Changing Role of HR and Executive Search in India (as featured in NHRD Network Journal)

Introduction:

Modern management in India can be said to have started with the introduction of the Factories Act in 1881, which brought in previously unheard of concepts like weekly holidays, fixed wages and hours of work. It was in the early 20th Century that various laws were passed, which brought into play the Industrial period and the advent of personnel management and Industrial Relations as part of the human resource management in the workplace. Some of these were the Trade Union Act of 1926, Payment of Wages Act, 1936 or the Bombay Industrial Relations Act, 1938.

Post-independence, India was marked by rapid growth in industrialism, with the rise of many Indian family run companies. It was in the 1990-s finally, with the Rajiv Gandhi led government and the financial
brains of Dr Manmohan Singh, that India first started on its way to become a truly industrially developed, well-balanced, well-managed, talent-oriented society, where Human Resources started getting its due importance.
The shifting focus of the company from a simple hierarchical structure of boss and employee to a complex dynamic of a changing population, trying to survive in a highly competitive market means that managing the human factor has become the most important aspect of any business today. People are seen to be the most important asset of the organization. Human Resource Management has now become an integral part of every company, from eCommerce to manufacturing. It is now clear that a motivated employee is a productive employee and to improve the performance of the individual and in effect the whole firm, the creation of the happy employee has become imperative.
Leading studies suggest that changes from a regulated environment to a free- market driven, liberated environment, has definitely changed HR practices in India. Restructuring and increased competition has made it important for companies to look at their people practices. Professionalising a work force, dealing with changes in competition, need to build capabilities and increased need for good leadership were all need of the hour. Add to it the emergence of the MNC, which had more than just basic HR practices, made it imperative for companies to improve motivation, quality and functioning of teams so as not to lose their leading talent.
India has the youngest population in the world. Almost half of her population is aged less than 25. And they are all entering or about to enter the Indian work force. What this means for a company is complex and demanding, especially for its HR department. Every generation has its own requirements. The Gen Y as they are called, don’t just want more money, but also more growth and more learning opportunity.
The ever changing nature of technology in today’s world is a far cry from the employee of old, the desk worker who would be doing the same thing for decades. Now new technology needs to be integrated into the system at the speed of light. Hence, the two pronged need to hire people with the right skill set, and to train individuals in the right skill sets. New technology also means the rise of the innovation generation. By definition innovation means non-traditional. Add to it, this is also the era of the knowledge worker- the professional who uses knowledge as capital- like a software engineer. A survey by Ranstad this year has shown that companies all over the world, and also India are going easy on the hiring of knowledge workers, the reason being that hiring them in a world of inflated work profiles and over loaded information is tough.
Thus we are dealing with HR issues across the counter, starting from the right hiring practices, to retention, development, training to creating innovative solutions to cultural problems arising in the company. Thus managing constant change in the work environment is now basically the job of the HR Manager. The Human Resources department of the company is expected to deal with roles such as retention of talent, development and training, and strategizing in terms of employee engagement and more importantly people issues related to the merger and acquisitions which Indian firms. The HR Head is now as important as a CFO to the company. OD or Organization Development now held as much importance as Marketing.
In the modern evolved corporate world, Strategic HRM or SHRM now handles a very strategic function dealing with performance management, balanced scorecard, competency mapping, talent development, retention policy development and overall skill and leadership mapping in the organization which would lead to a proper leadership pipeline.
Consider these examples: Tata Group has always been known as a front runner in best practices of HR. they have the Tata Management and Training Center which brings together employees for training which helps in binding them into a stronger force. GE has its international development center at Crotonville and their leadership development program is custom made for their Indian executives. Companies like HUL, Cognizant, Infosys have roped in their heads of HR to be the champions of leadership training and development of their employees, and this, in turn has proven to be a massive retention tool for modern corporate India.
How executive search has slowly become an imperative to corporate HR, from a placement firm to becoming partners in talent management
To deal with the ever changing nature of the business environment and productivity issues many companies have taken a two-pronged approach. Firstly many of them, especially IT firms are opting for temporary staffing, where professionals on the “bench” can be deployed at any given point. The other is the use of consultants for many HR functions like training and development, hiring, and OD.
