From Pampered Pashas to Pink Slips

Assets—this is what knowledge workers came to be regarded as. But that was it… The till-now pampered employees came in for a rude shock as the slowdown hit the HR plans of even top-notch companies

This was the year of Ayn Rand—that strident votary of man’s intellect. Traditional economics has revolved around the concept of labor as a cost of production—right there with the cost of land, raw materials, plants and machinery. Well, traditional economists have had to do some serious rethinking this year as a basic paradigm shifted completely—labor cost turned into intellectual capital. And became the most important investment a company could make. Throughout the year, analysts, researchers and consultants told the IT industry in general and the software sector in particular: preserve your intellectual capital, it is your most precious asset.

As a result, this was the year when people processes became important. Deploying intellectual capital where it was most productive became crucial and ensuring the health of this capital—both emotional and monetary—became of paramount concern. This was true of the IT industry in general but nowhere more appropriate than in the software exports sector. The new credo was—You are what you hire.

Consequently, HR departments, always derided for their perceived redundancy, became among the most crucial departments in any IT company. From being seen as hagglers of employee salaries, they became the caretakers of the company’s health.

Dataquest called 1999-2000 the era of the knowledge worker. By the same token, this was the Year of the Knowledge Capitalists. So, was it a great year for IT employees? Of course not. Whoever said capitalists had it easy?

Much like traditional capital, their fortunes rose and fell with the fortunes of the economy in general and the company in particular. The first half of the year was a time of unheard of hiring rates, big salaries and crazy perks. In the second half, new hiring slowed down and finally in Q4, came almost to a halt. Employees whose salary appraisal cycles fell in January or after, got significantly lower hikes than those appraised in October. And finally, by the end of the financial year, rumors flew thick and fast of companies cutting jobs. Many of these rumors were unfounded but—some were not. All in all, it was quite a roller-coaster ride.

Here we take a more detailed look at some of the major HR trends of the year with respect to recruitment, training and employee profiles.

Recruitment trends

Last year, the industry’s strength grew by 24% from 425,000 tech workers to over 525,000. Over 70% of these fall in the knowledge worker category. The average number of employees recruited per organization grew from 208 to 315. There were, however, some major skews in the numbers in the domestic and software exports sectors. In the domestic sector, the average recruitment per organization rose from 81 to 135 employees, while it was much higher in the software exports sector where the average grew from 334 last year to 540. Significant variations were also noticeable in figures of individual companies.

Not all these employees were, however, recruited to fuel growth. Many of them were brought in to deal with the issue of attrition, which remained dominant. Of course, it slowed down considerably by Q4 when the US slowdown began to have its ripple effects on the Indian IT industry. The picture that emerged was that of the 43% of the total employee strength hired this year, only 24% went into fuelling growth. The remaining were added to fill in vacancies created by attrition. Compare this to 32% more employees added in the year before (1999-2000) of which 22% was to fuel growth and 10% to compensate for attrition.

There were some differences in hiring patterns between the domestic sector and the software industry. Hiring in software companies was significantly higher at 39% of total strength, while the domestic sector hired 29% of its total strength. However, since attrition levels were high in the first three quarters, almost half the hiring that took place was to compensate for people moving out while the other half went into fuelling growth.

Even between companies, the skews were large. Infosys was the big recruiter with 4,482 or 82% more employees added. On the other end, Compaq added just one extra person. Others fell in between, ranging from 5% (or 172) more employees at HCL to 40% more at Wipro and 24% more at TCS.

Qualification trends

This was a B2B or back to basics year. After a spree of unrestrained and not very discerning hiring, software companies in particular began to realize that any number of short-term courses would not compensate for a sound grounding in the basics. Besides, learnability has become a big issue with the demand for skills changing from year to year. Java skills, for instance, were much sought after at the beginning of the year and many Java programmers from sundry training institutes found cushy jobs. By the end of the year though, those skills were no longer at a premium and many companies found themselves stuck with employees who knew nothing else.

All said and done, the message of the year was—plug-ins do not function so well when it comes to IT education.

Work experience trends

Experience has always been at a premium in the IT industry, which is even today, a relatively young industry. It is not surprising therefore that one of the largest rise in employees has happened at the less than one-year experience level. Overall, employees in this experience group grew from 16 to 27%. Surprisingly though, this proportion grew higher in the domestic segment from 17 to 27% while it grew from 15 to 19% in the software exporters segment.

However, with the high levels of recruitment witnessed in the last three years, the number of employees in 1-3 years experience category has also grown and like last year, forms the largest experience group in the industry. In the domestic segment, this experience group grew from 36 to 39% and in the software exports segment it grew from 35 to 37%. Overall, the number of employees with 1-3 years of experience in the IT industry now stands at 39%. Employees in the 3-5 years experience groups have also risen marginally from 21 to 23% in software export companies though their proportion in domestic companies remains the same at 23%. The major problem area however continues to be finding good talent at the project manager level with 5-10 years of experience. Software exporters were particularly hit in the early part of the year as relaxed US visa norms led to a lot of migration. The bottomline was that though the domestic sector remained unaffected at 14%, the percentage of project manager-level of employees actually fell from 20% to 16% among software exporters.

Training

The good news is that because it is still a young industry and because of the kind of industry it is, employee training is beginning to be increasingly important. Last year’s big trend was the growing emphasis on soft skills, especially in the software segment. As India becomes the software outsourcing destination of choice, more and more software programmers have to interact with the outside world. So things like culture training, customer contact, language skills (both English and German or Japanese or Spanish–depending on where the next project takes you) are becoming crucial. Also, as software engineers move up the ladder, the line between geeks and "management types" is slowly getting blurred.

All indications for this year are that the job market will remain tight. The freeze on jobs continues with new recruitment restricted to project-based requirements. Nor are big salary hikes on the anvil. Post-slowdown wisdom is that bad times give companies an opportunity to get rid of deadwood and spruce up their act in all departments—human resources included. So a bulging workforce, huge hikes, trips abroad—they are all passé. As we said earlier, knowledge workers may be turning into knowledge capitalists, but the change in status does not automatically mean that life is going to be easier.