"This is a period of time when CEOs understand that people can make a difference. Now is the turn of the knowledge economy"

As the chairman & CEO of $2.36 billion Mercer, Michele Burns heads the largest human resource consulting firm in the world, with 15,000 employees in 180 different cities. Yet, the interesting thing is, before she took over her current job in September last year, Burns was a numbers person, not a people's person. She was the chief financial officer at Marsh & McLennan Companies (MMC), Mercer's parent company, and prior to that she was a Chief Restructuring Officer, responsible for turning around another MMC subsidiary, Mirant Corp. So, the crossover from the world of hard numbers to touchy-feely people issues must have been daunting for Burns, right? Not really, says the lady, who's also on the boards of Wal-Mart and Cisco Systems. After all, the accountancy major began her career in consulting with Arthur Andersen and for 18 years worked closely with various clients. Recently in India on her first visit as Mercer CEO, Burns, accompanied by Mercer's head of Asia, Rajan Srikanth and India head, R. Sankar, spoke to BT's R. Sridharan on people issues and India plans. Excerpts:

If you talk to CEOs around the world, they will tell you that human capital management is the single thing they most worry about. So, is managing people going to get easier or a whole lot harder in the years ahead?

I think it's going to be at least as difficult, if not more. This is a period of time when (CEOs) understand that people can make a difference. If you look at it in a different way, the last decade has been the decade of technology-fuelled productivity. Now is the turn of the knowledge economy. There are two things happening. One, we have to continue to improve productivity because that's how we continue to have the economy grow. But people aren't machines, so the soft side of people and the soft side of engagement and the soft side of working with creating productivity through positive re-enforcement such as training, development and career pathing are the new ways in which the CEOs and their hr directors and CFOs will seek to boost productivity.

Having said that, is there a disconnect between what CEOs profess and what they do? For example, how many CEOs are there who were, say, HR directors? More likely than not, they would have been heads of marketing or finance.

I think that (view) is much more historical in nature, and it depends on the industry. But practically speaking, hr organisations have been viewed as less strategic and perhaps haven't taken that seat at the table in a real strategic way. In a way you could argue that maybe finance was viewed the same way. Finance was viewed as a very important function in a corporation, and depending on the company it had different seats at the table. But it was not necessarily viewed as a strategic partner. But after 9/11 all the economies experienced a hiccup that they hadn't ever experienced as a globe before, and CFOs became even more important at their tables. I would suggest to you the same things would begin to happen now, because now people issues are the leading indicator. So what does it mean? The hr directors of today, the key hr people have to make sure they meet that strategic imperative. So, when the CEO does link the two and looks at both, the CFO and the hr director, the hr director needs to be able to deliver strategic advice and be able to take that seat at the table.

Talking about workplace, my sense is that the workplace is changing faster than the tools and techniques companies currently have to manage it. Is that perception correct?

That's an excellent question. But I really don't think there are that many different value drivers and that many fundamental things that you have to do. When I made a presentation recently, some of the statistics that were relevant to the Indian employer, if you read it, you could have been anywhere. So, trust in the employee-employer relationship, appropriate pay, reasonable work-life balance…it doesn't matter what company you are in and what country you are in. Those tend to be the things that drive employee engagement.

What I meant was, if you look at the workplace today, you are dealing with knowledge workers, and not the blue-collar variety. So, the tools and techniques one would need to measure their performance and reward them, and to motivate and retain them would be different.

It's a complex issue, but people have been doing it for quite a while now. Cisco Systems, Google and Microsoft are relative newcomers, but they have attracted talented people and created very sticky cultures.

Sankar: Particularly for large companies, what's important (in dealing with such issues) is a willingness to look at the workforce in a segmented way. That is, not all people are the same and to engage people who have different needs. For example, an R&D guy doesn't necessarily care for a vertical career or titles…like every two years becoming a general manager or VP or anything like that. His needs are somewhat different. Are we in a position to recognise those needs and keep those employees, valuable employees engaged and keep them engaged as to deliver on their aspirations? To my mind hr managers are not proactive enough. They want to follow; 'oh, somebody is doing it, it's best practice', and by the time they think it's time to do something, the guy has left. We are not innovative enough to say 'this group needs to be treated differently'.