Starting at the end of the 1990-s and the beginning of the 2000-s decade, the outsourced recruitment industry has emerged as a major force. Now the industry consists of freelancers, small and medium sized firms, large Indian companies and MNCs like EgonZehnder, Heidrick and Struggles, Russel Reynolds, Korn Ferry, Spencer Stuart, Aon Hewitt, Kelly Services, Manpower Group, Ranstad etc.
What started with the development of placement firms in earlier era, became differentiated from senior management hiring, which companies realised, required quite a different set of skills to fulfil, like competency mapping and competency based hiring, and career counselling. The fledgling senior “placement industry” reinvented itself in the 2000-s as specialised or boutique head hunting or executive search firms. Even one of the oldest firms in HR in India is ABC Consultants started in 1969 by Bish Agarwal, reinvented themselves when they launched their
Chairman’s High Circle and head Honchos portals, aimed at hiring senior management and executive search. Firms now have their own portals, and some executive search firms like Korn Ferry have ventured into mid-level management recruitment through subsidiaries (in this case Future Step).
I have been part of the Executive Search Industry since 1996, and in those days this term didn’t exist and people associated us with placement / recruitment sector itself. It was indeed challenging to educate CXO’s regarding the benefits of Search including the retainer driven fee structure. It always came as a premium because the process was indeed different than the methods used by Placement firms earlier.
It is important for HR professionals and line managers who hire, to know the difference between placement agencies and Executive Search. Placement agencies usually handle medium and low level vacancies in their client companies and they deal in bulk. They usually have a cache of job searchers in their database. Some placement firm have large databases where they have a steady supply of job applicants. Many use job search engines like naukri.com or monster.com to build their data base. The firm receives a mandate from their client, and the recruitment executive goes to work on the database, matching the profile with the requirement. At lower levels, there are usually scores of professionals in a particular field who would fit into a particular job requirement. These CVs are then sorted and sent out to the client, who goes into the interview process from there. The catchword here is number. For instance, for 5 Manager level positions for an Insurance company, there would probably be 5 to 6 placement agencies vying to have their candidate make the cut and get selected. So the more number of profiles they send, the more chance of success they would have. Once the hiring is done, the agency is paid for each person hired through them.
Executive Search which is also called head hunting or retained search, works on a completely different platform. While the placement firm model works best for junior and mid level positions, the executive search model works for senior and board level hirings, where you are looking for leaders and superheroes, and not just worker bees. The number game does not work here. An executive search firm works on mandates which are usually exclusive to the firm and they are retained for the period of the assignment. Which means that one firm will work on one CXO position exclusively in a time bound fashion. This is done to avoid dilution of the importance of the position. You would not like to have your next CEO to be approached by 2 or 3 consultants touting the job.
Executive search also does not use a ready made database. Different executive search firms use various methods of contacting potential candidates for a given role. One of these is networking. Top head hunters have an enviable network of senior level professionals. At Spearhead Intersearch we use a lot of back ground research for any position. Therefore what the client gets is not a bunch of profiles who are looking out for a change, but a lot of candidates who are happy in their present jobs and were not actively looking out for a job change. Thus the pool of candidates increases a great deal. Also the employees who are happy enough not to be available on a job site are the kind of people a client would want at the helm when we are talking about productive difficult-to-reach talent.
When we started off, convincing potential clients about Executive Search was a challenge; candidates were not used to a professional exclusive recruitment firms. These were some of the initial hurdles we faced in setting up. Eventually clients, candidates and the entire HR eco system saw value in hiring Executive Search firms which led this industry to a rapid growth. Compensation Structures became aggressive, Indian managers were in Global demand, new entities made their India entry and the country got an entire new recognition in the late nineties. The end of the last century also saw the first emergence of Start ups and Venture Capital funding. New terminology like ESOPS came into existence which was a great motivating tool to attract talent to the start ups from large established corporate. Unfortunately the virtual world of Stocks collapsed and this became a shake out.
