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Motivating India Inc in troubled times

Reward Information Services | August 2009

The heady days of jumping ship to another organization, lured by a double-

digit salary increase, are over. Just a couple of years ago, such a salary hike
would have been considered par for the course. These days, employees say
that they are happy just to have jobs. This just goes to show that though India
is surely feeling the effects of the global economic turbulence. In many ways
this has led to some much needed moderation in a labour market that has
been on fire for the last few years. Left unchecked, it would have seriously
damaged India’s global competitiveness.

Are the guns really drawn?
be close to targeted levels, hence revealing
When it comes to India has culturally and economically been a relatively optimistic outlook when
salary increases, very conservative with regards to finance. compared to the rest of the world (Figure 1).
As the doors of ‘easy’ finance only opened
the majority of
up a few years ago, India has been relatively
Indian businesses sheltered from the sub-prime tsunami and However, when it comes to salary
have chosen to be the subsequent global recession. increases, the majority of Indian
more businesses have chosen to be more

conservative. Hay Group’s Reward in a downturn survey
conservative, with less than one-third
stating that they are increasing their salary
(April 2009), comprising 2,000 global budgets. According to the same Hay Group
companies including 52 leading Indian survey, base salary increases will drop to
companies supports this: 71% of the 7.25% from 12.2% (April 2009) on year-on-
Indian companies expected their results to year basis.

©2009 Hay Group. All rights reserved

Reward Information Services | August 2009

According to a recent Hay Group Insight
The India challenge survey of millions of employees around
All this for a Hence, Corporate India’s biggest headache the world, while 90% of them feel that they
generation of is to ensure that high levels of employee are committed to success, only two-thirds
employees who engagement are balanced with competitive believe that they are as productive as they
pay structures on a smaller remuneration could be. In Asia, this number is a bit more
have come to budget. All this for a generation of startling. Frustrated employees represent as
regard high salary employees who have come to regard high much as one third of the Asian workforce,
increases as a salary increases as a norm and in some with only 16% of them believing that they
norm, and in cases, an entitlement. are effective in their jobs. This means that,
about four out of every five employees in
some cases, an

your company right now could be more
entitlement. And yet, things are not as bad in India as productive. Can our organizations afford
reported in the mass media. this?

Let’s look at the other Asia powerhouse, In other words, unless engagement is
China. According to Hay Group’s PayNet – a complemented by enablement, managers’
global compensation and benefits database, jobs are only half done. Matching employee
base salary increases in China have been with the right jobs is only going to be as
decelerating for the same period: from effective if the environment is in place to
10.9% (August 2008) to 9% (October 2008) give employees the confidence that they are
to a mere 3.8% in April 2009. This is all the being set up to succeed.
more significant in a country where the
government is still pushing for a 8% GDP
growth in 2009 and where salary trends And there are rewards to reap. Hay Group
have been similar to India’s for the past few Insight research also shows that
years. companies, which engage and enable
employees, clearly and consistently out-
perform their industry peers both on
However, the traditional retention and revenue growth and profitability.
motivation weapon – salary – is now no
longer as available now that salary budgets
are tighter. What other tools can Indian Reward smart, Reward well & Reap the
companies use to improve productivity and
retain high performers who continue to be
in demand in good times and bad? Closely linked to employee engagement are
remuneration practices. In Hay Group’s
Reward Next Practices research, conducted
by Hay Group and WorldatWork in early
The Road Ahead 2009, out of over 760 global organizations
Engage, Enable…Succeed from 66 countries, a large number of
Everybody knows that an engaged organizations are planning shift the focus
employee is a valuable employee. However, of their reward programs by paying closer
even the most engaged employee can run attention to variable pay and non-financial
out of steam if he is not enabled for success. recognition. In addition, companies are also
Just think back: how many times have you planning more pay differentiation in terms
personally felt, when given a project, that of salary increases and incentive payouts for
you’ve been set up to fail? top and average performers.

©2009 Hay Group. All rights reserved

Reward Information Services | August 2009

Employees appreciate reward 35%

-35% 63%
program consists of total rewards

Leaders regularly sustain reward and 33%

-33% 64%
performance communications

Employees are provided with 35%

-35% 48%
individualized total reward statements

Managers effectively communicate 15%

-15% 67%
total rewards to employees

80% 60% 40% 20% 0% 20% 40% 60% 80%

% Current Focus % Greater Focus in Future

Figure 2: What companies intend to do better in reward communications

Against this backdrop, effective reward Potentially, this practice will enable
communication will be a priority in the business managers and supervisors to
implementation of future reward programs. approach engagement and reward
A great reward program is of no use if it management in a completely different way.
remains on paper and employees are not People managers, with their enormous
aware of it. influence over non-financial rewards and
organizational climate, are powerful tools
for organizations. They can therefore be
And while it is the HR departments that utilized more fully by coaching and
mostly take care of the reward-related educating them on managing total reward,
communication, 67% of the global and indeed, also employee
organizations surveyed plan to place a communications. Indeed, this can only lead
greater emphasis on helping line managers to future Supermanagers who will enable
managing total rewards communications organizations to have more satisfied and
(Figure 2). productive employees.

India Inc. is certainly under a cloud of uncertainty but things are not
as bad as the media makes it out to be. How we choose to approach
people management in such conditions will ultimately affect our ability
to not only ride out the storm but also our readiness to compete fiercely
again when the worst is over.

Contact us
About Hay Group Oscar De Mello
Hay Group is a global consulting firm that works with leaders to turn strategies Country Head
into reality. We develop talent, organize people to be more effective, and moti- Reward Information Services
vate them to perform at their best. With 85 offices in 47 countries, we work with
Hay Group India
over 7,000 clients across the world. Our clients are from the public and private
sector, across every major industry, and represent diverse business challenges. Tel: +91 124 417 7400
Our focus is on making change happen and helping organizations realize their E: Oscar.de.mello@haygroup.com

©2009 Hay Group. All rights reserved