Omam Consultants in the News

Why and how did Indian companies justify paying those salaries?

Of course there was severe war for talent amid hyper growth. More important, there was certain optimism about the future. Everybody expected economic growth to continue and momentum to be sustainable for a long time. As result, the premium to grab the growth, enter the business first and roll out the project fast was huge.

"Everything—including fat pay packets—was justified to maintain the speed," says K Sudarshan, head, EMA Partners. So bidding for talent, unprecedented salary hikes, making hefty counter offers to stem attrition, companies tried every trick in the book to recruit and retain employees.

MNCs were the biggest culprits, especially in IT and banking sector. Not having invested in building talent pipeline, unlike Indian firms, they often jacked up the salary levels substantially to lure away executives. Foreign banks typically paid 30-40 per cent more than their India counterparts to their executives, says Sudarshan.

An AGM at ICICI Bank would get around Rs 25-27 lakh as against Rs 40-42 lakh at say Stanchart Bank. Priya Chetty, vice president of Stanton Chase International, recalls a bidding war in which she saw the salary of a senior executive in the real estate sector go up from Rs 25 lakh to Rs 1.7 crore in a very short span. "A client was willing to offer Rs 1.7 crore and yet the candidate declined," she recalls.

Aviation was even worse. In the last two-three years, monthly salaries of cabin crew had gone up from Rs 20,000 to Rs 40,000, aircraft engineers from Rs 70,000 to Rs 3 lakh, and pilots (captains) from Rs 1.8-2 lakh to Rs 4 lakh plus. In Mumbai, at Mariott Powai hotel, a private airline kept ready more than 50 luxurious apartments for its senior executives. Each cost Rs 5 lakh a month. "Frequent parties, on-the-house dinners were normal," says a Mumbai-based executive who was privy to some of these parties.

This talent shortage and consequent salary surge played out in many ways. At the top, salaries in India and outside have converged substantially in the recent past, says Rajeeva Kumar, director at Omam Consultants. For example, in a sector like aviation, expat pilots actually come cheaper than Indians – around $8,000-9,000 a month vs around $11,000. This also nudged companies to look beyond India to hire their top talent.

“Companies used different and liberal yardsticks to make salary decisions. For many financial services firms, it was about how much business and relationships you got on the table," says a former executive at Motilal Oswal Securities.

For airlines, not having pilots meant a grounded aircraft with significant losses—a reason why pilot salaries surged sharply. For real estate firms, one-year construction delay meant a project lost, money lost. It was as if time was at a premium—and nobody wanted a delay in their new projects.

As executives worry about difficult job market, employers are breathing a little easier. Puffed up egos and arrogance have vanished. Delhi-based entrepreneur Mukut Pathak who is launching Aryan Cargo Express early next year was worrying about getting people for his start-up. "Earlier you could feel that arrogance when you reached out to them. Now they are writing emails, talk politely and don't have sky-high price."

In Mumbai, a senior executive who oversees a US-based hedge fund seconds this opinion. Eight months back, he was trying to hire a CFO for a company they had invested in. The candidate, working with Kingfisher, was earning Rs 30 lakh CTC. "We were willing to offer Rs 55 lakh with good ESOPs etc but he declined after keeping us hanging for some time," he recalls. Last week he called him asking if that position was still open or if there was any other opening.

Companies are bringing rigour and a renewed focus on performance management. Suddenly, employee productivity, revenue/profit per employee is top of the agenda. Companies across the board from Genpact to Wipro to Bharti are looking at ways to boost per employee productivity. "We can move up the bar and hire better caliber people," says Arvind Agarwal, head (HR) RPG Group.

"Companies had gone about giving salaries pretty unmindful of productivity," says Gangapriya Chakraverti, head (information product solutions), Mercer India. "That's beginning to change," she says. Companies across the board are strengthening performance management system and bringing in greater differentiation in salaries.

Teamlease, India's largest temp firm can feel the difference. "Salary closure is becoming one of the biggest stumbling blocks as companies have hardened stance on salaries," says Manish Sabharwal, head, Teamlease Services. At least 30-40 per cent of placement cases, especially at the senior level, are falling apart. "Junior ones are more willing to adjust," he says.

There is also an increased thrust on raising the variable component in salaries across sectors. While the specifics are still being worked out, RPG Group says it could go up from 10-15 per cent band to 20-30 per cent on an average.

How soon will India recover from the crisis is uncertain. But lessons are being learnt the hard way and an entire generation brought up on an economic boom knows the days of overflowing cheer are over. Sanity has returned to the job market.

 

Big Fat Salary
1. Finance	2001	2008
Senior level I	30 L	1.3 CR
Senior level II	24 L	1.04 CR
2. IT
Senior level I	35.5 L	1.03 CR
Senior level II	26.6 L	76 L
3. Realty
Senior level I	33.6 L	90.15 L
Senior level II	24.75 L	66.3 L
4. Consumer durable
Senior level I	31 L	76.7 L
Senior level II	19 L	47.1 L
5. Auto
Senior level I	29 L	70.6 L
Senior level II	15.9 L	39.2 L
* Source: Omam Consultants * Average annual sectoral salaries

(Malini Goyal is Editor, Business and Society, at the new business magazine to be launched by Network18 in alliance with Forbes. Associate Editor Pravin Palande contributed to the story. )