a good job of it, then the culture will be something everybody will feel comfortable in. By definition, culture is the personality of the organization. It is very important to set the expectations right at the recruitment level itself, so that when somebody joins the organization they are fully aware of what the organization stands for even before being fully inducted. Typically, when you have a sufficiently large number of employees, your CEO is the custodian of the culture, but the culture evolves with the people. You do set your vision, mission and values in place and after that it evolves with the very large number of young people who work in the company.

Q. Moving to specifics, what are the key elements of your rewards strategy and what are the key HR challenges you face currently? 

A. Our organization has imbibed fun as an inherent part of the culture. There are things that we do to create fun. An area where a lot of people have fun is, when you become a supervisor, you grow a ponytail. So you are doing something which is not encouraged in the Indian society and it’s a mark of success to have a ponytail. When I look at the employee feedback and the results, a few things come out as popular choices. One of them is that 10% of our employees are speech and hearing impaired. For them, it is not just a job. So it is the employee disability scheme that we have, which makes them feel like we are contributing towards social inclusivity.We believe in excessive communication. A lot of people tell me you spend too much time in communication and I say, you can never communicate enough. If we do badly in any financial parameters, or if there are issues relating to the employees or to any stakeholders, or generally how we think the economy is doing, we try and communicate to ensure whether it is an associate, supervisor or team leader, we are on the same page when it comes to the awareness about the internal and external environment.Going forward, our biggest challenge will not be the hotel industry. We produce these young motivated employees, and it is the parallel industries who poach them. Hotels cannot pay as well as retail banks, or insurance or retail as a business. So we have attrition not only between hotels but also outside the industry. Those are the real challenges, and which is why you retain with non-financial systems such as long-term incentives and benefits, etc.

Q. What, according to you, are the key drivers of employee engagement? How important is the role of Total Rewards in it?

A. Rewards are very important and as much as I would like to believe that the employee feels it’s a life-long mission to be in the company, it is not so. It is ultimately transactional and the first question any employee will ask is what is in it for me? We have cut the company into four roles and it is divided along two axes – what is critical to business and what is critical to customer. Basis these criticalities we have different pay philosophies defined. We have a long tail method of performance evaluation. We don’t force fit people into a bell curve. So we try and identify the top 25-30% of the employees, whom we in our mind call the ‘steel spine’. The KRAs to their leaders are directly linked to their attrition rates. We have a Super High Achiever (SHA) system where we identify people as quickly as possible and help them develop faster. As a fast growing organization, our ability to promote people is higher than a traditional hotel company so we have three avenues constantly opening up – replacement hires, growth and promotion. We promote internally as much as possible. So our intake only is at entry/associate level. Otherwise, as long as an employee is at least 80% as good as the external candidate, we will take the internal candidate any day. Those are the trade-offs we are happy to make.

"Culture is the personality of the organization. It is very important to set the expectations right at the recruitment level itself"

Patu Keswani – Chairman and Managing Director / Chief Executive Officer, Lemon Tree Hotel Company
 

Pedal on Performance

Q. In the global business landscape, what do you think is India’s USP and have you seen it changing over the past few years?

A. The Indian market is very unique compared to any other market because it is far more stratified. India is the only market where you will see an RPO or average revenue per user going from 3/month to 10,000/user. The challenge in such a market, something that we have done very well in the past is, how to deliver a low-cost business model. As we move forward, the game is beginning to change and our challenge now is to continue to have the low-cost business model but yet do multiple things at the same time – grow both voice and data, grow financial services and cloud-based services. That is a much more complex game than in the past which was simply about driving voice penetration.

Q. How do you envisage HR partnering with you and supporting the business in this change? 

A. I think HR can play one of the two roles – either it can be a transactional role where it is about managing the entire process or it can be the most strategic role, certainly for me as a CEO as well as for the company. I have found normally HR playing the former role than the latter in many environments. The reason that HR is perhaps the most important to me is that what drives exceptional performance is ultimately the way we manage our people. The reason for that is the market context which is so different. You are fighting for global talent on one side and looking to create and groom new leaders on the other side. You have to instill ingenuity and passion in the people to stay with you, yet you have to be able to attract young graduates, from the best schools. All of this needs to be done in the best form, which actually drives a culture of humility, responsibility and passion, and that to me is really what will make a company stand out. And that’s the reason that HR is an extremely important role. But the question is, can HR stand up to actually play that role? 

Q. Do you intend to change your talent management strategy in future to support the business growth? If yes, how?

A. At the end of the day, the business performance is not going to happen because you got more towers or more spectrum or more call centers. Finally, it is going to be delivered by a bunch of cohesive people who are aligned to a common purpose, creating a lot of ingenuityand executing brilliantly. Talent management strategy has to be the ability to put oneself in the shoes of the employee and say, what would they like to see. Three things that I would like to see as an employee –

  1. Am I clear of what needs to be done,
  2. Am I confident of delivering it seamlessly, 
  3. Do I feel like I belong here. That’s what the strategy needs to deliver.

Q. Currently, which HR initiatives are you really proud of and believe that they differentiate Airtel from the other telecom companies?

A. There are two things that we have done in the last year – one is that we are far more balanced in the way we conduct performance assessments. We have not been mechanistic. We have looked at the context in which the performance was delivered and then made an assessment of that performance. The second thing is that we have spent a lot of time in getting people to understand how to have a performance dialogue. We have taken almost 300 people through this because in a performance dialogue, the most important thing is not about the person but about the performance. The capacity to separate the person from the performance leaves the conversation in a much richer place, so that the person, who has had that discussion, even though it is not a good performance, still feels a great sense of caring and dignity as he/she leaves the room. I think that is very important that you separate the person from the performance.

Gopal Vittal – Managing Director & Chief Executive Officer (India & Southasia), Bharti Airtel


 
Speakers at the Aon Hewitt's 7th Annual Rewards Conference

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