We are undergoing at the moment a twin phenomenon of tremendous growth rate in the economy and acute mismatch of demand-supply of skilled talent/manpower. Owing to this twin phenomenon there has been tremendous salary increments for the last 3 years in a row.
In the last 3 years India has had the highest rate of increment in Asia, constantly clocking an average of close to 14-15%. This translates to almost 20-25% increment in highest performing organizations in their respective sectors. While due to inflation and other global factors have attributed to certain slow down in growth by 0.5-1.0%. We are now looking at close to 8% growth in short to medium term. However that itself is almost a tremendous rate by any global standard. Given such rate and ofcourse inflation itself we are likely to witness double digit average salary increments in the next 2-3 years as well.
The key question now is are these tremendous increments proportionate to increase in efficiency levels of these people; hence do they actually deserve this. Honestly my view on efficiency is these increments are hugely disproportionate to improvement in efficiency. This is driven very strongly by demand and supply situation in the economy today.
Some interesting aspects of this situation today are:
· Demand supply relation and would take time to settle down. IT industry for example is already signs of slowing down, rather must I say settling down. We are hearing of single digit salary increments in the industry this year. This is driven as much by slow down from US, as on the fact IT industry over the past few years has invested heavily in creating skilled talent and hence increasing the pool size available (which by the way is ONLY ultimate answer to this madness anyways)
· Whilst organizations might not be necessarily able to control increments completely, they are looking at alternate actions like reducing administration cost of hiring, cost of hiring, internal referrals, eliminating non value adding roles, re-looking at skill set required for doing a certain role etc.
· Some organizations would yet grow at higher rate than industry average and so would the employees grow at disproportionate rate
· Key safeguard for most organizations is however the fact revenue per employee in most of these organizations is growing, even though not attributable to efficiency. It’s in all probability just an outcome of current business environment and bigger business opportunity than before. In such environment if organizations would benefit with higher growth than previous years, so would its employees.
In summary I think increments for the next few years would continue to outrun delta improvement in employee efficiency. As organization would invest in creating larger talent pool and various industries would reach stage of consolidation, this phenomenon will settle down. We are likely to continue our leading position in Asia as highest salary increments J
Hence we will continue to see increments in proportion to growth in business but not necessarily similar increase in efficiency.
Have you seen similar trends? Have you come across interesting ways of managing this situation?
~~Rohit~~
Rohit Jain