Thursday, February 17, 2005

Retiring Workforce, Widening Skills Gap

Exodus of "critical talent" threaten U.S. companies

New York — February 16, 2005 — Impending Baby Boomer retirements, a widening skills gap driven by declining educational standards, and outdated and ineffective approaches to talent management are combining forces to produce a "perfect storm" that threatens the global business economy, according to new research conducted by the Human Capital practice of Deloitte Consulting and Deloitte Research, a part of Deloitte Services.

In a recent U.S. survey of human resources executives nationwide conducted by Deloitte Consulting, more than 70 percent of the 123 respondents say incoming workers with inadequate skills pose the greatest threat to business performance over the next three years, followed by Baby Boomer retirement (61 percent), and the inability to retain key talent (55 percent). These survey findings are underscored in Deloitte Research's report, "It's 2008: Do You Know Where Your Talent Is? Why Acquisition and Retention Strategies Don't Work."

"The overwhelming accumulation of data, including Deloitte Consulting's new research, points to an inescapable conclusion: the widening skills gap, particularly among the categories of workers who disproportionately drive companies' growth and performance, is a global phenomenon that will create unprecedented challenges for businesses," said Ainar Aijala, vice chairman of Deloitte Consulting and global service area leader of Deloitte Consulting's Human Capital practice. "The confluence of demographic and social trends — the full force of which will begin to be felt in as little as three years — will leave behind companies that do not begin to rethink and redesign their approach to managing human capital."

Draining of the Global Labor Pool

In only three years, the first wave of Baby Boomers will turn 62, the average retirement age in North America, Europe and Asia. According to the Deloitte Consulting survey, one-third of U.S. companies expect to lose 11 percent or more of their current workforce to retirements by 2008.

"While the 'greying' of the workforce will independently create large vacancies across industries, additional factors, such as low birth and immigration rates in Europe and the single-child policy in China, present further perils to companies worldwide," explained Aijala. "Companies will also continue to face inadequate skills among an increasingly diverse, virtual, global, and disengaged workforce."

Life sciences, energy and the public sector will be the hardest hit with manufacturing, consumer business and financial services industries close behind. For example, Canada, Australia and the United States could lose more than a third of their government employees by 2010. The National Association of Manufacturers revealed in a recent survey that more than 80 percent of U.S. manufacturers face a shortage of skilled machinists, craft workers and technicians. Further, the U.S. Department of Education predicts that 60 percent of new jobs in the 21st century will require skills possessed by only 20 percent of the current workforce.

The Critical Talent Factor

Among the many threats affecting the global workforce over the next few years, the exit of "critical talent" could be the most damaging. Deloitte Consulting defines "critical talent" as the individuals and groups who drive a disproportionate share of their company's business performance and generate greater-than-average value for customers and shareholders. These individuals are "critical" to their company's ability to meet strategic goals and objectives.

"When we talk about critical talent, we are not necessarily referring to the 'A players' or senior executives," explained Mike Fucci, principal and U.S. leader of Deloitte Consulting's Human Capital practice. "Critical talent represents those individuals who possess highly developed skills and deep knowledge of not just the work itself, but of how to make things happen within a company, such as the couriers within package delivery companies who have daily client contact and direct knowledge of the supply chain, or researchers and clinicians within drug companies."

Unfortunately, few organizations have talent management processes in place to address the impending workforce shifts that will negatively impact critical talent segments. In fact, only half of the organizations surveyed by Deloitte Consulting have identified a list of the critical skills they need for future growth. Even more alarming, more than a quarter of respondents say defining critical skills as a workforce tool is "unimportant."

"Employers need to focus quickly on understanding which skills will make or break their business, where those skilled individuals will come from, and how to keep these workers engaged and committed within the organization," Fucci cautioned. "Only those organizations that respond swiftly and plan effectively will find themselves on top of these new challenges."

Talent Management Shortcomings

Traditional approaches to talent management frequently focus on acquisition and retention. When the talent pool tightened in the 1990s, companies responded by offering rich compensation packages and "hot skills" bonuses. The end result, however, was often disappointing — recruiting costs soared while investments in training languished. In addition, such compensation packages were often matched by competitors, contributing to high attrition rates of talented personnel.

Despite the changing landscape, organizations still plan to increase their investment in traditional talent solutions for 2005. Approximately 60 percent of survey respondents plan to increase experienced employee recruitment, while 42 percent plan to increase campus recruitment. Additional investment will also be given to rewards packages for experienced employees (39 percent) and new recruits (30 percent).

