From pre- to post-downturn, the executive search space in India has gone through a radical transformation with companies accepting the ‘value-add’ provided by International search firms, say Deepak Gupta, Country Head – MD and Dhruv Prakash, MD India - Leadership & Talent Consulting, Korn Ferry International

What are the trends in the executive search space in India? What is unique in each industry vertical?

Deepak: The executive search industry in India has matured a lot in the last ten years. Back in the beginning of this decade, most recruitment at senior levels was done through informal & unstructured channels. Some of the international search firms had just begun operations in India in the last few years and they were still trying to get to their feet on the ground. The bulk of recruitment happening in India was through references or local recruitment agencies, resulting in a less structured process with a more contingent pricing model as opposed to being retained for a search. In the contingent model, the hiring company gets paid only if a candidate recommended by the recruitment firm ultimately joins the organization.

With the coming of international firms a greater rigor and formality in structured processes in mapping, assessment and due-diligence was brought in and thereby the fees are based on a retained exclusive model; wherein the company gets specific requirement exclusively to only one provider and the retained executive search firm gave a commitment to find the right person for that position. The initial years went into educating the market about the value proposition of retained executive search firms and trying to break the cost barrier by demonstrating value-add through better processes and better results.

Around 2005-06, the executive search business picked up pace with numerous international players coming in. The new players entered late, and hence, in order for them to gain market share, they often resorted to cutting prices and offering to work with companies on a contingent or semi-contingent basis consequently tainting the retained executive search model to some extent. However, due to their track record and credibility, the more established international retained executive search firms were able to hold their market share and in fact grew significantly during this period.

Then came the pre-downturn phase where markets were witnessing enormous growth wherein talent wasn’t easily available and companies were hiring for growth. During this phase, companies were not that price sensitive and they did a lot of work with the international search firms. Markets were changing because companies were getting desperate. This phase saw the emergence of a new trend – from the employers having more leverage to the employees having significant leverage. This was the pre-downturn period wherein the candidates were calling all the shots.

In the first half of 2008, global economies started experiencing the first signs of a downturn with the global executive search industry losing 40-50% of its revenue. This was experienced around the world including in the Asia Pacific Region wherein retrenchment in the market, and search firms were no exception. It is only in the last few months that the markets have picked up and are now pulling out of that phase.

Overall, the industry has matured since the downturn; there is a lot more acceptance of international retained executive search firms and understanding of what these firms bring to the table. However some of the large conglomerates are still a bit hesitant to work with international retained executive search firms since they have the bench strength and can attract talent on their own except for very critical and key positions for which they work with such firms.

How is India different from other Asia Pacific countries in the space of executive search? What is unique?

Deepak: In India, there is an interesting difference when it comes to the talent pool. Here, the pool is much larger but the challenge is to find the right person from this pool as there are many more nuances required for the right fit like cultural fit, location of the job, etc. On the contrary, the talent pool in other APAC countries is much smaller but more mobile and more adaptable to other countries within the region. In India, people are not willing to move from Mumbai to Delhi, leave alone around the APAC Region. There is not much regional hiring happening from India except in a few areas like finance for example. Talent from India relocates into the region mostly due to internal transfers. But when you see the rest of the countries in the region, talent tends to be a bit more mobile between China/Singapore/ASEAN for example.

How can companies build a strong leadership pipeline by acquiring the right talent?

Dhruv: The first step in building a leadership pipeline is to hire right. The major shift that is happening today is that companies are hiring for quality as opposed to hiring for numbers alone at all levels. Companies are hiring for the organization and not just for the job. ‘Quality’ includes attributes such as long term sustainability of the candidate in the organization, ability to move across roles and levels, sustained performance, flexibility to adapt to the changes that the organization may go through, et al.

We help organizations get a perspective of how the prospective hire fits the role in terms of competencies, the organization’s preferred leadership style and decision making styles, and whether their personal fundamental motivation weave with the nature of job and the organization through a proprietary assessment tool and interview methodology.

In the period of pre-2008, companies were hiring in excess trying to cater to future demand; after the downturn, what do you think companies have learnt and how are those learnings being incorporated in the Manpower Planning Strategy?
Deepak: Pre-downturn, I do not think companies were necessarily stocking up for the future. There was never an excess of employees. At times, companies hire employees much before they actually need them but I believe that there was a lot of “crisis hiring” going on.

The growth pre-downturn was significant. The learning in terms of manpower planning strategies derives from the experience of having gone through retrenchment, compensation dips; companies have learnt to tread very carefully & cautiously with respect to the talent that they acquire and thereby they are not going to hurried in their recruitment exercise. Hiring will be only at rational compensation structures. Candidates are also a lot more thoughtful about their moves; they are being much more reasonable about their expectations of compensation. These are the major learning’s from the downturn and are certainly relevant to the present.

However, I feel that these learning’s are short-lived and it won’t be very long before some will be forgotten. Pre-downturn, it is not that companies didn’t know what the right things to do were, but they were forced to take a lot of steps because of shortage of talent and the growth opportunities, hence the leverage moved to the hands of the candidates. The similar situation occurring in the future is inevitable. But there is no denying that this time round, everyone is going to plan their processes using more robust methodologies ahead of time, with a more rational and sensible approach. The market just rapidly grew the last time, and caught the companies unawares. People are more prepared to handle these eventualities post the downturn.

