CEOs of real estate majors, engineering and construction firms, and project management consultancies are running scared. Reliance Industries Chairman Mukesh Ambani is on the prowl, looking for senior executives who can translate the company's grandiose SEZ (special economic zone) plans into reality, and promising to do a repeat of what he has done with Reliance Retail, where he literally hired the best of breed from a clutch of sectors: Raghu Pillai from Pantaloon to look after the front-end, Gunender Kapur from Unilever to head the grocery and foods business, Sriram Srinivasan from Indus League to head the apparels one, Rajeev Karwal from Electrolux, for the consumer durables one, and K. Muralidhara from AmEx for the financial services one. Running scared, that is, if they haven't put in their papers and thrown in their lot with a man who is rapidly emerging India's most hungry and most successful executive hunter.

Ambani may have done his bit in raising salaries for high-flying CEOs and senior (very senior) execs, up from Rs 1 crore in 2005 to around Rs 4 crore in 2006. Yet, in one of those paradoxes of plenty, there do not seem to be enough people available. At the CEO level, certainly (see The CEO Crunch on page 78), but also across the board, including the entry level. At Larsen & Toubro, the board has increased the retirement age to allow Chairman and CEO A.M. Naik, a battle-scarred veteran who has spent 41 years at the company, work on till he turns 70. At yes Bank, one of the newest private sector banks in the Indian banking firmament, CEO Rana Kapoor is currently monitoring the company's ongoing 60-day recruitment (he does this every 48 hours).

By 2010, estimates from India Inc. suggest (see Manpower Gap by 2010), most sectors will face a shortage of people. What's happening now isn't a temporary gap between demand and supply; it is the beginning of a real scarcity. "There is a real talent shortage as the economy grows and diversifies," explains R. Sankar, Country Head, Mercer Human Resource Consulting. "And our education system is geared only towards a 3 per cent economic growth." For the record, the Indian economy grew by 8.5 per cent, 7.5 per cent, and 8.4 per cent in 2003-04, 2004-05, and 2005-06, respectively, and estimates suggest that it could grow by 8 per cent this year.

Even as companies try to get to grips with the long-term implications of this, and come up with the appropriate long-term solutions, they are doing the predictable: trying to cope with a demand-supply gap, by simply upping the ante. Result: salaries that are seemingly impervious not just to the laws of gravity, but also to those of economics.

A recent study by Hay Group claims that the salaries of senior managers in India, adjusted for purchasing power parity, are the second-highest in the world (after that of senior managers in Turkey), at $77,665 a year (Rs 36.50 lakh). Evidently, India is in the midst of a secular increase in wages and salaries, across sectors and levels. It would also seem to be experiencing the pangs of a secular shortage of people.

Million-dollar Babies

Retail Rider: Raghu Pillai helped grow RPG's retail business; he was first poached by Future Group's Kishore Biyani, then by Reliance's Mukesh Ambani

The buzz in India's head-hunting circles is that million-dollar salaries are no longer as rare as they once were. Senior investment bankers, it goes, are being hired at a million-half (over Rs 7 crore) and heads of private equity firms for around $350,000 (Rs 1.64 crore and that's the salary alone; on top comes a bonus of between $2 million and $5 million a year). In the past year, say headhunters, an unprecedented number of senior executives have moved companies. Several have joined Reliance Retail (apart from the ones named already, the list includes Sanjeev Asthana from Cargill India, Bijou Kurien from Titan and G. Sankar from Lifestyle, D. Saravanan from McDonald's and Suresh Singaravelu from Prestige Constructions); several others have joined Anil Dhirubhai Ambani Enterprises in various positions (Tarun Katial from Sony Entertainment Television and Rajesh Sawhney from Indiatimes are two such); George Zacharias has moved from Sify to Yahoo; Munesh Khanna from Enam to DSP Merrill Lynch; and Anil Chawla from ge to de Shaw. "A year ago, there were just a handful of people making Rs 1 crore to Rs 1.5 crore," says Deepak Gupta, Country Head and Managing Director, Korn/Ferry International, a search firm. "Today, there are many more who are earning more than that."

Hedge Champion: When one of the world's largest hedge funds, DE Shaw came to India, it roped in GE Capital vet Anil Chawla	Expat Expert: The telecom market is booming; who better to head Tata Teleservices then, the Darryl Green, formerly of Vodafone KK, Japan?

