Most people recognise that there is a huge difference between a list of ingredients and a recipe. While the list of potential ingredients with which we can alleviate poverty of a country is largely universal, India and China seem to be adopting very different recipes.

China decided in the 1980s, with significant but unacknowledged inspiration from the World Bank, that the best path to prosperity lay in manufacturing goods for export. This decision not only led to a huge clustering of people (it has 174 cities with more than a million people, relative to India’s 34) but a clustering of skills in low-skill manufacturing (45 per cent of its labour force works in manufacturing, relative to India’s 12 per cent).

While it is too early to conclude that India’s services and consumption model will deliver, it is clear that combining our economic model with a decentralised democracy will ensure that India’s geography of work and skills will be far less clustered than those of China. Businesses focused on domestic consumption in India — banking, insurance, financial services, healthcare, consumer durables, consumer goods, pharmaceuticals, retail, telecom, education, engineering, and infrastructure — will soon emerge as our biggest employers. The staffing of China’s export engine benefited from the relatively easy transition from agricultural labour to low-skill manufacturing. However, companies that want to serve India’s geographically-dispersed consumers will have to struggle with the challenge of putting together geographically dispersed sales and services workforces.

Fishing in the same pond

We make the case that these companies, irrespective of industry, will be fishing in the same pond for talent and need to craft thoughtful and sustainable human capital strategies. An important factor of growth will be their ability to build the national level sales and service organisations required to achieve the trinity of cost, quality and scale.

Many companies have, in the past, seemed to accept lower standards in the selection, training, and retention of their ‘sub-fifteen thousand rupees per month’ employee base. This is not only a short-sighted approach, but downright dangerous — these institutions run the risk of outsourcing their future. Domestic consumption companies need to create efficient, effective and sustainable solutions for staffing by taking a holistic view of the traditionally separate components of hiring, hygiene and productivity.

Companies that aim to build differentiated sales and service people supply chains will need to align their entire ecosystems in order to target employee productivity. This is easier said than done; productivity is singularly difficult to measure. Further, companies with any real ambition to target India’s domestic consumption need feet-on-ground in over 800 cities and towns. This is impossible to do solely with internal capabilities but requires working with partners. In addition, the current skill system in the public sector delivers very uneven quality but it is hard — if not impossible — to sustain a completely employer-paid training solution. The situation is further complicated by archaic labour laws and increasing divergence among states around minimum wages, shops and establishment acts and other related legislation. In order to be effective, any ‘people supply chain’ will have to deliver and align on seven key components:

Components of a supply chain

Assessments: The effective binning of candidates and employees with identified capabilities and potential. Traditional assessments have had the predictive efficacy of say, palm reading or astrology. Companies need to make substantial investments in functional, company and industry-level assessment centres that find, or imply, better fits. Companies who win will also ensure that assessment is not episodic but a structured and formal process that continues through the employee lifecycle.

Candidate sourcing: Companies with effective sourcing strategies for national sales and service organisations answer the difficult ‘what’ before the obvious ‘how’. Questions and trade-offs include newbie’s vs experienced, trained vs untrained, line-up vs filtered, nice to have vs must have skills, etc. The unevenness of hiring standards across line managers of the same company currently accepted in the name of decentralisation, has to stop, as companies need to recognise fully loaded hiring costs, diversify sources and ensure effective on-boarding and induction.

Training financing: It is clear that companies cannot afford the complete, A to Z training of every candidate they hire. However, India’s skill crisis means most candidates will require at least a modicum of company, industry, or functional training in order to be effective. Companies will increasingly need to rely on alternate ways to fund this training — apprenticeships, tenure-based reimbursements, subsidies and credible certifications are some of the methods that ought to be utilised.

Training delivery: The physical dispersion of sales and service workforces often renders it uneconomical to get all the employees to a single location. Delivery of training via satellite delivery, e-learning, and other methods are crucial to cost-effectively meet learning objectives. Repair programs for new employees must be complemented by upgrade or certification programs for existing employees delivered over the same infrastructure.

Employee contracts: Employees, particularly those in the sub-fifteen thousand salary, no longer view employment as an undertaking that will last a lifetime but a short relationship. The ideal structure allows each side to test-drive the other. Companies never hire people with the intent to fire them but they obviously need a judicious mix of temporary staffing, permanent hiring, apprenticeships, consulting and outsourcing in order to balance flexibility with continuity.

Salary, benefits and compliance: Many domestic consumption firms outsource the ‘plumbing’ of salary and benefits administration for their sales or service force to their dealers.

However, issues such as wage transmission losses, compliance, benefit deduction but no deposit, and others are common and the most-cited reasons for employee turnover. The implementation of service-level agreements, multi-modal self-service (call centre, email or Web-based), SMS communication and other infrastructure are critical steps that complement the more glamorous components of the chain.

Performance management: Companies that do not hold their bad performers accountable are in effect, punishing their achievers. Performance management infrastructure such as automated attendance, sales reporting and customer feedback are rightly viewed as important inputs into fixed and variable compensation management. Their more important applications, however, lie in increasing the learnability, adaptability and self-healing abilities of supply chain components, specifically, sourcing, assessment, training, financing, and delivery.

Competitive advantage

Doing business in India requires companies to substitute for the state in many ways — generating power, providing transport, security and much else. Often, this hardware has been a source of competitive advantage.

However, as the corporate landscape matures companies are increasingly coming to realise that their true equity does not sit on their balance sheet but goes home every night. The sources of competitive advantage are shifting from machinery or distribution access to human capital. This creates both a challenge as well as an opportunity for domestic consumption companies because India is too large and the million negotiations of democracy too slow to wait for public policy to fix the people supply chain.

The productive capabilities of a country are not like oil, which will eventually run out, but like wind power which is potentially infinite. Similarly, individual capabilities are not like shoe size or height, which cannot be changed, but like muscles, which can be developed. This supply chain view of a country or individual capabilities is not only an optimistic viewpoint but also a happy congruence of doing well by doing good.

The companies that win will be those that act decisively, swiftly and boldly with respect to their staffing. If strategy is defined as the art of creating an unfair advantage — a gun in a knife fight — it is clear that companies who creatively create, configure and catalyse their people supply chains in India will create an advantage that is hard to replicate.

(The author is the Director and Co-Founder of TeamLease Services.)

(This article was published on September 20, 2012)
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