With large companies diversifying into newer and newer sectors, the HR department finds it tougher to find the right fit for their talent requirements. The talent pool today is very large and dispersed not only all over the country but globally also. Global auto, luxury group, FMCG or consumer business majors are setting up shop in the country. Many Indian firms with global presence or MNCs in India now require a person who is not necessarily Indian. In demand is also the PIO, or Person of Indian Origin, part of the large diaspora of professionals living scattered all over the globe. This environment requires a complete overhaul of the recruitment system, which a consultant is more equipped to handle.
Thus we see more and more large Indian firms partnering with consulting firms for their hiring needs.
For smaller, innovative, growing companies or start-ups or for the service industry the need is to find the intrepreneur, the self- driven highly motivated Super Men or Women, who would take the company to double digit growth. Here too the selection process is highly sensitive and very complex, with the requirement being a thorough understanding of markets, individualities and company cultures. Again, an experienced consultant is best suited for this purpose.
Even family run organizations are making the subtle move to partly or fully professionalising leadership. While these firms were once solely dependent on referrals for hiring, they are now more open to looking at external partners in their hiring process.
We have many such examples of helping family run organisations to professionalise. One of them was a medium sized Technology Services company. The founder was the sole Head but the HR intervened and wanted to professionalise the entire Senior Management by bringing more robust and innovative practices. Our firm was brought in to manage this transition and identify high quality talent who have made organisations grow from the current revenue of 300 crores to 1000 crores in 5 years. We did screen multiple candidates and successfully hired the CEO and CXO’s who are playing a key role for its growth and expansion. Such kind of examples are increasing and we see Promoter driven companies are equally competitive when it comes to professionalise with adequate compensation, stocks and other measures.
The first decade of the 21st Century saw the emergence of new entrants to the Search Industry. We, as a firm also grew by setting up new offices as every city offered an opportunity for growth and every city had its own cultural professional style. We did realise Mumbai was different from Chennai, Bangalore was more driven towards the technology wave with a lot of Start-ups and Venture Capitalists. Delhi has also been the capital which continued its dominance. Kolkata was still conservative yet has the potential to grow. With a network of 5 offices in these cities it was important to be closer to the client and the candidate. Today we can proudly say, no other Executive Search firm has a presence in 5 cities.
Not just city, the difference in recruitment methods are also driven by the type of industry or size of the company. IT and telecom, as well as the other sunrise industries were more open to trying the executive search model, while old brick and mortar companies are still happy with advertising in newspapers. We recently got called into a financial services company where the HR Head confessed that they had tried filling senior positions with newspaper advertisements, but got flooded with hundreds of irrelevant resumes. With time, many clients have come to value the level of expertise we bring to the table when it comes to initial interviewing and background checks. This also depends on the role the HR department plays in the company.
In traditional firms, recruitment is still handled by the HR department. The rapidly changing face of technology, and the new-fangled hip culture of new IT firms, means that recruiting is now more than just matching CVs. A recruiting manager has to find a “fitment”, a person with the right credentials, who would fit into the culture of the company. Every company is different. Some prefer a shorts and T shirt culture while some wants black tie to approach government clients- it all depends on the firm’s clientele and background. Development of start-ups gave a fillip to this trend. Here was a new crop of firms, flush with investor money, waiting at the brink of an explosion, just looking for the perfect CEO to get their product “out there”. The company admin department was not equipped to handle such rapid and overwhelming changes. Nor are placement firms best placed in this case, to find the perfect candidate from their vast databases. Here is where executive search firms come in to fill that gap.
Today the Search Industry is maturing continuously, with people coming in from different backgrounds either Management consulting, Corporate CXO’s, Senior HR Professionals who all contribute to the efficient functioning of the Industry. World wide, there is increasing pressure on the executive search industry with ongoing recession which influences companies to cut costs. Thus companies are hiring their in house head hunters, one who will have networks, who will trail the industry for the right fit, track movement of key executives important to the company through linked in and other networking websites. Companies now value their own in house tiny teams of head hunters, rather than pay an external agency for the same work. Also, recession has influenced companies to look at “temping” as a viable option. Thus today even CFOs and CEOs are available for short stints, to pull out company from the doldrums or just to see it through a merger.
However, in India, increasing competition within the executive search field has led to improving quality thereby satisfying the clients and candidates and also increasing the acceptance of Executive Search as an Industry and making it as a more organised entity.