"It is true that good business performance drives people to stay with a company. But high performance companies don't always have happy employees"

Retention is proving to be a major problem as well. Everyone is expanding, everyone is scrambling for people, and people are able to leave jobs more easily. Is it safe to say that high attrition is here to stay?

In this economy, employee attrition and retention will be an issue for years to come not days or months. Part of the issue is fuelled by a couple of things: you've got immense growth, with Indian companies growing and multinational companies growing here. The other part is, despite India's large pool of graduates, most of them need to be trained to put to work. So, the actual shortage is even bigger. But retention is about employee engagement. If you build an engagement model that engages employees, it makes the employer-employee relationship more sticky. The local company here has to compete with multinational companies for talent. However, multinational companies should not rely solely on the strength of their brand. It can lead to some false starts in the area.

That's an interesting point because even in our Best Companies to Work for surveys (where Mercer is the knowledge partner), we don't have too many MNC brands in the top 10.

Sankar: In fact, that's a point that came up in our presentation earlier this afternoon…

Srikanth: Actually, (the delegates) were reading into it more than what Shankar eventually let them. They were saying, 'Hey, look maybe it means multinationals don't have employee value proposition right'.

So are MNCs depending too much on their brand?

I don't know this. But I would suspect multinationals know one other thing and which is, they have the brand perhaps to leverage, but generally local companies are going to have an advantage because they are local companies and people feel that way. People feel positively about local companies and about local companies doing well. That's true everywhere...

Srikanth: I think it's a market maturity thing. India has reached a point where people have a choice and people actually have evidence out there, they believe that Indian companies are much better employers and have much better prospects. The pride has come back. When I studied here, that was never the case.

But could it be that MNC employees are more demanding and have higher expectations of their employers than people working in Indian companies?

Sankar: We haven't found that…

Srikanth: I think each is demanding in their own way.

Sankar: If you are working in a multinational company, management is more process driven. There's a way to do things and you follow rules, processes and so on. That can be a huge plus and also be a huge minus. The minus aspect is very important for professionals who want to make things happen and who want to be empowered to deliver. They see that beyond a certain point you can't do that in a large corporation. If you are an Indian company you probably need to empower because you don't have the systems of a large MNC. So that's a big motivator for somebody who wants to say, 'I built this company'.

Another interesting thing that emerges from our surveys is that best employers need not be the best companies in terms of market performance…

Sankar: …or even compensation. If you just look at the list, there's hardly one of them that is at, say, the 75th percentile in pay in their industry. That's a striking feature, yet they are rated amongst the best. There are some things that matter beyond compensation.

Burns: From my perspective, it must mean-I don't know the companies-that despite the companies' performance, they have built an engagement model where people will stay even through that. Because it is absolutely true that good business performance drives people to stay with companies. But high performance companies don't always have happy employees. They have one of the factors already, and which is a reason to stay, and it's a matter of 'do they communicate well, do they involve the employee, whether the employee feels a part of that, that they are successful'.

Sankar: If a company continues to under-perform significantly, then happy employees will cease to be happy after a while.

"If you build an engagement model that engages employees, it makes the employer-employee relationship more sticky"

So, what's the secret sauce that goes into keeping employees happy?

First of all, if you were to look at an employee engagement survey, you would not find the top thing being compensation at all. The top thing is trust in management. So, really to me that very metric is a combination of two things. There's a lot of engagement right through, and you have to have an environment of transparency. The second thing is, throughout the middle management you have to have a consistent communication cascade. That you are communicating what the company is doing, why the company is making the decisions it's making, and the team, far beyond the top senior management, has to be aligned to communicate that all the way through the line. That's the first driver. The second one can be compensation.

Sankar: It's the fairness of compensation, relative to your peers, which seems to be more important than the absolute amounts. 'How am I being paid relative to my peer?' is what people are more concerned about, rather than 'I should be the best paid employee on the face of the earth.'

Finally, how significant is India in Mercer's scheme of things globally and what are your plans here?

India is a very key focus area for us. Asia in general is a key focus area, given the size and breadth of the firm. In India, we believe we are the consultants of choice in many ways, and we want to continue to be that in a very meaningful way. Secondly, we see India as a place where we can have a more general operations centre or global operations centre. We are already doing little bits of benefits administration work, actuarial work and data mining work. We are around 400-plus employees, but we expect that to continue to ramp and I would be very surprised if we are not into 1000s easily in a couple of years.