To leverage its human capital, the corporation of tommorow would need to build superlative work systems that facilitate individual and collective excellence.

By Paroma Roy Chowdhury

October 19, 2007: It's two in the morning and I am holed up inside a motel on the outskirts of Las Vegas. The night is freezing, but my frantic eyes are riveted on the bright blue screen of my laptop. In another six hours, I'll be making a presentation to the purchase team of one of my company's most important clients. But there's been a problem. Earlier this evening, there was an explosion in one of our client factories, and the initial report says that the fire was due to the failure of circuit-breakers supplied by my company. I have another hour or so to find out everything about that circuit-breaker-the model, its type...just about anything that'll prove the reliability of our circuit-breakers.

Phew! It's half-past-three, but I've managed to collect a mine of information. My sales counterpart in Bonn (Germany) has sent me performance reports on all the models supplied in the last five years; the chief of manufacturing in New Delhi has e-mailed a detailed tolerance level report of all components that go into the circuit-breaker; the services chief in New York has pulled out case studies of electric fires, where the circuit-breaker was thought to be the cause, but in reality was not. To top it all, my boss has sent me a list of 'what-if' scenarios for the deep end. I think I have the deal nailed.

Be it in terms of technology, processes, knowledge management, or human capital, the Millennium Corporation will need systems that aggregate and leverage its most critical raw materials-knowledge, competencies, physical assets, capital, and relationships. In fact, the presence of a superlative information nervous system will determine how successful the corporation is in meeting the disruptions of technology, markets, and changing consumer preferences. The work systems must be aligned not only to current goals, but also to future targets.

Doing so, of course, won't be easy. For one, the stakeholders in its value-creation process would be many and typically scattered across the globe. For another, managing current imperatives in conjunction with future strategic needs will demand a tremendous amount of multi-dimensional flexibility-strategic, organisational, manufacturing, financial, and marketing, among others. That apart, there will be the physical limitations of the real world. But for seamless transfer and sharing of information, all the systems must mesh in, and allow real-time updation and access. The cost of disparate systems will be too high for organisations to bear. Says Aditya Narayan, Managing Director, ICI India: ''Work processes must be completely integrated to allow seamless information flow, which again, would be a crucial determinant of strategy.''

The People Principle

As businesses pull down physical barriers and merge boundaries, integration and standardisation of work systems will become even more important. Similarly, capture and storing of market information must be done in a way that allows cross-organisation sharing. Also, cross-rotation of human resources and sharing of knowledge will take place only if information systems allow so. But perhaps, the biggest challenge tomorrow would be to tailor the work systems around an organisation's core asset: its people. How the corporation recruits, measures and rates, and rewards its employees will eventually determine whether or not the investment in systems pays off. BT examines how the three RS of human capital-recruitment, rating, and reward-will metamorphose in the new millennium.

THE RECRUITMENT SYSTEM: The quest for the Perfect Being, a.k.a., the millennium manager, will be both global and local. More importantly, recruitment won't be purely need-based but also opportunity-led. For example, an executive with a great business idea will actually be scouted out. Agrees Sunil Kishore, Vice-President, EIH Ltd: ''Talent will get sought out far more aggressively. Companies could even hire a person first and then decide to create a position for him.''

Searches for talent will be global and yet niche. With transnationals using Indians to man global operations as well as employing their global talent agents to hunt locally, executive search will be seamless and across borders. Four out of the top six executive search firms, Heidrich & Struggles (H&S), Korn/Ferry, Egon Zehnder, and Stanton Chase, are already here. Says Charles Tseng, President, Korn/Ferry Asia Pacific: ''Search firms will get assignments based on their global presence, partnerships, and service delivery. Ability to execute searches across continents will be crucial.'' Chicago-based Heidrich & Struggles, for example, has 74 offices in 35 countries and has done placements for Coca-Cola, and Deloitte & Touche, which are its global as well as local client. Korn/Ferry too has 71 offices in 41 countries and a roster of international clients including Carrier Corporation and Ford, for whom they conduct local searches as well.

As partnering becomes common, corporates could outsource the entire recruitment process through customised selection packages for each level. The pluses: convenience and perfect fitment. Korn/Ferry, for instance, has an entire range of services. Its Future Step is a net-based recruitment product for junior- to middle-level selection; and Jobsdirect is a campus recruitment tool that also doubles up as a bench-strength assessment tool for senior levels. It is also putting together a database on the Net, e-Korn/Ferry, where it stores resumes for managers to access. H&S has a Net-based selection tool for middle management called 'leader-online' and also a campus recruitment package. Says Jurgen Mulder, Chairman of H&S International: ''The idea is to extend the relationship and provide a line of service from cradle-to-grave.''

Or it will be niche recruiting, driven by employee referrals and networking. More so at senior levels and in positions that demand a specific or unique set of skills. Examples would be jobs demanding high technical skills, start-up skills or ability to achieve complete business turnaround. Says Arunav Bannerji, CEO, Triple-A People Solutions: ''Organisations themselves would be highly networked and would naturally use the referral route to get perfect skill-position match.'' Already organisations like Citibank, American Express, Siemens AG, and Hewlett-Packard use referrals for better quality recruitment and lower turnaround time, and even pay their employees a referral fee.

