A Passage to India

Nov 18, 2008
This article is part of a series called News & Trends.

In 1605 Joseph Jacobs wrote a story titled Dick Whittington’s Cat, about a boy who’s told about the great city of London where the streets are paved with gold. Eagerly he sets out, only to find that while London has a lot of opportunity, it isn’t quite the promised land he was told it was — and the streets are paved with dust. That parallels the experience of a lot of companies that have made their way to India in the hopes of tapping the vast pool of talent the country has to offer. As most have found setting up shop in India and hiring employees has major benefits, but also poses some significant challenges.

On the positive side, many Indian universities — like the Indian Institutes of Technology and the Indian Institutes of Management turn out some of the best technical and managerial talent in the world. There are also a host of second-tier schools that provide excellent graduates. And with the multinationals like Microsoft, P&G, HP, Satyam, Wipro and others having been established in India now for some 20 years, there’s a good-sized pool of experienced talent as well.

But all this comes at a price. Three factors in particular make recruiting difficult. These are:

Unreliability Of Resumes. A recent study by KPMG found that about 60% of employers complain about resume fraud and fake credentials among significant numbers of applicants. Five percent of companies have reported losses exceeding $2 million as a result. The situation is such that many universities are now starting to embed RFID chips in their diplomas to prevent fraud.

Hiring Losses. The Indian Chamber of Commerce estimates that one in three candidates who is offered a position and accepts does not show up for employment. This is partly the result of employment practices that can require an employee to have a long notice period — exceeding two months in some cases. That allows candidates a long-time to shop offers around or for their current employers to convince them to stay.

Uneven Quality. While candidates from top-tier Indian universities are equal to the best in the world, the quality drops off significantly with candidates from second- and third-tier schools. Employers often find that their interview to hire ratios are typically 10:1 or higher.

Employers also complain that employees have a very mercenary attitude, and leave their jobs for even small increases in pay elsewhere. A lot of this can be explained by understanding the cultural and economic conditions that exist in India. India is a poor country (GDP per capita is $2,600). Only about 10% of the population of 1.1 billion works in the “organized sector,” i.e., regular, stable employment with a private or public sector employer. The rest are self-employed or farmers. The IT and outsourcing industry collectively employs only 4 million people. In the scheme of things, that’s very little. A job in the organized sector is a ticket out of poverty, but requires a good education, which is difficult to come by. As an example, the ITs have a selection ratio of 1:60. Having the smarts to qualify in the entrance tests usually requires a private education, because the public education system leaves a lot to be desired. Consequently, the temptation to fake credentials is huge.

As to hiring losses, call it the revenge of the nerds. While frustrating, it’s perfectly rational economic behavior. What many consider a small increase can be substantial in India. An experienced SAP developer in Bangalore makes about $25K to $30K. The same job pays over a hundred thousand dollars in the U.S. So an SAP developer in India who’s offered an additional $3K would be foolish to not consider it, and irrational to not accept it. It’s not that people are mercenaries, it’s that they are not irrational fools.

Evaluating the quality of education is particularly challenging, because there is not a standard ranking. There are all kinds of lists but none that match the credibility of the one by U.S. News and World Report or BusinessWeek. The best institutions are well known and acknowledged as such, but the quality of education at second- and third-tier schools can be anyone’s guess. A study by the McKinsey Globe Institute had determined that of the 350,000 engineers Indian universities graduate, almost two-thirds are no more than technicians. The same is likely to be the case with graduates in other categories.

So there is top-flight talent available, but it isn’t just there for the taking. The best tend to gravitate to the brand-name employers. For others an active sourcing effort is needed to be successful. Posting on job boards in India is about as effective as it is here. But then no one said it would be easy. Dick Whittington eventually became the Mayor of London, but it wasn’t the day after he arrived.

This article is part of a series called News & Trends.
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