DQCI HR SURVEY 2004: TheBitterPill?

Addressing HR-related issues can be more daunting a task for many solution providers than generating revenue and
increasing profitability. DQ Channels India for the first time ever conducted a unique HR survey across 50 leading SI organizations in the country to identify various trends that are evolving in this community. Also, the survey attempted at pin-pointing various issues faced by HR managers/owners of these solution providing organizations. High attrition rates, problems in finding the right kind of manpower top the list.

It's a well-acknowledged
fact that people are the
biggest asset for any organization. And it's no different for IT solution providers who act as the most crucial link between technology vendors and end-customers. These solution providers (also referred as SIs), on an average have been in business for last 10 years employing between 50 and 1,000 people.

These are organizations with a turnover of as low as Rs 10 crore and even as high as Rs 200 crore. Most importantly, these are companies with a strong determination to grow. However, often in the process of growth, these organizations are faced with challenges that go beyond the scope of revenue and profitability. As SIs grow their scale of operations, their workforce also swells up and so do the challenges in managing an increased pool of people.

DQ Channels India identified the need to highlight these challenges and inform its readers about the latest HR trends in the solution provider community. The result of this thought process is DQCI HR Survey, involving nearly 50 leading solution providers across the country.

In this survey spanning organizations across top seven Indian cities, the respondents were asked to give various HR-related details and an analysis of the same was done.

THE WEAKEST LINKS

On being asked to list the top five HR issues faced by the organization, high attrition rates topped the chart with nearly 58% of respondents listing it among the top three issues. This was followed by 'recruitment of right kind of people' (38%) and 'training' (30%). Twenty-one percent respondents felt that poaching of employees by other larger organizations was one of their major concerns while 18% felt that keeping the motivation levels high for employees was the biggest HR challenge.

That attrition rate is one of the biggest problems faced by HR managers in these SI organizations can be well-understood from the survey results, which show that nearly 50% organizations have attrition rates between 10% and 20%-a figure which is on a slightly higher side. Further, 16% respondents have to handle attrition rates which are anywhere between 20% and 40%. On a closer look at the profile of people who tend to leave these organizations faster, one sees that most of these are the technical staff. And given the fact that technical workforce constitutes for over 80% of the overall employee base, the attrition rates for tech staff gets mirrored in that of the total workforce.

The survey also indicates the main reasons behind employees leaving these organizations. And despite 68% companies giving a salary hike between 10% and 20%, people tend to jump jobs for even better pay packages. In fact, nearly 58% of respondents rate 'higher salary offered by other companies' as the biggest reason behind their employees quitting jobs. Many of these prefer to join MNC outfits or explore opportunities abroad. Interestingly enough, some 27% of the companies surveyed point out that under-performance by employees was one of the main reasons why they had to leave the job.

PEOPLE vs PRODUCTIVITY vs PROFITABILITY

Trying to gauge the revenue per employee in the SI organizations that were surveyed, we stumbled across some interesting trends. One, there is an extreme disparity as far as revenue per employee (or productivity) is concerned. Of all the respondents, the revenue per employee ranged between
Rs 7.5 lakh and Rs 75 lakh.

Second, at organizations which have a large employee base like Accel ICIM (1400+ people), Allied Digital (1200+) or even Team Computers (800+), the revenue per employee is at the lower-end. However, for quite a few companies with a workforce of 50-200 employees, the same is far more higher with six of them reporting a per employee revenue above Rs 50 lakh.

And third, profitability doesn't seem to have any obvious co-relation with the number of people that the organization employs or even the revenue it generates. “We employ close to 1,000 people in our organization with majority of them looking after managed services business, which is very people-intensive. While at the outset, our per employee revenue may not look so attractive, the fact is we have maintained our profitability well in the region of 10%,” explains Sudhir Sarma, Director, Network Solutions. According to him, because of different business models adopted by SIs, a benchmarking for revenue per employee cannot be really done and that profitability shouldn't be linked to this.

