The last four to five months of 2011 have been rough for most industries, in turn impacting hiring and appraisals across levels. Some of the inertia of the slowdown will be felt through 2012. The shape of things that have come would have been impossible to foretell at the beginning of 2011. Despite some clear trends, hiring and people policies in 2012 will be difficult to predict — because, all is not lost. There are game changers that could spin things around for some industries. And there are the silver linings.
B-schools
Placements are underway or just beginning, and the top business schools are likely to remain relatively insulated from the impact of the 2011 slowdown. However, the highest and average pay packages offered may come down. The expectations of candidates is also likely to reflect a more grounded understanding of the market reality.
Corporates that hire are likely to cherry pick from the talent pool available. The second- and third-rung schools will be affected more. With the entry barriers now at manageable limits, public sector undertakings might just visit the top and the second rung schools to hire on campus. That can't be all that bad.
Appraisals and the ‘L' word
Appraisals are likely to remain moderated in 2012. Companies will try to protect employees against inflation with pay hikes.
Where a fixed and variable component is in practice, the fixed component will offset inflation, while the variable component will be made attractive to improve productivity in a slowdown scenario.
The worst case scenario of letting people go has also been witnessed in some sectors in the year gone by. But let us understand that lay-offs will be the last resort for a variety of reasons: it impacts morale, it impacts the employer brand, and it can even affect the consumer brands from the company.
If industries such as insurance, brokerages, real estate and telecom have seen lay-offs in 2011, it was only because there was extraordinary pressure to maintain margins. I am not saying there will be no lay-offs in 2012. It's just not on the horizon — at this moment.
e-Commerce
Companies are literally mushrooming in this space. There is a lot of action, and the premier institutes are being approached for talent. Some senior talent is also being tapped from other industries. We need to see where this heads, though hiring is expected to continue into 2012.
We saw a similar series of developments during the dotcom boom in 1998-99. There is money coming in from investors. We helped hire people back then too. Everyone was saying that they were there for the long haul, there to stay. Sustainability and profitability were issues then, and they will be issues for e-commerce now. We need to see how many of them will last.
As long as the new generation of companies understand the lessons of the dotcom bust, including on the people front, things are fine. It takes one high-profile failure for things to take a U-turn. The good news is that it's unlikely to happen in Indian e-commerce as early as 2012.
ITeS
ITeS is an industry that is maturing. There is a transformation in its nature that dictates that it cannot hire by the hundreds and thousands, and cannot hire fresh college students to sell credit cards over voice calls.
Those low-paying voice call jobs are moving to countries such as the Philippines, while India continues to emerge as an outsourcing destination for higher value services. So the demand will be for PhDs in Mathematics and Statistics, those with expertise in financial modelling, analytics, and the like. And these high-paying jobs won't come in thousands per contract. The changes are already being seen — we'll see more of it in 2012.
The debate on whether FDI in multi-brand retail will create new jobs lingers on. For new jobs to be created, new players will have to come in. How many of them come in is one question; the other is the business models they will adopt and how people-intensive those models will be.
Even as that debate gathered steam, several people in the retail space lost their jobs, including those who had moved into retail from other industries. From the senior management to the store level, retail cut down on people — and with good reason.
Many an industrial house ventured into retail, as did several entrepreneurs. They opened up thousands of stores, several of which have since shut down. This was not a game of high margins, some realised, and had to calibrate people costs to the 2 to 3 per cent margins of the business.
Existing players are developing and improving on their people productivity models. While the global slowdown of 2008 put some out of business, the current slowdown is teaching people to become more efficient.
A large part of retail is driven by discretionary spending. If consumer confidence and spending is high, there are several candidates with retail experience to fill vacancies that will arise.
I believe that there is no industry that is recession-proof. Even in healthcare and pharma, if people are really short of money, they might just postpone a surgery or treatment. Not all expenses in this industry are born of life-threatening illnesses.
Having said that, when there is a real slowdown, corporate hospitals and pharmaceutical companies have shown more resilience. But that does not necessarily translate into a higher headcount, especially when it involves an MNC.
We need to see what happens in the M&A space. Very broadly, when companies make an acquisition, MNCs from the West tend to be more focused on increasing productivity than headcount. So, though the wage levels may increase, the headcount may not — in many cases, it will not.
This year has been good for pharma and healthcare in terms of the number of people hired. I think 2012 will be good as well. We'll need to keep watching the macro picture here.
India's demographic profile demands that we need better and more institutions — be it schools, colleges or vocational training institutes. Education is also becoming sharply segmented, providing options for different strata of people and their needs.
Training has been a big hit in 2011. It did create more jobs as it prepared people to get ready for jobs. There has also been a lot of talk and debate about foreign universities coming in, but very little action on the ground. However, Indian companies in the education and training sector will keep hiring.
Insurance
This is another industry that is taking stock. A large chunk of sales and associated back-end jobs have vanished. In a category that has abysmally low levels of penetration in the country, it's not what one would expect. What we saw in 2011 is not just a course correction, but a complete re-look at the operating models. And it reflected in the people trends.
Ten years is a reasonable amount of time for an industry to get its model right, but it's still happening for the Indian insurance sector. 2011 was a difficult phase. If online channels came in, branches were being closed and staff were being handed pink slips. The coming year could be a phase of stability in the new business model for insurance companies. I wouldn't want to break into this industry now, but the worst is already over.
Banking
Banks have gone back to hiring mode in the last two to three years, and they're hiring different kinds of people. There are more marketing and customer-centric roles coming up. For an earlier generation of bankers, business used to come to them. The new competency being demanded is that of bringing in the business. That change is likely to continue.
When the VRS wave swept across banks in the late 90's, the sector lost around 2,00,000 employees. At that point, most public sector banks invested in information technology instead of replacing people. Now the investment is in different profile of people, alongside IT spending.
In the first seven months of 2011, banks continued to expand and so did their people numbers. From July, the slowdown made its mark on this sector as much as it did on any other, if not more.
A reform-oriented budget can change things dramatically for banking. Another game changer could be the entry of big industrial houses. When that happens, especially with riders on the minimum number of branches in rural India, the people boom will come alive.
The entire C-suite will have to come from other banks. There will be movement. It may not all happen at once and IT will play a role, but there will be action on the HR front.
The good news, if you look at it my way, is that any positive impact on banking will impact other industries — real estate, auto and retail included. That much I can predict safely.
(E. Balaji is MD and CEO, Ma Foi Randstad. As told to The New Manager.)