THE RATING SYSTEM: Employee rating mechanisms would undergo a dramatic transformation in Future Inc. No more lengthy annual appraisals or indeterminate goals for new-age manager. Instead, appraisals would be speedier, more rigorous with wider performance linkages built into them. They would be soft-skill led and milestone-based to cater to the various categories of workers who are likely to dominate the corporate landscape. Take speed, for instance. Quarterly appraisals, or even monthly or weekly reviews, could become the norm in the company of the future, with moving targets and compensation reviews. In most cases, employees across industry sectors would demand it. At internet service provider and portal Mantra, hr instituted a quarterly appraisal system instead of the earlier bi-annual one, when it was found that the absence of performance feedback was creating a problem. The company is now considering monthly appraisals. At consumer electronics company Samsung India, performance review is quarterly. Shaving products transnational Gillette India has introduced a 'Hall of Fame' review system in its sales function whereby performance is measured against a given target every two months. The company plans to institute it in other functions as well. Says Arun Sehgal, Director (HR), Gillette: ''Such short-term reviews are essential to keep employee morale high and recognise extraordinary performance in the short run.''

The typical manager may be reviewed and rewarded every quarter, even every month or week, but she may not necessarily have it easier. For, performance ratings would be far more rigorous, often with parameters like volume growth, operating margins and customer satisfaction built into them, particularly at senior levels. PepsiCo India uses unit performance, volume growth, and marketshare to calculate senior-level incentives. At telecom company Escotel, along with individual performance, company goals, country performance, operating margin and customer satisfaction are woven into the rating for senior managers. Underscores Rajan Dutta, Vice-President (hr), Escotel: ''Increasingly, such factors are going to be important even lower down, creating serious performance-barriers.''

Ratings will also increasingly be driven by skills and to the extent the individual concerned exercises them. With the ascendancy of knowledge economy, organisations are becoming ideas-driven, rather than process or product-led, and accordingly, skill profiles have undergone a shift. Explains Riju Vashisht, General Manager (hr), Whirlpool Corporation India (Whirlpool): ''Today's soft skills, like change management, networking and knowledge management will become hard skills in tomorrow's networked and matrix organisations.'' Ergo, rating systems will incorporate such skills along with hard functional and managerial skills and provide composite reviews.

At Enron Corporation, new products and services are created around hi-tech trading and risk management skills, and employees are rated on the quality of their ideas. In the upper echelons, attributes like the ability to work in ambiguity, retain talent, lead teams and act on feedback, too, are likely to be crucial. At the A.V. Birla Group, line managers are already being rated on their ability to develop and retain talent. The system of 360-degree feedback could, in fact, become a norm-like it is at Gillette and Ballarpur Industries (BILT) for senior managers. Direct-selling organisation Amway even practices a group appraisal system, where a manager is appraised by his management team as well as customers.

The millennium worker could be part-time, flexible or connected, and her appraisal would also become task-specific and project-led and, often, team-driven. Hindustan Lever is working on a team-based assessment and compensation system. From effort, the focus would shift to output and large tasks would invariably be divided up into smaller, more specific and time-bound projects. Tracking would also become milestone-led, rather than being determined totally by the end-result. Criticality of processes followed would be rated too. At HCL Technologies, for instance, individuals are rated on their performance on each project. The A.V. Birla Group too is trying to capture and rate performance on specific, critical tasks in its rating system. Says Santrupt Mishra, Group President (HR), A.V. Birla Group: ''Appraisal would increasingly be led by task forces and critical associations.''

THE REWARD SYSTEM: Sharp contrasts would be the recurrent theme in the third and the most vital r in people systems. Performance would continue to be the most crucial determinant of pay, followed by skills and competencies, wealth-creation, the organisational life-cycle, and the demand-supply situation. Structuring would see rising customisation, particularly in knowledge industries. Lifestyle perquisites could be revisited as well as non-monetary recognition systems that could see a high degree of innovation.

Take performance, the oldest trick in the book, first. Variable pay, comprising 10-30 per cent of total compensation depending on levels, could go up to as much as 70 per cent in the years to come. Corporates would pay for results that would be rigorously monitored using a variety of measures. Hospitality company EIH, for instance, tracks performance using twin parameters of task and relationship management. At ICI India, performance ratings are decided by both individual performance as well as business performance, and gauged against budget compliance, profit maximisation, volume growth, and innovation. Whirlpool's performance excellence plan assesses performance using shareholder value, customer value and employee value to fit the employee on a salary grid. And rewards could be sky high. At LG Electronics, performance bonus is given bi-annually and can go up to five times an individual's salary. Similarly, lows could touch rock-bottom. At LG, 5 per cent employees also get zero bonus. Computer major IBM follows the principle of zero-based compensation at the beginning of every appraisal cycle. Says Shailesh Shah, Managing Consultant at hr consulting firm Watson Wyatt: ''Negative pay or performance disincentivisation will be a feature in the years to come. Companies would pay less, even as they generally pay more.''

