Feature

Falling dollar impacts workforce strategy

The rising rupee has necessitated many changes in workforce decisions. Sudipta Dev writes that it is the time for retraining, redeploying people and reworking costs

The last six months have seen an endless stream of debates on how the IT industry will be impacted by the falling dollar rate. Those who expected it to be just a temporary phase and were waiting for the situation to get normal, have a much longer wait than anybody expected—the rising value of rupee, it seems, is here to stay. For a dollar-focused industry whose maximum revenues go into wages, it would mean long-term changes in workforce strategy. Interestingly, most experts believe that the situation will actually be beneficial for the industry in the long-term as it would bring about the much needed stability in people resources and costs.

The situation is almost reminiscent of the dotcom bust, only this time most companies are trying to deal with the problem more strategically and positively. The revenues are mostly generated in dollars and the costs are accounted for in rupees. “There’s been a direct and an incidental impact which will continue to affect throughout this year and a spiral effect on the years beyond. There will be a shift in the paradigm within talent management and C&B (compensation and benefits) policies, also more direct HR interventions would become the order of the day,” stated Vikram Bhardwaj, Managing Director, Redileon.

It has also impacted sales negatively. “However, it does also have a converse effect on cost-to-serve for Indian service providers, which has achieved a better efficiency,” said Monisha Advani, Managing Director, Randstad India.

Cutting the flab

Is the flab being cut, particularly among the bench staff? There have been reports of companies reducing their bench strength, along with plans for reduced hiring in the next few quarters. Some experts believe that the bench is now a luxury as organizations have now to fully utilize their workforce to combat effectively in a tough market scenario.

Many organizations have streamlined their processes to cut the flab on costs. “Bench staff reduction will only happen in very extreme conditions,” asserted Vaidyanathan Iyer, CEO, Flexiworks India. With most Indian firms adopting positive measures to deal with the situation, he added that the best way was to increase work hours (with employee concurrence), retrain in cutting edge technology, and use more people to cut down deployment time and earn extra dollars for early completion.

Impact on recruitment scenario

While the situation will not see any drastic cut in manpower, most organizations will be bound to rework their costs, particularly as far as recruitments are concerned. “Redeployment, retraining, linking higher variable pay to delivery and resorting to flexi staffing could be some of the key developments,” stated Iyer. A positive development would be reduction in job-hopping; which is alarmingly high these days. This would also enable employees to understand and appreciate the need for a stable career, as organizations in times of crunch would still do all the needful to keep the loyal and stable group than believing in job hoppers.

Manpower crunch is not foreseen as a problem thanks to the large force of temporary staffers who would step in, in case of any eventuality. “Temp staffing organizations will provide just-in-time quality human resources to organizations. I personally think our corporates today have enough wherewithal to tide over such challenges successfully,” added Iyer.

While organizations may try to increase employee utilization levels for mid to junior ranks, at the senior levels there might not be much difference. “Interestingly, to differentiate from competition, this is the time when technology companies hire talent at the leadership levels with even more progressive skills and experience, for example, partner-level consulting professionals from the Big 4, etc.,” said Bhardwaj.

Affect on employee salary

Another positive impact will be on the remuneration structure, which will witness a much needed stabilization. Increments will become productivity based, with a larger percentage of variable pay. Promotions, increments and rewards will no longer be just a retention strategy, but actually based on an individual’s ability to excel in his job.

Advani predicts a couple of interesting developments:

• The way Indian salaries for professionals has galloped beyond realistic levels will now be challenged by expatriate secondments which will become more economical in face of a weaker dollar.
• Another development is the tightening of indirect HR budgets e.g. recruitment, training, employee relations, etc., are facing rationalization in companies dependent on foreign investment/capital.

It has become imperative for employers to become realistic in managing personnel costs. “We have demonstrated unnecessary flexibility in this regard which has resulted in a candidate-driven market with flippant creativity in defining rewards and recognition,” asserted Advani, adding that one of the elements of being a global economy is being responsible with costs. This is the biggest lesson which Indian organizations must not ignore.

Long-term benefits

There seems to be a general consensus that such slowdown in the US if not drastic, may actually be beneficial to the Indian IT players in the medium to long term. “In a slowdown, the tendency for the client is to first cut down the discretionary IT spending and secondly to reduce the existing cost of core IT spending,” added Iyer, insisting that this is where the offshore Indian IT services players will score.

Bhardwaj concludes that the prevalent conditions have brought back the memories and learnings from the dotcom bust days, “Irrational exuberance is being avoided by all companies, even the captive R&D or technology centers of global companies.”

sudipta.dev@expressindia.com