"Acquisition and retention strategies remain important parts of talent management. Such strategies, however, attend to the 'end-points' of the process and only offer a quick fix to these new workforce challenges," said William Chafetz, national practice leader of Deloitte Consulting's Organization and People Performance Services. "To survive the changing labor landscape, organizations must employ more comprehensive talent management strategies that reflect an understanding of critical workforce segments and satisfy the conditions those employees need to succeed."

Getting to the Heart of Talent Management

According to Deloitte Research, talent-savvy organizations build strategies around what matters most to their critical talent — their personal growth or development, their need to be deployed in positions and assignments that engage their interests and curiosities, and their connection to others in ways that drive performance for the company as a whole.

Many of the companies Deloitte Consulting surveyed seem to understand the importance of development and training their employees, with more than two-thirds (70 percent) of respondents planning to increase investments for mentoring and coaching in 2005, e-learning (64 percent) and classroom training (49 percent).

"It is a great sign that most organizations are committed to strengthening the skills and knowledge of their workforce, but they need to do more," said Chafetz. "No single part of the talent management process can sustain an organization or generate superior business performance on its own. Organizations must adapt a new way of thinking and use critical talent as a competitive advantage and a long-term investment."

"Develop-Deploy-Connect"

Deloitte is using the survey results to promote its "Develop-Deploy-Connect" model for talent management strategies, which focuses on the development, deployment and connection of critical talent. Combined with supporting programs, organizations that build strategies to develop, deploy and connect their critical talent generate the workforce contributions for superior business performance, the consultancy said, and when this happens, attraction and retention largely take care of themselves.

"Companies can avoid sustaining a direct hit from the looming talent crisis, and in fact convert these challenges into an opportunity, by rethinking and reinventing their talent management processes into a well-designed talent strategy that truly utilizes critical workforce as a competitive advantage and, therefore, differentiates a company from its competitors," Deloitte said.

Wednesday, February 16, 2005

Three Indians on Forbes 'Midas List'

Three Indian Americans, including debutant Ram Shriram who put his money into Internet search engine Google, are among top 10 investors on Forbes magazine's latest annual 'Midas List' of 100 best venture capitalists.

Shriram, an early investor in Google Inc that went public last year, was ranked sixth, while renowned Silicon Valley venture capitalists Pramod Haque and Vinod Khosla were ranked eighth and ninth respectively.

A member of the Google board since September 1998 and a partner at venture fund Sherpalo, Shriram was a co-founder of Junglee and has served as vice president of Amazon.com. He was an early member of the Netscape executive team.

Shriram "likes to call himself a Sherpa - helps entrepreneurs climb the peaks of Mount Nasdaq. Looking for university research to exploit", Forbes said.

The California-based Khosla, who is a partner at the well-known Silicon Valley venture fund Kleiner Perkins Caufield and Byers, had co-founded Sun Microsystems in 1982 and counts among the richest people of Indian origin.

Among his recent activities, he has endowed $5 million to his alma mater, the Indian Institute of Technology in New Delhi, and is starting a micro-credit programme for small units in India on the lines of Grameen Bank in Bangladesh.

Khosla is "semi-retired now, which means he's only working 80 hours a week", said Forbes, adding that he now proposes to fund projects that have high socio-economic impact.

These include protein arrays for low-cost medicine and micro-loans in India, besides investing in Zettacore, a chip company and one of a few nano-technology outfits in which he has faith.

Haque is a managing partner with Norwest Venture Partners. "Last year's number one dealmaker had a quiet year. His specialty - no-name networking companies that get sold for billions," Forbes said.

His old hits included parking funds at Cerent and CoSine, while his current investments include Amberpoint and Veraz .

Saturday, February 05, 2005

Reverse brain drain worries US academics

"I love the traffic," says Prof Eduardo Glandt enthusiastically. "I love the honking as well. It's a nice ‘hey I'm there' sort of honking. A blind man would be able to drive easily," he adds. The Dean of the School of Engineering and Applied Sciences at the University of Pennsylvania, in Mumbai for the third time, loves most things Indian especially its students.


And he wants more. Prof Glandt was in the country primarily to recruit students. "Ten per cent of our faculty is Indian, 10 to 15 per cent of our students are Indian and we want more," he says. Indians are the second-largest ethnic group on UPenn's campus after Canadians. China, though not there yet, is a force to be reckoned with.

Despite being a university in great demand (the latest across-the-board rankings list UPenn at number 4), it has been marketing itself aggressively for the last three years because, as Prof Glandt says, "in a knowledge economy, the battle for the top brains is getting brutal".

