Early this year, the fault lines had started appearing in the global economy; especially the United States and the sub prime crisis had started taking its toll on large global financial institutions. Going in to 2008, India like other emerging markets had witnessed a period of hectic economic growth. In the past 5 years along with the sensex and the real estate capital values, corporate sector had seen a whopping 400 % increase in salaries given the demand – supply equation for talented, proven managers. In the meanwhile, driven by market growth, cash flows and availability of cheap credit, Indian companies had unfurled their global ambition and embarked on big ticket acquisitions. At the start of this year, there was still a strong belief in the decoupling theory and India in everyone’s eyes was still largely insulated from what was seen as someone else’s problem. However, by the middle of the year, falling capital markets on global and local cues, the sudden collapse of Lehman Brothers and tightening global liquidity set the alarm bells ringing for India Inc... The overnight change in market situation caught corporate India unawares and left very little time to react.
Going in to the New Year and the last quarter of the financial year, the specter of layoffs and salary cuts does loom large across sectors. Companies which hired aggressively for new ventures or anticipating high growth rates are now left with several employees on ‘the shelf’. Financial services, especially broking, investment banking and retail banking, Real Estate, ITES / BPO, Automobile and modern retail to an extent are the sectors which will face the heat. Infrastructure projects which depend on fresh dose of capital, both equity and debt, are also seen at risk and may see a few job losses. The highest impact will be felt at the entry and middle levels where the intake is expected to be reduced in the short term. Certain slowdown proof sectors like healthcare, energy, education, telecom, basic consumer goods and services will continue to be robust during these times. However, irrespective of the sector, jobs which do not have a clear ‘Monday morning agenda’ are at risk. As India does not possess a social security apparatus, the societal impact of layoffs remain an area of huge concern.
On a positive note, things are expected to improve from April, when companies recalibrate their growth plans and things settle down in a lower state of equilibrium. Smart companies focusing on the long-term will certainly look at this as a great opportunity to acquire good talent at reasonable costs. Companies will look to cherry-pick talent to sustain and build long term competitive advantage. Proven performers who have a great track- record of success in creating shareholder value will continue to be in demand and more so during tough times.
Senior people may have to double hat as organizations will look to cut the flab and several staff roles could be eliminated. Like equity markets, real estate or commodities, the compensation levels may also see a correction and we will see the emergence of aggressive variable pay regime across companies. ESOPs which is a cyclical retention tool will be in vogue again at these rock bottom valuations and one can expect a significant tax effective upside in the medium term.
The traditional sectors like FMCG, manufacturing and heavy engineering which had lost out on talent in the past few years are expected to be back in favor. The public sector and government jobs could regain some of their lost sheen. On the whole, India, which will continue to grow in relative terms to the rest of the world, will be even more attractive for global talent. Expect to see more instances of returning Indians and expatriates accepting or exploring job opportunities in India.
Established organizations which have witnessed such business cycles in the past are better equipped to deal with the situation and one can expect them not to make knee jerk decisions on layoffs and salary cuts. Across most sectors, compensation increase will be in single digits this year, though good performers will continue to be differentiated and will be unscathed. We expect to see consolidation and up- gradation of talent across corporations and in fact, on the positive side, one would expect companies to invest further on key performers for the long term without the fear of attrition.
Lastly, the era of across the board double digit salary hikes and yearly promotions are certainly over for now. Easy money, fancy cars, inflated job titles and bonuses will have to wait and it will be back to the good old fashioned method of hard work and perseverance which will separate the men from the boys. Going in to 2009, one thing is for certain; the balance of power has well and truly shifted to the employer and will remain so for some time to come.
Going in to the New Year and the last quarter of the financial year, the specter of layoffs and salary cuts does loom large across sectors. Companies which hired aggressively for new ventures or anticipating high growth rates are now left with several employees on ‘the shelf’. Financial services, especially broking, investment banking and retail banking, Real Estate, ITES / BPO, Automobile and modern retail to an extent are the sectors which will face the heat. Infrastructure projects which depend on fresh dose of capital, both equity and debt, are also seen at risk and may see a few job losses. The highest impact will be felt at the entry and middle levels where the intake is expected to be reduced in the short term. Certain slowdown proof sectors like healthcare, energy, education, telecom, basic consumer goods and services will continue to be robust during these times. However, irrespective of the sector, jobs which do not have a clear ‘Monday morning agenda’ are at risk. As India does not possess a social security apparatus, the societal impact of layoffs remain an area of huge concern.
On a positive note, things are expected to improve from April, when companies recalibrate their growth plans and things settle down in a lower state of equilibrium. Smart companies focusing on the long-term will certainly look at this as a great opportunity to acquire good talent at reasonable costs. Companies will look to cherry-pick talent to sustain and build long term competitive advantage. Proven performers who have a great track- record of success in creating shareholder value will continue to be in demand and more so during tough times.
Senior people may have to double hat as organizations will look to cut the flab and several staff roles could be eliminated. Like equity markets, real estate or commodities, the compensation levels may also see a correction and we will see the emergence of aggressive variable pay regime across companies. ESOPs which is a cyclical retention tool will be in vogue again at these rock bottom valuations and one can expect a significant tax effective upside in the medium term.
The traditional sectors like FMCG, manufacturing and heavy engineering which had lost out on talent in the past few years are expected to be back in favor. The public sector and government jobs could regain some of their lost sheen. On the whole, India, which will continue to grow in relative terms to the rest of the world, will be even more attractive for global talent. Expect to see more instances of returning Indians and expatriates accepting or exploring job opportunities in India.
Established organizations which have witnessed such business cycles in the past are better equipped to deal with the situation and one can expect them not to make knee jerk decisions on layoffs and salary cuts. Across most sectors, compensation increase will be in single digits this year, though good performers will continue to be differentiated and will be unscathed. We expect to see consolidation and up- gradation of talent across corporations and in fact, on the positive side, one would expect companies to invest further on key performers for the long term without the fear of attrition.
Lastly, the era of across the board double digit salary hikes and yearly promotions are certainly over for now. Easy money, fancy cars, inflated job titles and bonuses will have to wait and it will be back to the good old fashioned method of hard work and perseverance which will separate the men from the boys. Going in to 2009, one thing is for certain; the balance of power has well and truly shifted to the employer and will remain so for some time to come.
- K Sudarshan
The author is Managing Partner - India, EMA Partners International, A Global Executive Search firm
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