Retrenching is Part of an HR Man’s Lot

For 12 years, Richard Payne has been consulting with firms in the

Asia-Pacific to establish competitive pay-practices, design compensation

policies and streamline compensation and administration. He is the author of

numerous articles and books such as "The Asian Expatriate: Strategies for

recruitment, training and re-entry". He spoke to DATAQUEST about the

current challenges faced by HR professionals in the IT industry. Excerpts:

Have the challenges that HR managers face changed due to the economic

downturn?

The challenges have not changed, but the context has. You have to control

costs aggressively while also at the same time deal with market pressures where

you have limited flexibility.

Now that ESOPs have lost their charm, what steps are companies taking?

The problem arises when there is a variance in the

market.Then one is forced to maintain one’s best people with whatever limited

money is available. Retrenching employees is a part of the job for a HR manager.

Would the approach taken by HR professionals in the US

towards retrenchment be different from their counterparts in Europe and Asia?

Yes. In Asia where by and large there are no safety nets, HR

professionals are more sensitive to the issue of retrenchment. You can retrench

someone in a country like Singapore where there though there is no safety net

you can more or less be sure that a particular individual will be able to find a

job soon.

So, is there a definite relationship between the

sensitivity of a HR manager and his geographical location?

That’s right. Besides geography, sensitivity also depends

upon the nature of the industry. Even in India, one would behave very

differently while dealing with software professionals and a person employed in

an old manufacturing firm.

You have been a consultant at firms in this region for

quite some time. Do you notice any paradigm shift in the firm’s needs in the

past few years?

Organizations have definitely become more sophisticated in

terms of what they are asking for. It’s also related to implementing more

modern systems. In the past, there were lot of issues like seniority-based pay

which has been replaced by variable pay which is more common these days.

What is your opinion of the Just-in-Time recruitment that

many firms especially in the IT sector have gone in for?

I think that’s a reflection of the current economic

situation. It seems that some companies expect students to be equipped to face

the job from day one. I kind of question the ability of B-schools to train

students to be on the job right away.

Has the 360-degree method of appraisal become common in

the Indian software industry?

Yes certainly. The way in which they have done it is to

enable individuals to do it in a very confidential manner and without suspicion

or worry about confidentiality. In India, they are much ahead of the game.

Does it make sense to import US-centric management and HR

principles to countries like India?

I would like to start off by disputing the value of importing

management principles from the US. A lot of the stuff developed in the US has

not been effective at all in other regions.

We have to recognize the fact that the US is perhaps the

world’s most unique market. The cultural variance in India is 10 times more

than that in the US. The US market is thus remarkably homogenous.

Then why do people apply US-centric models?

Because its easier and market size is bigger and one can

support a kind of market methodology for it, which would otherwise be different

if I went to a smaller market like France. One has to be careful as to whether

all US-centric concepts are applicable here.

Amit Sarkar in New Delhi

PROMOTERS’ BACKGROUND:

In the absence of a track record, this is the key area that a VC investor looks

at. The background should provide the educational and professional history of

the promoters. It should highlight the contribution and strength of the

promoters and their commitment to the venture.

BUSINESS PLAN:

The plan section should indicate projections of income for the next three to

five years, ratio analysis and the proposed investment plan. It should also

provide an industry analysis, the different participants, a study of theÂ

competitors and the proposed promotion and marketing strategy.

EXIT FOR THE VC:

The final aspect that VCs look at is how they can exit from the investment. The

exit section should highlight the possible exit options for the VC, whether it

can be through a strategic sale, or through an IPO.

Choosing the right VC

Once the

homework is done, the next stage is to identify a suitable VC investor to

fund the project. While deciding on the source of capital, remember that VCs

bring more than just funds to the table. This concept of bringing along a bundle

of capabilities along with funding is called ‘smart’ money. The VC can

contribute in any of the following areas:

MANAGEMENT CAPABILITIES:

VCs can bring in management expertise, which the technocrat entrepreneur may

lack. Angel investors and other VCs can play a prominent role in taking the

start-up from conception through operation till expansion in the market. VCs can

nominate senior people on the board to provide direction or they can themselves

be involved in day to day operations–an approach called hand-holding. They can

also help investee companies to identify proper people for key positions in the

organization. Therefore, depending on the expertise required, the entrepreneur

can look for angel investors, seed capital investors or institutional investors.

MARKET ACCESS:

VCs, by their extensive networks in the industry, can help start-ups get their

initial business. Providing such initial breakthroughs can be critical for the

start-up in its struggle to gain credibility and a foothold in the market.

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DURING IPO OR SALE:

Before deciding on the VC

investor, the entrepreneur should also decide on the nature of funding required

for the venture, whether it is seed capital, start-up capital or later-stage

funding. Seed capital is the initial funding required to validate the idea and

finance the initial feasibility studies. Start-up funding is required for

product development and initial marketing. Later-stage funding is required for

working capital finance and business expansion. As different business stages

would demand different business capabilities, the nature of the VC investment

would depend on the type of funding sought. While seed capital and start-up

funding can be obtained from angel investors, incubators and start up venture

capital funds, later stage funding can be obtained from institutional venture

funds and mutual funds.

The future is now

Several new

initiatives have been started like the India Venture 2000 and the e-mahamillionaire

project of NIIT to nurture and guide prospective entrepreneurs to obtain VC

funding. Notwithstanding the recent developments, the VC industry is in a

nascent stage in India today. With the prospect of more growth in the IT

sector, a lot more activity can be expected in the VC industry with the

availability of more investible funds. Some of the recently launched technology

mutual funds have earmarked a portion of their funds in unlisted companies,

which make them more like VC funds. All this is happy news for the entrepreneur.

Venture funds have been an engine for economic growth for over a decade in

countries like USA, Israel and Taiwan. The situation is now ripe to be

replicated in India.

Dr Thillai Rajan