Managing human capital through tough times

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…” — Charles Dickens, A Tale of Two Cities

When two years ago, India inc. WAS witnessing an economic boom and a resulting overheated talent market, we had noted in this column that far-sighted business leaders need to make management of talent their highest corporate priority. Today, with several large economies “declaring” a recession, the US shedding over 500,000 jobs in November alone (more than the number of job cuts in any month in the past 34 years) and India’s GDP growth showing signs of slowing down, the advice seems just as relevant. Managing human capital would be the true differentiator in these unprecedented times.

What human capital strategies and practices would stand an organisation in good stead? The Best Companies to Work For in India Study 2008 takes a closer look at the winners this year in an attempt to seek answers to some of these questions.

The common thread that runs across all our winners is the solid foundation they have built to manage their human capital. In managing their people, organisations that feature in the top 10 this year have consistently focussed on values, invested in people, gone by meritocracy and finally, developed excellence in HR process. While these aspects will not address all challenges faced by organisations in today’s downturn, companies that have invested considerable time and resources in building a solid human capital management foundation will be better-placed to weather the storm.

Values and processes
Underlying organisational values of excellence, integrity, fairness and growth are reflected in the people processes and policies of companies which have emerged at the top. These companies ensure fair and unbiased employee treatment—be it for pay, benefits, increments or promotions—and have woven transparency into their HR processes. These steps include mandatory employee sign-offs on individual performance ratings, self-nominations for training programmes, formal employee suggestion programmes, formal policies on equal opportunity & diversity, and dedicated resources for employee grievance resolution in order to build employee ownership and faith.

Investing in people
Undoubtedly, our “Best” companies are making significant financial and non-financial investments in their people, spending approximately 3.72 per cent of their revenue in HR-related activities (excluding wages and salaries), which is close to twice the budget allocated by the rest in the top quartile. And they are not just splurging on salary increments—the annual increments given by these companies are 4.31 per cent lower than the rest in the top quartile. These companies have found that paying top dollar is not the only answer to engaging employees; investing in them in the form of learning and development is.

Striving to provide long-term careers, the “Best” take a far-sighted view of engaging and developing talent beyond the scope of their immediate job requirements. They invest consistently in employee development, so the “training expense per employee” incurred by the top 10 in our study is seven times the average expense incurred by the top quartile. Employee satisfaction results have shown year after year that an employee’s perception of a long-term career and the company’s investment in employees’ career development has a significant impact on their perception of the company as an employer and its engagement levels. Apart from just large spends, all these companies have the process and infrastructure to support these investments in terms of clear career paths with defined mobility criteria and assessment mechanisms and clarity in employee communication. The best are seeking to provide more than just a 9 to 6 job.

Merit rules
What sets the “Best” apart from the rest is their performance management process that links employee performance goals with those of the organisation. These companies did not dilute the process and its key output of identifying and appropriately rewarding the top performers even during the upswing when companies resorted to short-term appeasement and skewed the performance curves to accommodate larger proportions of their employee strength.

The “Best” are able to match pay with individual performance and devise performance-centric incentives and bonuses. Employees at the “Best” perceive the incentive compensation plans to be better than the employees at the rest, with a 12 per cent differential in the positive responses on this dimension. With the help of well designed programmes aimed at identifying their star players and retaining them, they are able to keep their focus on the critical resources needed for the future. These companies are selective and invest generously to build and develop a pipeline of their highpotential candidates through succession planning.

Making technology work for you
Many of the “Best” are global companies facing the challenge of a distributed and diverse workforce, and they have put in place processes that cater to the global employee but also suit local employee needs. They have gained process maturity and cost effectiveness through standardisation, economies of scale and continuous innovation to meet business and employee requirements across countries and businesses. They are constantly looking for the maximum returns on each dollar spent by focusing on costeffective means of developing and empowering their workforce. The “Best” are all ears for their employees using real-time online employee issue resolution mechanisms such as employees raising tickets, laid-down timelines and escalation matrices for resolving issues, dedicated online helpdesks and friendly mascots to give a face to the online support backbone.

While there are the lessons to be learnt from some of the best-inclass organisations and how they are managing their workforce and talent, one must watch out for some of the biggest human capital mistakes that an organisation could easily commit. Negative growth prospects and falling bottom lines are tempting organisations to rush into quick fix solutions like drastic headcount reductions and sweeping salary cuts. These steps could ease immediate financial pressures but will leave the organisation illprepared when business does recover tomorrow.

So, what should be a business’s response to today’s human capital challenges? Wise business leaders will take the opportunity to temper unreasonable employee expectations, check unsustainable double-digit salary hikes, outsource non-core activities and prune frivolous benefit programmes. This period gives the HR manager a reprieve from fighting the constant attrition brought on by an overheated talent market, giving them the opportunity to build, review, repair and streamline sustainable processes in order to align them with corporate strategy and real value creation over the long run. This also presents India Inc. with an opportunity to mould its leadership and talent to learn resilience and manage through adversity and tough times. Finally, it is also about making employees a partner and making the companies the best to work with rather than work for. The need for the right talent remains, and will always continue to remain recession-proof, and understanding this is at the heart of making the most of the worst of times.

Padmaja is India Business Leader and Gyan, Prakrite and Madhumitha are Consultants at Human Capital Business, Mercer