CCMC Corporate Comprehensive Management Consultants

1. CCMC Corporate Comprehensive Management Consultants “People Drive the Process of Excellence”

2. Competency Based HR Practices in India: Yesterday and Tomorrow – Lessons for South Africa Key note Address at the Annual Conference of ACSG, Stellenbosch- South Africa Dr. S. Pandey Corporate Comprehensive Management Consultants India, Bombay 18th March, 2011

3. Scope and Objective Scope: Current Business Environment in this emerging economy Opportunities & challenges of Enterprises in general and specially Consulting organizations including Management Consulting Firms

4. Scope and Objective (contd.) Objective: Insights for HR-Professionals and Enterprise owners based on macro level secondary data and ethnographic approach Ideas about setting up business in India specific emerging Industries Ideas about specific business opportunities for AC-professionals and Management consulting in general

6. India • Region: South Asia • Income category: Lower middle income • Population: 1,185,347,678 • GNI per capita (US$): 1200

7. India Business witnessed some critical events recently Pre-liberalization era (prior to 1990s) Supply of fresh air in Auto and Manufacturing (post 1991-93) The advent of IT (post 1992-93) Speculative bubble covering roughly 1995–2000 (with a climax on March 10, 2000 the dot-com bubble burst) The Call center’s entry to India, maturing to serious BPO business (ITES – technology driven). End 1999-2000 The rise of emerging markets; following Y2K, the IT-service business in many domains, KPOs The recent economic meltdown (2007-8) The recognition of economic growth engines along with some of the developing countries in Africa, Asia, and South-America since the middle of 2009.

8. Graphs are for representational purpose only AC Market MoneySupply 2005 Pre 1980s 1980s 1995 2010 1990 2000

9. The story of Competency based HR practice in Indian Business organizations Ethnographic Domain: Selected 30 significant Competency design & implementation projects selected in western, southern, and north India; over a period of about 15 years. Research and consulting assignment of a group of early practitioners of competency based work that the author had opportunity to see from inside

10. 1994-2000 [large numbers; lower to middle level; long duration; all but 1 had critical issues

11. 2001-2005 [Strategic areas, deep interest; institutionalization

12. 2006- 2007

13. 2008- Onwards

14. The summary or Trend analyses 1985-1993: • Localization (Indianization) of MNC Competency frameworks (that was designed in EU, Germany, & US parent organizations), preparation of Method bank, AC stationary, supplemental psychometric tests, Assessors training and handholding for deployment • In the form of MDP: Seminars on AC approach, Assessors training program

15. The summary or Trend analyses 1994-2000: • Full blown Competency framework development for Organization wide use • Start-up Assessment Centre design and implementation for large scale selection • Indian Manufacturing organizations, Large PSUs (specialized project), Civil Aviation (Airlines Pilots) • Approach was mostly problem shooting events

16. The summary or Trend analyses 2001-2005: • Along with Behavioral and Leadership Competency Models, the Technical competency models construction and deployments • AC approach based interventions in strategic areas, across functions, deep interest, institutionalization • Mostly Indian fast growing Large or very large organizations. Top and middle management level. • Industry: IT (product & service companies), ITES/ BPO/ KPO, Petrochemical, Refineries, Telecommunication software

17. The summary or Trend analyses 2006-2007 (just before global recession) • IT organizations large projects, serious developmental centers with long drawn interest in overall Human capital approach; use of AC for Merger & Acquisition. • Organization wide deployment of Competency based HR system design and implementation • National level vision for AC (NAC) by NASSCOM (National Association of software and service companies); state Govt.’s Dept of education initiative for standard XII students’ preparation for employment in emerging BPO organization

18. The summary or Trend analyses 2008-2010 Organization wide deployment of Competency based HR system design and implementation or isolated competency based HR system design e.g., • Competency based performance management system • Competency based promotion system, • Competency based Graduate engineers’ on campus selection system, • Competency based Technical & Managerial training systems Strategic leadership development as a proxy to OD Airlines Pilot, Cabin crew, Maintenance engineers In Automobile, Petrochemical and refinery, Petroleum product marketing company, PSU, Few IT telecommunication

19. India Business Environment, Opportunities* Strong Growth Momentum • Sustained process of liberalization (since 1991): Continuous GDP growth, Increased openness to foreign trade and investment - declining tariffs, liberalization of FDI restrictions • Rapid growth in export-oriented IT, ITES/BPO, & Retail industries • Manufacturing is a strong base • Fast growing Automotive sector (India is highest 2-wheeler producer in the world) • The above has stimulated Indian industry to restructure for international competitiveness • Strong balance of payments - rapid build up of reserves • Growing portfolio investment • Cross-party support continued for liberalization in-spite of coalition Govt. *Based on International Finance Corporation report, CDC report and other published data]

20. But private industry remains underdeveloped • Private investment only 15-20% of GDP • FDI flows still low (< 3%) • Industry contributes < 30% of GDP • Only 10% of total employment is in the organized sector