Customised Salaries

With companies increasingly offering generalist career paths to performers, super-specialists in any function would become rare and thus would command a price as would unique baskets of skills like start-up or turnaround skills, typically for a finite period. In such situations, the profile of the person will determine the pay. As careers become shorter and compensation becomes entrepreneurial, wealth-creation will drive salaries in a big way. Translated, the millennium manager will become rich if he stayed around long enough. Points out Atul Vohra, Partner, H&S: ''Previously, people often traded cash for ESOPs or vice-versa. Now ESOPs will be the norm.''

Once a preserve of software companies-Infosys, Wipro, HSS, HCL Technologies, and Hewlett-Packard (H-P), among others-stock options are being awarded even by family-owned corporates like Dabur India, apart from transnationals like Motorola, Coca-Cola and Gillette. Enron offers start-up employees the opportunity to convert cash into options, if they wish to do so. At new-age industries like dotcoms, it is the rule rather than exception, with options working as both reward and retention mechanisms. Agrees Himanshu Jani, Director (HR), Asia Pacific, Agilent Technologies, a former h-p division: ''Sharing will drive compensation, both of wealth and of risks.''

Options apart, risk premium would ride high. Without social security nets to protect in the event of redundancy, the employee would look to create safety nets whenever possible. So will employers. Says Mishra of A.V. Birla Group: ''Companies will offer risk management options in wealth-creation facilities, without thinking of market equity or internal parity.'' Accordingly, short-term wealth creation options like sign-on bonuses-frequent in industries like telecom and entertainment-and asset-building opportunities like housing or car loans, would be common, says Anita Ramachandran, CEO, Cerebrus, a Mumbai-based hr and compensation consultancy firm. 'Golden parachute' clauses that allows three to six months of salary in case being made redundant, would also be a feature, particularly at senior levels and with contractual employment. A television software major recently offloaded a CEO, but paid him a year's compensation as part of settlement dues.

But the I-am-paying-because-my-rival-is-doing- so brand of salaries would become outdated. Companies will also do strategic compensation design, which allows an organisation to fine-tune its compensation policy along with its life-cycle. An insurance start-up would be in a high talent acquisition mode and would necessarily pay a premium for talent and so would a manufacturing company on the decline. But while an FMCG company in the consolidation stage would be driven by internal equity and market parity. Broadbanding will come in play with flattening of structures. Sharp benchmarking within and outside one's own industry sectors would be practiced to remain competitive. Sony India, for instance, benchmarks its managerial compensation against new-age sectors like software and entertainment, over and above consumer electronics. Both Coca-Cola and PepsiCo benchmark themselves against FMCG as well as financial services.

It would also be the age of one-person, one-pay salaries. Structuring would increasingly be customised to individual needs-particularly in knowledge-based industries. It could include a high-cash component with almost no super-annuation, or it could heavily lean on stocks. As in the case of a dotcom CEO, 90 per cent could be variable and tied to performance. At HCL Technologies, for example, nine top jobs have variable bonuses that keep changing with roles and responsibilities. Says Shah of Watson Wyatt: ''At least 10 companies in India have started doing this at high levels and more will follow. It will also cascade down to lower levels.'' With employees who may not be on regular payroll-consultants and temp workers-or those who have reduced work-loads or work-flex, cash-heavy salaries could see a regeneration. Says Mishra: ''Since such workers may not get institutionalised benefits or take advantage of infrastructure, they could be compensated with high cash.''

Smart selection, speedy ratings, fat salaries and fatter options-does that sum up work systems for the millennium manager? No, companies would also look to develop and train their people, to make and keep them employable. As lifetime employment contracts vanish, such development efforts would hinge more and more on learning opportunities. The A.V. Birla Group is sending its top performers to advanced management programmes to top b-schools like Harvard and Wharton. Escotel has tied up with the University of Michigan (US) and bits Pilani to promote long-distance learning among its managers. At h-p and its subsidiary Agilent Industries, 40 days of skill training are mandatory and employees could volunteer for more.

Yet others like SmithKline Beecham Consumer Healthcare are employing tools like mentoring to enhance their newcomers' skill bases. Of late, SKBCH has even started sending few of its trainees abroad to work in overseas offices for short stints. Underlines, P. Dwarakanath, Director (HR), SKBCH: ''Right from the beginning, we want to ensure that the will to learn is deeply embedded.'' Hindustan Lever has just re-jigged its orientation programme to include the close interactions of its trainees with the directors.

But largely, the onus of development in the Future Inc., would be on the managers. Says Ramachandran: ''Re-learn, re-skill and re-tool should be the new mantras, if they do not want to be left by the wayside.'' Indeed, as businesses, markets and technology change constantly, it is imperative for the employee to remain on top of her field and keep pace with the changes. Equally important will be for the employer to back his human dynamos with processes and systems that help them stay on the bleeding edge.

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