A fallout of this competition that will go down well with Indian students, is more aid for foreign students. "That's the power of competition. When one university did it, all the rest had to follow, because we couldn't afford to have the best brains going to them," he says candidly.

Prof Glandt is more than familiar with the concept of brain drain, having moved to America from Argentina 31 years ago. "I was accused of not giving enough back, of betraying the fatherland," he admits. "But Argentina had no jobs for me and I had to go. In India, while opportunities for work and study may not yet be on par with the US, it is getting there. And that worries us," says Prof Glandt.

Part of making the US more attractive to foreign students is working with Congress on improving the visa situation, he says. There are indications of reverse brain drain as well. "This is happening more in China, but we've had an Indian professor taking a sabbatical to teach at home recently. We're worried for the first time," he says.

Thursday, February 03, 2005

1 million IT jobs by 2005-end

India's information technology industry is estimated to cross Rs 1 lakh crore (Rs 1 trillion) in 2004-05 and employ over 10 lakh (1 million) knowledge professionals, according to National Association for Software and Service Companies.

"The Indian IT industry would cross Rs 100,000 crore ($28.3 billion) in 2004-05, thanks to the growth in IT-enabled Services (ITeS) and IT Services and Software," Nasscom president Kiran Karnik said.

The ITeS segment is expected to record a 20 per cent growth, up from 18.2 per cent posted in the fiscal year '04, IT services and Software is estimated to post 58.8 per cent (down from 59.4 per cent) and hardware at 21.2 per cent (22.4 per cent in FY'04), he said.

IT services and ITeS contribute about 78 per cent to overall industry, he said, adding that the size also includes hardware sold in India by multi-national companies.

Karnik also said that IT and ITeS sectors would emerge as the major contributors to the country's GDP, providing over 4 per cent in 2004-05, up from 3.5 per cent recorded in 2003-04 and a meagre 1.2 per cent in 1997-98.

On the employment of IT professionals, he said it would cross 10 lakh in the fiscal year '04, with software exports sector recruiting around 3.45 lakh (2.70 lakh in fiscal year '04), software domestic sector employing 30,000 (28,000) and software in-house captive staff recruitment rising to 3.22 lakh (2.90 lakh).

ITeS sector would be the largest employment generator, staffing around 3.48 lakh in 2004-05, up from 2.54 lakh jobs provided a year-ago, he said.

The Indian IT industry includes hardware, peripherals, networking, training, domestic and export market for IT services and products and ITeS-BPO segments.

On the recent trends in the sector, Karnik said the industry would exceed its target of 30-32 per cent in exports to around 34-35 per cent in FY'05, and was likely to witness a domestic IT market upsurge.

The domestic IT market upsurge would be due to the localisation of software by Microsoft Corproation and Red Hat, he added.

An increase in mergers and acquisitions - like the merger between eBay and Bazee.com, IBM-Daksh, Patni-Cymbal and Flextronics-HSS - are also likely to take place, he said.

A return of venture capitalists, who had fled after the dot.com burst, an increase in the presence of MNCs, and the country emerging as an R&D hub are also on the anvil, he said.

Emergence of global sourcing, resulting in India increasingly becoming a market place is also in the offing, he added.

However, India needs to focus on building delivery capabilities in low cost geographies, operational excellence at the activity, function and business levels, consultative selling capabilities to complement existing relationships among others.

"Security is the main concern. However, the solace is that it is a concern across the world. India should also focus on improving infrastructure," Karnik said. Lack of proper infrastructure is plaguing the growth of IT industry in India, he said.

Wednesday, February 02, 2005

Indian Institute of Management - Bangalore to take in more students in '05
This could be good news for aspiring students wanting to get into the Indian Institute of Management (IIM).

More students are expected to get admission in the coveted IIMs this year as IIM Bangalore has decided to increase its intake this year.

The institute, which has a current capacity of around 185-190 students will increase its total seat strength to around 250 from the session starting 2005 onwards.

The move could impact the total intake of other IIMs as well. The rise of around 60-65 seats this year has been the result of the addition of a new section of around 65 seats to the existing infrastructure.

IIM-Bangalore has been keeping its intake lower than the other top three IIMs—IIM-Ahmedabad, IIM Lucknow and IIM Kolkata. While IIM Ahmedabad has 250 seats in PGP in management, IIM-Lucknow has 240 seats. IIM-Kolkata on the other hand offers a total of 250 seats.

The two other IIMs at Kozhikode and Indore have 120 seats each.