One reason for the spurt in salaries, especially at the top, is, according to Sonal Agrawal, CEO, Accord Group India, a headhunting firm, "the emergence of new sectors." Private equity is one such: in the past year, some 70 new firms have pitched their tents in India; between them, they need around 400 people; the available talent pool is around 60. "We are just not able to find the right people," says Rahul Bhasin, Managing Partner, Baring Private Equity. "These days, I spend 30 per cent of my time on recruitments." Another is the growth in sectors such as pharmaceuticals, telecommunications, consumer durables and fast moving consumer goods. Even once-dormant sectors such as aviation, real estate, and construction are now growing, and growing fast. In the three months ended June 30, 2006, the sales of India's top 500 listed companies grew by 25 per cent as compared to the corresponding period of 2005; the net profits, 31 per cent. "The aviation industry will need around 400 pilots this year and the available talent pool is around 150," says Captain G.R. Gopinath, Managing Director, Air Deccan. The result? A bloodbath in the domestic market for available talent (even then, a large number of pilots will have to be hired globally). The problem is compounded, adds Mohit Mohan, Senior Vice President, Gilbert Tweed Associates, a search firm, because "the new sectors have no pool of trained professionals to hire from". "They are recruiting from the available generic pool of professionals, thereby, creating a ripple effect across sectors," he says. Apart from causing salaries to accelerate unnaturally, this also results in too many companies across several sectors chasing too few (and often, the same) people.

From Glut To Lack

Today's shop-floor: Business Process Outsourcing is the new manufacturing, at least in India, and is equally, if not more, manpower intensive

Tomorrow's shop floor: With the entry of several major Indian business group, the organized retail industry is expected to get a fillip and witness unprecedented growth

Rainmaker #1: I-banking veteran Munesh Khanna recently signed up to head DSP Merrill Lynch's investment banking business

If industry has been caught unprepared by its own appetite for people, blame it on time. Even as recently as 2002, a mere four years ago, the demand-supply equation was skewed towards supply. "The last time graduates were benched or retrenched, 2001-02, wasn't so long ago," says Mohinish Sinha, Associate Director, PricewaterhouseCoopers. Since then, however, India has grown, and changed. The IT and IT-enabled services sectors continue to hire, their appetite for people seemingly endless. Other sectors, such as retail banking, financial services, healthcare, aviation, telecommunications, even energy and manufacturing, have done their bit as well.

The demand has been highest at the top, and the bottom (except in the case of it services, where middle managers can't be had for the love of code or money). At the top, CEOs need to possess leadership skills, the ability to build and manage teams, and charisma enough to be the public face of the company. And, at the entry level, across most sectors, executives and managers need to have the ability to manage the interface with customers. The easiest way to find people at these levels, then, is to poach them. "Shortage is an understatement," moans R. Suresh, MD, Stanton Chase India, an executive search firm. "There is a severe paucity of talent at the vice-president level and above." "We hire for attitude, cultural fit, and not just domain knowledge," adds Sanjay Jog, Head (HR), Pantaloon Retail, a statement seconded by K. Ramkumar, Head (HR), ICICI Bank; both Jog and Ramkumar need a huge number of entry level executives to fuel their respective companies' plans, Pantaloon's in organised retail and ICICI's in banking. The preferred hunting ground for most companies looking for executives with some amount of expertise in handling customers is hospitality. Then, with that industry itself poised for tremendous growth, supplies from that source could dry up soon. "Going forward, the fight for talent will be within the industry, and it is clearly not prepared for the task," says Saurabh Gupta, Head (Hospitality), HVS Executive Search, describing how the hospitality industry is itself not prepared for the coming boom.

Some companies have come up with an innovative way of tackling the shortage of people: imports. Higher salaries and a buoyant economy make this a viable option, especially for fast-growth industries that require people in a hurry. At Air Deccan, one out of every three pilots and engineers is an expatriate. And, at UK construction company Laing O'Rourke's Indian joint venture, 10 per cent of the project managers and engineers are expatriates. The flipside: expatriates mean expatriate salaries, and that could rewrite the entire India story.

