The Fight For Human Capital
The Indian economy is booming since the past three years; it is now growing in the range of 8-9.0% and is on course to be the world’s third largest by the year 2025. By the year 2050, its GDP (in US $ terms) will surpass that of the US making it the second largest economy after China, according to the Goldman Sachs, 2007 report titled ‘India’s Rising Growth Potential’.
The economic growth since 2003 represents a structural increase rather than simply a cyclical upturn. A large proportion of India’s growth comes from high technology processes requiring skilled labour, in which exports of services have played a key role. This growth pattern has resulted in services becoming the largest component of the Indian economy – contributing 51% of GDP – making India’s situation unique in the developing world. Driving this service-driven economy were the policy changes that eased its regulatory environment, and an available supply of skilled workers who, very importantly, spoke fluent English. In fact, it is estimated that by 2010, India will have the highest number of English speakers in the world. The years to come also favor the service-driven economy as India’s demographic profile boasts of a large working class (20-56 years age) as well as the largest size of young population (in a total of 1.1 billion) in the world. This age profile amongst the global population is considered to be a better dividend for the country’s economy.
However, the downside of the booming economy is the acute shortage of manpower: industries requiring the same set of skills dip into the same talent pool resulting in a high attrition rate. In India, the rapid expansion of new businesses to meet worldwide needs has created thousands of new jobs. With more choices, job-hopping is prevalent. The paradox couldn’t be starker: the world’s second most populous nation is facing one of the severest of people crunches, especially at the rarefied senior levels. As opposed to the global trend, the crunch seems to be lower in India at only 9% as against 41% worldwide in the year 2007. The attrition rate of the hospitality industry in India is currently around 30% as opposed to other established markets like Singapore (40-45%). Today, industry after industry faces an acute shortage of trained manpower as talent flows freely across the business spectrum.
The most frightening aspect of this scenario is its impact: the immediate fallout is a soaring wage bill and an unprecedented employee churn. And a possible slowdown in the industry cannot be ruled out if the right talent to fuel growth is not there. For the booming hospitality industry too, a shortage of quality personnel is posing a massive challenge to managers. In this scenario, attracting and retaining star performers is becoming imperative, as that will provide the real competitive edge. This article broadly strategizes for this and shows how the best organizations are going about it.
LONG TERM
Education: As the world’s largest democratic republic and home to a substantial English-speaking population, India is poised to establish itself as a powerful engine for global economic growth. To ensure that this service-driven economic engine does not run out of fuel, there must be a constant supply of a well-educated and skilled workforce that provides the impetus for future growth. Today there is a perceived gap between the education offered in professional colleges/schools/universities and the industry specific skills. Most large companies in every sector have taken to starting their own training schools to resource skilled personnel. It is this gap that must be marginalized. Thus education for all and an education that is in line with future employment or industry-based is the only way forward. The hospitality sector too should form its own regulatory board that inspects the professional schools offering education in this field, like the medical board. They should be even empowered to cancel certificates to schools that do not adhere to the board’s criteria; in effect ensuring a system that will monitor the content of training and the skills acquired. Partnerships with business schools/universities that offer hospitality education amongst a variety of other subjects should be initiated to update them with the requirements of the industry. This would ensure that minimum standards of excellence are created, as is a skilled resource pool.
Market Image: In a world where talent flows freely not only across companies in the same field, but also across industries, the paramount objective of the hospitality industry should be to project a better image of itself. This industry suffers from a negative perception worldwide with its notoriety for long hours, night and weekend shifts. It’s also perceived as a low-skill, low-tech and low-wage job.
This is in contrast to the dynamics of the Indian tourism and hospitality industry, which currently is on a roll, driven by a huge surge in both business and leisure travel by domestic and foreign tourists. The year 2006 was not only a record year for India’s inbound tourism but also the fourth consecutive year showing a double-digit increase in foreign tourist arrivals. Also, as noted by UN World Tourism Organization (UNWTO), the growth of the Indian tourism industry was instrumental in the ’emergence’ of South Asia as a tourist destination. Tourism, constituting of various other related sectors including hotels, hospitals, aviation, and shipping, is contributing around 5.9% of the Indian GDP and providing employment to about 41.8 million. Perhaps the time is right for the Indian hospitality industry to advocate itself, to raise awareness of the industry in terms of knowledge, skills, attitudes and benefits: communicating the positive and fun aspects of the industry. Establishing a new positive image would help in both recruiting and retaining talent. Other countries that have taken action in this regard are New Zealand, Ireland and Scotland.