However, in the survey it so happens that nearly 64% organizations have a per employee turnover between Rs 10 lakh and 30 lakh. Nine percent have it less than Rs 10 lakh and 18% above Rs 50 lakh.

Justifying this skew, R Srinivasan an independent HR consultant (who also acts as a corporate advisor to Neoteric Infomatique, the distribution company) says, “While revenue per employee is a significant factor for organizations to monitor, it should be viewed in context of other parameters as well. These could be geographical spread of one's business or product portfolio one deals in.”

According to him, many times a company needs to add a large team of people but the returns can only be expected after certain period of time. Hence, if this number is also factored, the per employee revenue figure can significantly come down.

THE YOUNGER THE BETTER

The HR Survey reveals that employers prefer to have people in the age-group of 25-35 years. On an average, 68% employees in any organization were found to fall in this age bracket. Twenty-three percent of workforce was aged less than 25 years, while 8% was between 35-50 years. Only 1% of the total employee base was found to be more than 50 years. A significant reason behind a very 'youthful' workforce is the fact that these SIs recruit lot of people at the entry-level, with 1-3 years experience.

On the educational profile of the employees, the survey found an average of 38% to be mere graduates. A good 24% employees possess a BE/BTech degree while another 10% are MBAs/MCAs.

On being asked about the most preferred mode of recruitment, 82% respondents listed referrals/word-of-mouth publicity as one of the top three choices. 70% had put manpower consultants in the top three list of recruitment source, while 61% rely on print ads as the preferred route to recruiting people. Job sites are relied by only 39%
companies.

CERTIFICATIONS AND BONDS

A lot gets spoken about how companies spend lots of money every year on getting their employees certified, and once they are, how they tend to jump jobs since their market value goes up. The HR Survey tried to assess the amount of investment SI organizations are allocating towards getting their employees certified/trained. Also, it tried to see if there is a trend of companies asking their employees to sign bonds while getting them certified, as a means to safeguard their investment.

Of the 42 companies that responded to the survey, 12 have less than 20% of their employees certified, while another 12 have between 20% and 40% of their workforce certified on one thing or the other. A majority of organizations (67%) spend less than Rs 5 lakh per annum on getting their employees
certified. Fourteen percent spend between Rs 5 lakh and Rs 20 lakh, while 14% spend between Rs 20 lakh and Rs 40 lakh. Two companies namely Allied Digital and Network Solutions spend upwards of Rs 40 lakh on certifications.

In an attempt to ensure adequate ROIs on training and certification, organizations are slowly exploring the option of getting their employees to sign some kind of bond/agreement before getting them certified. However, in most cases, the bonds are not really legal in nature and is more of an understanding between the employer and the 'would-be certified' employee that he/she will at least serve the organization for a minimum tenure on getting the certification. Twenty-five percent of the solution providers who were surveyed have already put such a practice in place or are about to do so. This trend is only likely to become prominent in the days to come. Some of the SIs that Channels India spoke to even mentioned that 'contract hiring' will become a norm in the near future.

GOLDIE with inputs from Team DQCI and CyberMedia News

SURVEY METHODOLOGY

The DQCI HR Survey 2004 is an extensive exercise carried out across the IT solution provider community largely concentrated in the seven major cities: Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata and Pune. In all, 50 leading systems integration organizations were invited to take part in the survey, out of which 42 responded. The respondents were administered an exhaustive questionnaire pertaining to various HR-related issues.

Data from these 42 respondents was then aggregated and analyzed to establish significant HR trends across SI outfits.

The survey however did not include the tier-1 players like Wipro Infotech, HCL, CMC and CMS, purely on account of their very large scale of operations (both in terms of manpower as well as revenue). The logic behind such an exclusion was to maintain a certain degree of homogeneity in
the profile of respondents. Being an HR survey, only companies with an employee base upwards of 40 people were considered.