No Cure In Sight

Much of the India story is built around cost-efficiencies. This is especially true of sectors such as it and it-enabled services, but also holds for businesses such as retail banking where the emphasis is on maximising reach and minimising cost of transactions. "How do companies cope with 15-20 per cent salary increases a year, when inflation is 5 per cent?" asks Mercer's Sankar. With demand for people continuing to rise, a company that reasons, logically, that it can no longer afford 15-20 per cent hikes, could jeopardise its own future. "All companies need to make a choice between the cost of attrition and salary increases," explains Arun Tadanki, President and Managing Director, Monster.com.

Right now, the argument is skewed heavily in favour of the latter. At L&T, for instance, junior managers received a 25 per cent increase on average. "We have been facing maximum attrition at the junior levels and have to resort to remunerative ways of retaining talent," shrugs M.S. Krishnamoorthy, Executive Vice President, L&T. Other companies are doing things differently, but these still have to do with remuneration. "Retention bonuses and, sign-on bonuses are increasingly being used by employers to retain people," explains Purvi Sheth, Vice President, Shilputsi Consultants. "We recently placed the President of a large FMCG company in Mumbai and one of the conditions of his appointment was that the company would bear the cost of sending his son to Harvard University for post-graduate studies," adds a headhunter. Stock options, too, are back in vogue.

The Temping Trend

The largest private sector employer: Ashok Reddy's TeamLease is already that Put it down as another instance of India adopting a global trend and tweaking it to suit local conditions. The world over, temping (or staffing) is driven by the desire on the part of companies to ride demand-supply fluctuations and on the part of employees to take up modular part-time or time-bound assignments. While the two hold true in India, a third driver of the phenomenon has emerged. "Temping becomes a means to take candidates for a 'test drive' to evaluating fitment and in effect becomes a fast track apprentice program," explains Ashok Reddy, Managing Director of Bangalore-based TeamLease Services, India's largest staffing company with some 52,000 employees on its rolls. Around 44 per cent of the company's temps, he points out, tend to find permanent employment within six-to-nine months (of taking up temporary assignments). Temping also helps reduce fixed costs by keeping a portion of wage costs variable and, therefore, in control. According to E. Balaji, COO, Ma Foi Management Consultants, "A company where 15 per cent of the workforce becomes temporary can save 17-23 per cent of its costs in the medium term (2-3 years)." Today, there are around 185,000-200,000 people working as temps around the country in the organised sector. Sectors such as IT-enabled services, banking, telecommunications, retail, even manufacturing (yes, the trend of blue-collar temps has started) are the main beneficiaries. Still, existing policies take a rather dim view of the phenomenon. Internationally, temping has its own regulations. "In India, in the absence of a law geared specifically towards temping, we follow the labour laws," says TeamLease's Reddy. And there are some 25,000 of these that are industry- and location-specific. Much of the laws were framed to protect the interests of blue-collar workers, not white-collar temps. "While these laws do not restrict us, they create operational cholesterol," says Reddy. With adequate changes in the regulatory regime, execs in the industry believe that a further 10-12 million jobs could be created through the temping route in next five years. -Shalini S. Dagar

At a broader level, the phenomenon of soaring salaries and vanishing workers is indicative of several skill-gaps in the country's education system. "The most obvious skills that are lacking are generic, soft skills such as communication, articulation and teamwork," says Kiran Karnik, President, NASSCOM. "In India, salaries are rising to the point that the outsourcing industry risks becoming uncompetitive," adds Vivek Wadhwa, a professor at Duke University, whose recent paper highlighting the real number and quality of India's engineers generated a great deal of interest. "This means the country isn't generating enough engineers that meet the needs of the industry."

Training is an option, and India Inc. has embraced it wholeheartedly. ICICI bank, for instance, spends around Rs 30 crore a year on training. "On any given day, there are about 1,000 people being trained personally, and another 2,000, through e-learning," says Ramkumar. The Future Group and 11 educational institutions such as Welingkar Institute of Management, Mumbai, and Institute of Integrated Learning in Management, Delhi, have joined forces to launch a programme in retail management. And yes Bank has a training programme in retail banking that it plans to offer to the entire industry in the next 18 months.

Blue-collar Blues As if shortage weren't enough, companies are also hamstrung by archaic laws.