Interestingly, an Associated Chambers of Commerce and Industry of India (ASSOCHAM) study in 2007 showed that hospitality along with aviation and journalism, afer the foreign servies, is the ‘urban youth’s new emerging choice for career making’. As these fields offer greater job security and more moderate and regulated working conditions than BPOs, youngsters are opting for them. This shows that at least a future talent supply exists.
SHORT TERM
Attrition at the middle level is the foremost issue for today’s hotel managers. Studies show that many employees leave for reasons that have nothing to do with money or benefits, but rather with central human resource issues such as improper career path planning, limited chance for advancement and work life balance. The peripheral complaints include poor job description, archaic appraisal system and lack of challenge/learning/training. The top differentiator would be the distinctive company culture and human capital practices that serve and fit their business strategies and objectives.
Training: India’s emerging international services sector requires a well-educated population in the future to maintain its intellectual capital and its knowledge-based advantage. Because the market is constantly changing, employee skills should be sharp and relevant. This benefits both the employee and employer, empowering the former with superior knowledge/skills/attitude which not only improve current productivity, but can also be leveraged in case of a job change. At the same time, training provides a mechanism for establishing and building a strong company culture, inculcating core company values and reinforcing key business objectives. Thus employee training is the key success factor to improving their performance. It may be through any mode like classroom or e-platform training, mentoring, coaching, paid memberships, and company libraries. Raffles’ enables its managers to earn Certificates from Cornell University in related fields such as Hospitality Management, Foodservice Management and Leadership. Measures such as these have kept their attrition rate – 2% every month – in check. Multinationals typically invest between 5-10% of the payroll cost in developing people, as they know that they can harvest 25-30% return on that investment.
Empowerment and Freedom: A paradigm shift has occurred in the global work culture and organizations are rapidly embracing the global mindset. The whole world is becoming one giant labor pool, as off-shoring opens up the free trade of labor – instead of goods – across borders. Wireless technologies and extended supply chains now widen the scope of global networks. There is also a major shift in how, when, and where work gets done, with flexibility being the buzzword.
While the hospitality industry is labor intensive, it cannot remain a spectator to the winds of change sweeping through ‘workplaces’. It’s important for hotels to develop their own global mindsets and skills for adapting not only to differences between markets, but also to change. These global mindsets will help them reinvent their core strengths: maximizing capital change for achieving high performance. This in turn will aid in retaining talent as people fear being left behind if not going with the tide.
A very important tenet of this culture is freedom and empowerment. It refers to the process in which managers give employees the autonomy to exercise control over job related situations, problems and decisions. Managers at such properties are likely to transfer responsibilities, provide opportunities for personal initiatives, and demonstrate trust in their employees. Empowerment increases morale, which is directly linked to achievement. Morale is defined as the feeling a worker has about his/her job based on how the worker perceives himself in the organization and the extent to which the organization is viewed as meeting the worker’s own needs and expectations. A higher degree of employee empowerment correlates directly with a higher service orientation and acts as a perceptible differentiator in a crowded space called brand world.
Hyatt’s core philosophy values diversity. ‘Workplace Values’ is a mandatory awareness and sensitivity training that allows employees to work more efficiently by developing effective management practices to include treating others with dignity and respect. ‘Valuing Differences’ is a management development training focused on valuing styles, abilities, and motivations regardless of race and gender.
Recognition and Reward: From a traditional form of hierarchy, the focus is now shifting to employee engagement. Managers of tomorrow must strive for activities that influence the level of intrinsic motivation for its employees: make them feel valued and important. The emotional investment of employees in their jobs has to be appreciated and quantified by the top-level management, in addition to their performance evaluation. According to Hewitt’s Attrition and Retention Asia Pacific Study 2006, turnover was highest at the professional/supervisor/technical level at 39% of total attrition and lowest among senior/top management at just 0.5% of total attrition. Interestingly, attrition among employees identified as high performers was considerably lower than other employees, indicating that most organizations are successfully retaining their top performers. Good talent management promotes people based not only on their performance but also on the manner in which they have made their mark. Coaching and developing the employee would be a contemporary strategy in the sector for developing and retaining employees. Managers and top leaders need to consistently meet and share constructive feedback in order to simulate and intend interventions to raise performance.