What is your view on expatriate hiring in India? Do you think we are dependent on expatriates today for senior or specialized roles?

Dhruv: I think India was never expatriate dependant in the way that China or several of the other Asian countries were. Some roles in specific industries needed them but the numbers were not large. Traditionally Indian companies have used global consultants to raise their competence and global competitiveness. Recently, however, as the regulations have eased and Indian companies have begun going global, they have begun hiring global talent to speed up their readiness for cross border forays as well as raise competence in the organization or even to simply hire the best talent available.

Businesses in India are changing rapidly and becoming more outward looking against the backdrop of more acquisitions by Indian companies abroad and more companies going out to set up bases. There is a change of balance between Asia and Europe and the US. Hence there is going to be demand for a different kind of manager – one who will be able to succeed in those regions. The Indian manager will need to be tuned to culture sensitivities and to manage people in a cross cultural scenario etc.

Overall thought, we are going to see more expatriates being hired for diversity and value addition, but certainly not because we lack competent leadership.

Korn Ferry View on Key Trends

Industrial Markets: Activity has picked up in most sectors during the last two quarters. Companies are focusing on both – hiring and retention to meet their growth plans.

Infrastructure, Energy and Basic Materials are also looking for talent for overseas needs.

Life Sciences Markets: There is a strong buzz in the pharma industry with MNC’s acquiring Indian generic players. Talent acquisition and retention will therefore be the key as most companies are looking at aggressive growth plans.

There is also a large focus on rural penetration which will mean hiring in tier II and tier III geographies.

Sales and marketing talent is again in demand.

There is huge activity also on the R&D and CRO front. Private healthcare systems and healthcare services are expanding their operations.

Financial Markets: There has been a pick up in executive recruitment in Corporate Banking and Investment Banking. Hiring is expected to continue in the banking space with both existing banks expanding their operations and newly set up banks setting up their representative offices.

Hiring is also expected to pick up within the Private Equity domain later this year, and also in the in the DCM and ECM space - especially with MNC banks expanding their teams.

Consumer Markets: Overall there is buoyancy in the Indian Consumer Markets, led by Consumer Goods – both FMCG and Durables.

An interesting trend is that the total remit of jobs keeps getting narrower as companies try and squeeze productivity from their operations. Companies have started investing in their core businesses. Media companies are sticking to media (publications are increasing the number of editions, channels increasing their spread by launching more channels in different genres, etc).

The talent war in these segments is thereby a direct reflection as companies become more risk averse: they continue to prefer hiring talent that has done similar jobs in similar categories.

Technology (Telecom/IT) Markets: Telecom has been the front-runner for growth even during the downturn, with Cellular operators needing to continually re-invent themselves in the intensely competitive environment. With new paradigms like ‘outsourced/managed services’, ‘optimized minute factories’, and ‘value-added-services’ expected to be driven by higher speed bandwidth (3G, WiMax, BWA) availability, these operators are looking for different skill-sets - many of whom are seeking talent from global markets. Other Telecom ecosystem players like software and hardware companies are setting up shop/increasing presence in India (to help the operators build differentiated services), and increasingly India is now exporting talent to other markets who can learn from India’s operating models.

Indian IT services firms (both outsourcing/off-shoring companies in software development/management and BPO/ITES) have started to renew their focus in global markets after the recession, and are looking at expanding their reach and relevance to the global ecosystem, both organically and inorganically - with targeted local hires in these overseas markets.

Many global Indian IT services firms are changing their talent mix to make it more diverse by looking at a larger global (non-Indian) talent pool in their senior leadership. Achieving gender diversity in key senior leadership roles is, however, still a challenge for these firms.

As large IT MNCs in India continue to grow their business, they are faced with the peculiar challenge of not finding enough talent in India who have seen ‘scale’ and thereby, some are resorting to importing talent from global markets into India.
In general there is a lot more NRI talent in the Technology/IT sectors who want to return/relocate back to India.

Professional Services Markets: Professional Services and Consulting firms have seen a lot of hiring even during the downturn. The Satyam scandal kicked off a frenzy in corporate governance/risk management becoming top-priority in the minds of the Indian businesses. The recessionary times also led a lot of organizations to hire consultants to optimize and reduce their operational costs and become leaner. Both of these have led to greater focus/business for the Professional Services firms and thereby their need to expand their teams.

Discretionary spending on other types of strategy, process consulting and M&A transaction advisory had been cut down during the recession, but is seeing a come-back, with a lot of companies in India seeking advice from management consulting firms on how to differentiate and stay ahead of their competition, both in India and in global waters - leading to senior level hiring in these professional services firms.

 Deepak Mohla is Managing Director at Inspire One. Deepak has over three decades of professional experience that is a dynamic mix of corporate and consulting assignments across various industries. His multidimensional experience across Investment Banking, Management Consulting, Agriculture, Automobiles,Of-fice Automation, Telecom and Industrial Entrepreneurship enables him to undertake the role of a Change Catalyst at the individual and organizational levels.

Jim Tapper is Managing Director at the Centre for High Performance Development. Jim has spent most of the last 25 years developing and leading consultancy practices in Europe and the United States with particular emphasis on major engineering and process industries. He has been advising companies on strategies and operational improvements to gain competitive advantage.