21. Remaining Growth Constraints • High fiscal deficits crowd out public and private investment • Severe infrastructure bottlenecks • Rigidities in labor and land markets • Widespread Govt. ownership of business, dominance in banking • Corruption is wide spread; particularly in Govt. regulatory institutions (proximity to the government is an enormous source of profitability in India) • More than 30% of Indians survive below poverty line and India has the second largest number of billionaires, second only to Russia • Import tariffs, complex tax regimes • Restrictions on FDI in some sectors • Excessive regulation increases costs of doing business

22. Investment Climate at a Glance in early 20th century China India Thailand % of Sr Mgt time with Govt. officials 9.2% 16% Share of firms with own 30% 69% - generators Days to clear imports 12 21 24 (longest) Cost of Shipping 5.4% 8.5% 6.7% Paved Roads (% of 88% 56% 97% total) Cost of Capital 5.85% 12.3% 7.8%

23. Opportunity • Large, rapidly growing domestic market. Phenomenal increase of disposable income in the hands of ever growing Middle class (350 million strong middle class which commands a formidable spending power) • Large, low cost labor force availability (though business of labor arbitrage is under pressure but growing)

24. Opportunity • World’ largest supply of scientific Man-power (but only 18% of the fresh technical graduates in India possessed the right skills for jobs in IT services companies) Engineering/IT/English language skills • Abundant availability of raw materials • Political instability, but consensus on economic policies • Growth in private ports and SEZs (special economic zones) addresses lack of infrastructure for export-oriented industry

25. High Potential Sectors in India • Knowledge based organizations, as for example, Software services, ITES (BPO/ KPO) • Autos and components • Medium Engineering-based manufacturing • Steel • Textiles • Pharmaceuticals • Alternative to China for companies looking to source merchandise globally

26. Ideas about specific business opportunities for AC-professionals and Management consulting in general

27. Knowledge based organizations, as for example, Software services, ITES (BPO/ KPO) 1. Behavioral competency is not enough for these Knowledge based organizations. They need complex technical competencies, Techno-behavioral competencies, domain competencies, quality competencies for superior technology transfer, R & D, and superior service 2. Talent supply: Macro level data shows talent availability is in abundance. The ground reality is very different; competencies are not aligned, employability is low. Labor Market supply of competencies do not match the companies’ demand matrix of competencies. Pre-job and post employment competency development is of dire need of the day.

28. Knowledge based organizations, as for example, Software services, ITES (BPO/ KPO) Contd. Talent shelf life is decreasing: Commitment to organization has diminished, work environment is very stressful, retention is serious problem, no patience, employee change job frequently, immediate money is first priority, the younger generation seem to have very different life plans As knee jerk response, Organizations getting into bonds, variable pay, pay for performance, mechanism to increase control almost to obnoxious level. Reducing further psychological identification and getting into pure transactional relationships; everything is matrix driven no time for vision or innovation. Talent supply is critical theme for management: Talent mix strategy is critical success criteria How much to buy (lateral hire – often 20-30%) How much to grow internally (entry level hire – typically 70-80%) pushing cost of development higher

29. Knowledge based organizations, as for example, Software services, ITES (BPO/ KPO) Contd. Multi geography HR management challenges (uniform corporate HR policies can not work across nations) New theme related to Customer priced Competency emerging (competencies for which customer is willing to pay): strict SLA (service level agreement) deployment & delivery competencies are flavor of the day New theme related to Techno-behavioral competency becoming critical (e.g., configuration management ability, release management ability, technology mentoring ability, Project management ability etc.)

30. For Manufacturing and Auto sectors Competition is too severe, growth is sudden and at a never seen before level, volume pressure, cost pressure, reducing margins are normal events Line Mangers (in the upper middle level of the hierarchy) moving up in the hierarchy based on core value chain competencies, organization is heavily dependent on these employees; there is scarcity of supply and it takes very long to develop these talents. Unfortunately they have severe deficiencies in People Management Competency-cluster and Business management Competency-cluster. Both these competencies are too critical to function effectively on the job (external supply from HR service and Finance service proving to be futile) Salary hike to attract and retain has gone high disproportionately, making cost of Management too high in comparison to compensation to employees in operation. Employee satisfaction index is going for toss.

31. The issues from current reality, mentioned above has brought Competency Management, Organization design, OD into the centre stage. These challenges are opportunities, in near terms, for you my colleague listeners If you are planning to come to India to set a shop you are going to face these Challenges and consequent opportunities To the extent Indian scenario matches with business metamorphosis here in South Africa these will emerge as ground reality here too. Hope the insights will be of some help to you.

32. Revisit the Objectives (contd.) Objective: Insights for HR-Professionals and Enterprise owners based on macro level secondary data and ethnographic approach Ideas about setting up business in India specific emerging Industries Ideas about specific business opportunities for AC-professionals and Management consulting in general

33. Thank You!