With independent research from The Jackson Organization and analysis by bestselling leadership experts Adrian Gostick and Chester Elton, a breakthrough study of 200,000 people over ten years found dramatically greater business results when managers offered constructive praise and meaningful rewards in ways that powerfully motivated employees to excel. Great managers lead with carrots, not sticks, and in doing so achieve higher productivity engagement, and improved business.
Open Environment: Channels of communication have to be kept open between top-level management and all employees. It works both ways. The bottom-up communication channels give senior management a sense of what’s happening at the front line, what challenges employees face, and what successes they’ve accomplished. And the employees also benefit from the mentoring (learn to view situations from a different perspective and look at the mega picture). Employees can also be made to feel valued, as they understand how their role adds to the larger picture, in this case the success of the hotel. Hotel general managers have long since stepped down from their ivory towers and are interacting with associates at all levels. But today’s generation wants to be aware of the strategic direction taken at a corporate level also. The City Inn prides itself as an extremely friendly company with a nice working environment. The directors are very involved in the business – right down to building design – and are approachable and easy to get hold of. Getting an answer to your question is immediate. On completion of a 13-week induction program employees are invited to stay with a relative or partner at the property, in recognition of their achievement and to get to know their colleagues better. The Fairmont Chateau Lake Louise in Canada is considered a great place to work as one gets to meet people, have fun, and work in the hospitality industry.
Identify Clear Career Paths: According to an ASSOCHAM study released in 2007, the maximum attrition in any industry was seen among employees in the age group of 26 to 30 years, especially those with experience ranging between two and four years. They are always on the look out for change. The Gallup opinion poll conducted in 2005 also shows that in general, expectations for personal financial situations in the short term grow more stable by age. In the short-term, 18-29 year olds expect the most change; 30-49 year olds expect less change than 18-29 year olds, but more than those in the older age groups. Companies such as Hindustan Unilever identify high potential employees right from the recruitment stage. They are intensively mentored, put on accelerated career paths, given more exposure and training; enabling them to rise faster and add value to the company. Best employers clearly communicate to employees the long-term growth and career development opportunities available within the organization. Accor Hotels with their chain of one to five-star hotels worldwide provide in-house opportunities for fast-track movement where younger people with potential can be given greater responsibilities at one of the properties. Thus such employees have a high comfort level in working in environments where their talent is recognized and rewarded; precious time would be wasted with a job change to achieve similar comfort levels. It’s a more long-term view of one’s career than an immediate one. For the hotel too, promotion from within for these trained and mentored people would be advantageous, as they would continue to espouse the company culture and beliefs. Recruitment at entry-level positions is far easier when a career path is outlined and managers can be cited who have worked their way up from line positions, as is the case in Marriott.
Top-level Management: From all the above points, it is quite evident that retention of trained staff is a very ‘people specific’ and personalized job as there is a shift in focus towards intangible assets such as talent. The Economist Intelligence Unit in co-operation with Development Dimensions International (DDI) reported that the management of a company’s pool of talent is now too important to be left to the human resources department alone and has become the responsibility of the top executive. Specifically that means the general manager (GM). Traditionally the role of the GM has been to look after the financial and marketing aspects. In India, there has also been visibility in circulating with guests and making expansive contact with employees. Now it is a strategic necessity to keep abreast of the latest developments in the company’s talent program and plot strategy, own associated initiatives and regularly participate in events related to talent management. The GM’s role must evolve to include identifying and grooming employees at all levels of the company so that they can rise faster up the corporate ladder. Thus in addition to leadership qualities, the right fit for the GM would also be on skills such as mentoring and training. The practice now is to hire people with general management skills more than just domain knowledge. An old HR adage is that ‘people leave managers and not companies’. It stands true more so now, where the manager’s role is also intrinsically linked with bonding people to companies.
To conclude, in the war for talent-retention, the focus must shift from reactive counter-offers to proactive training and skill-enhancement exercises, from across-the-board salary increments to performance-based compensation packages, and from pre-defined bonus levels to cost-of-living-linked flexi-benefits. An employee-centric environment is the order of the day with more methods devised to ‘bond’ employees to their companies. Companies must find non-monetary methods to connect with their employees, especially those that make work fun and encourage team spirit. ‘Mercenary Darwinism’, or offering money as an incentive to sign on should be avoided as it perpetuates employees looking for another sign-on bonus when the contract period is up. Developing a positive work environment with real opportunities for advancement, combined with creative strategies for recruitment and improval of employee productivity will be increasingly essential as the workforce continues to shrink in the foreseeable future.