The developments in the global financial and banking sector in the last year have had a profound impact on the global financial system including the outsourcing industry in India.

In partnership with NASSCOM, Hewitt Associates has conducted a dip-stick study of large and medium IT-BPO companies to understand the preliminary impact of the downturn. According to the survey, organisations in the IT-BPO sector are facing an uncertain environment where areas such as cost of delivery (pressure on pricing and billing rates) revenue realisation are getting impacted.

The primary points of focus for companies in the current environment are cost efficiencies, performance and productivity, employee engagement, innovative business practices and gearing up for the upturn. According to Hewitt, companies expect HR to play a strategic role in these areas and support the business.

HR challenges and market practices

Each focus area for business poses distinct HR challenges. HR managers have to look at how they can drive utilisation, control discretionary spending and HR budgets, improve employee productivity, tighten the linkage between performance and pay, understand what engagement means in today’s context, explore new work design models, drive and reward innovation and recognise and retain key talent.

Future Outlook for HR

We believe the following is the short to medium-term outlook for HR practices across Indian IT-BPO firms based on the revised business focus areas:

• Hiring: Cautiousness in hiring is expected to continue. Employees with high-end technical knowledge or in-depth domain expertise will continue to demand premium salaries
• Compensation and Benefits: The possibility of employees in the IT-BPO sector taking single digit hikes or no hikes is for the next fiscal is very real. Any increases will be linked even more strongly to performance
• Training and Development: Large organisations will invest strategically in training, as experience shows that cutting back blindly on T&D budgets is counter-productive in the long-term. Medium-sized companies are more likely to place T&D on the backburner in order to conserve cash
• The Role of the HR Function: HR is now at a stage to be a true partner to business. During growth, delivery teams were comfortable taking a lead role in managing business HR functions. As the downturn brings in fresh challenges and tougher targets, delivery leaders are now turning to internal HR specialists for advice in improving productivity and cost efficiencies.

Organisations should see the time of the downturn as an opportunity for making changes that are needed or introducing initiatives that got neglected during boom-time. These may span HR interventions (such as training programmes for re-skilling / multi-skilling employees, developing an impactful employee value proposition or changes in the HR function itself); and business aspects (such as refining customer relationship and go-to-market strategy). It may also be an opportune time for selective hiring from the market to fill skill gaps that may have been difficult to recruit during the boom years.

(This article has been contributed by Hewitt Associates LLC).

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