On the Shopfloor too: Demand for bluecollar workers has increased, as has their wages Hire and fire', a term preferred by old-economy industrialists and political parties alike to describe, in three words, labour reforms (the actual description would likely fill several books), the former in a wistful, wish-this-would-happen kind of way, and the latter, in a this-is-what-we-must-avoid one, will likely have to wait. For some time, it appeared that the government was veering around to the position of allowing some flexibility in such laws in special economic zones (currently, the only one seems to be that states are free to amend labour laws in SEZs, essentially, a passing of the buck), but that hasn't happened; the communist parties, key allies to the ruling United Progressive Alliance would certainly protest any such move. For the record, the government expects around 5 lakh jobs to be created by the end of 2007 in eight SEZs. With 150 more being cleared in principle, the number is set to grow. For years now, industry has cried itself hoarse explaining the need to reform the 25,000-odd laws that make up India's labour regulation framework and which apply to any industrial enterprise employing more than 20 personnel. While unionism is not quite the force it once was (despite the communists best efforts to establish a beachhead in the industrial belt of Haryana and Chandigarh), these antiquated labour laws do quite the same as that: at the least, they are irritants; and in some scenarios, they are actual deterrents to growth. Some economists believe that with the economy poised for greater growth, labour laws could be one factor in a phenomenon they describe as 'jobless growth'. That would be a pity, because industry confesses that there is a shortage of blue-collar workers all around. Demand-supply imbalances may be one reason for the rising salaries of blue-collar workers; economic growth, another; and inflation, still another. The Consumer Price Index (CPI) for the agricultural labour class has grown faster than that for other worker segments. This, since the prices of wheat, sugar and pulses have risen sharply in the recent past (these constitute a larger part of the consumption basket for farm workers than others). Not surprisingly, then, the agriculture sector, the largest employer of blue collar employees in the country (some 60 per cent of labour), has witnessed a 15 per cent across-the-board rise in wages, according to industry sources. Availability of farm labour is turning out to be a constraint, too, since migratory labour from Bihar, Jharkhand and West Bengal is finding less reason to travel northwards in search of better opportunities-back home, highway projects are kicking off and are offering better wages. The booming construction business across the country has also led to an increase in wages for labourers. According to real estate major DLF, the wage bill has risen by around 2 per cent in the last six months. And in the case of Railways, the largest employer in the country, the wage bill is expected to rise by around Rs 400 crore per annum since a part of the salary is inflation indexed. The situation isn't very different in the case of the manufacturing industry: wage bills have headed North and companies are scrambling to find people to meet ambitious expansion plans. -Balaji Chandramouli

The CEO Crunch India Inc. needs leaders, and can't find as many as it wants

Last year, CEO salaries in excess of Rs 1 crore were considered par for the course, and anything around Rs 2-2.5 crore high. Today, the accepted figure for CEO salaries would have to be a million dollars (around Rs 4.7 crore). The one reason for this? There aren't enough CEOs going around, especially in sectors such as infrastructure, real-estate and retail (and the situation at the senior management level is only marginally better). With the economy showing no signs of slowing down, demand, at both levels, will only increase. "From now on, India would need at least 2,000 CEOs per year," says R. Suresh, MD, Stanton Chase India, an executive search firm. Based on a conservative 1:4 CEO:Senior Manager ratio, this would mean 8,000 vacancies at that level. Then, there's the growing demand for independent directors, a demand brought about by law. Caught unawares, corporate India is now following a multi-pronged strategy to fill these positions. It is trying to attract Indians who have built careers outside the country, hiring expatriates, especially in sectors such as aviation where local talent is simply not to be had or IT and pharmaceuticals where the marketing front-end has to be based in the US or Europe, promoting internally, and poaching across sectors, even from small and medium enterprises. Consequently, there has been a distinct shift in the profile of the people occupying the corner offices. "The age, the stature and the gravitas that was once associated with a CEO's job has been redefined," says Suresh. -Shalini S. Dagar

That India should face a manpower shortage is ironic. Some 40 million people are registered with state-run employment exchanges. If barely 100,000 of them find jobs every year, says Rahul Bajaj, Chairman, Bajaj Auto, it is because of "inadequate interaction between industry and academia" which leads to inappropriate education in schools and colleges. "The (education) system is geared towards a low level of equilibrium," adds NASSCOM's Karnik: low fees, low investment in infrastructure and faculty, and graduates of low quality. In the short-run, India Inc. may be able to address these issues by importing workers (at all levels) or poaching them from other industries. In the long run, it will have to partner the government, lobby it, or do both to accelerate educational reform. "India can't sustain its growth unless it fixes its education system," warns Wadhwa. That's a frightening thought.