Article: Talent deficit: Where are the people?

Skilling

Talent deficit: Where are the people?

People Matters explores to understand what is wrong with our current education system what can be done to address this situation. We collect views from industry leaders, educationalists,policy-makers and from research to unravel the reasons and to look for solutions to the talent shortage confronting us
Talent deficit: Where are the people?
 

The competence of ‘whole systems' thinking and the ‘enthusiasm' can make a difference

 

Establishing a private university requires an Act of the state legislature and is therefore impossible without strong political connections

 

The very suggestion of a talent crunch in a country of a billion people could seem preposterous. Around 20 years ago, the idea of surplus capital and insufficient labour was unthinkable and the idea, even today, is alien to many.

Over the last 2 decades, the Indian economy has come up on the back of a solid, educated, white-collared workforce that has catapulted it to the ranks of global economies. Many intellectuals claim it was but inevitable for a nation with a ‘knowledge ethos’ to come of age in today’s information era. After all, belief in the value of knowledge and education has been the bulwark of Indian middle class upbringing and the results of this are apparent to any observer.

The IT industry has not just lent voice to a generation of educated Indian families, whose skills were previously under-utilized in the License Raj quagmire of the 1980s. Aided by some astute (and sometimes forced) reforms, it has created a swarming consumer class that has teed off a self-fulfilling prophecy of spending power, consumer demand, investment, capacity building and innovation.

The last decade has seen the spawning of industries to meet this demand – financial services, infrastructure, real estate, hospitality, telecom, healthcare, media – the rewards of being part of the knowledge economy are apparent to people and policy-makers alike. The spoils of a good education are lost on few.

And yet, there is talk of a huge talent deficit – every CEO, policy pundit, HR head we speak to has a very strong message: It is very hard to find good talent these days. And worse, employability among fresh graduates is very poor.

IS INDIA, THE PEOPLE, FALLING SHORT OF THE REQUIREMENTS OF INDIA, THE ECONOMY?

There is a near-consensus on the structural problems plaguing our education system – badly designed curriculum, poor teaching standards and politically-connected, myopic businessmen running majority of private educational institutes.
People Matters explores to understand what is wrong and what can be done to address this situation. We collect views from industry leaders, educationalists, policy-makers and from research to unravel the reasons and to look for solutions to the talent shortage confronting us.

BY TEJASVI MOHANRAM & ESTER MARTINEZ

Few companies have bene-fited from the Indian outsourcing revolution as Genpact. What started as a business unit within GE to provide business process services is today a USD 3.5 billion global BPO leader with offices in 16 countries. India is the central hub of the business with more than 70% of the 38,600 employees based out of India.

And yet, Pramod Bhasin, CEO of Genpact, is a worried man. “Employability of people coming out of college”, he says, “is a key issue. Most graduates are unable to perform basic functions that you would assume they have been trained for, be it finance-related or business language related. Poor quality of training and bookish curriculum mean that you just cannot rely on the skills coming out of college.”

And he is not alone in his concerns.
According to a study on the employability of graduates by McKinsey & Company, only 25% of engineering graduates, 15% of finance and accounting professionals and 10% of professionals with any kind of degrees in India, are suitable for working in multinational companies. On the same lines, a Nasscom 2009 report predicts a shortage of up to 3.5 million professionals by 2020 in the global sourcing market, which could seriously undermine its 51% share of the industry.

LIKELY ANNUAL REVENUE LOSS OF USD 150 BILLION BY 2020 IN THE IT & BUSINESS SERVICES MARKETS DUE TO A PROJECTED SHORTFALL OF 800,000 PROFESSIONALS - NASSCOM

CURRENT ANNUAL TRAINING CAPACITY OF 3 MILLION VS TOTAL SKILLED MANPOWER DEMAND OF 83 MILLION BY 2015 – NATIONAL SKILLS DEVELOPMENT COMMISSION

SHORTAGE OF 500,000 DOCTORS, 1 MILLION NURSES AND 80% SHORTFALL IN DOCTORAL AND POST-DOCTORAL SCIENTISTS – FICCI

As we spoke to a wide array of industry leaders, the concerns are similar. But nowhere more so than in the projected shortfall of trained non-graduate professionals. Says Hari Menon, CEO of IndiaSkills, a vocational training initiative, “A consumption driven economy, growing middle class and huge disposable incomes mean that retail, hospitality & BFSI will be the fastest growth sectors on the service side, with about 20 million trained manpower need projected in the next five years by the National Skills Development Report 2009.” The same report projects a demand of over 15 million skilled manpower in the construction sector. Specialized sectors such as auto and beauty are projected to need around 5 million skilled resources.

Manufacturing is another sector where India has traditionally lagged behind global giants, like China and the requirement here is a staggering 73 million factory workers by 2015, 50% more than today. Management talent too is hard to come by here. Says Ajit Rangnekar, Dean of the Indian School of Business “Manufacturing is one of the sectors that I see with increasing worry. As a country we cannot afford to neglect growth in this sector. But still, working in manufacturing is not attractive for students and the challenge is to create a pipeline of talent for this industry. To get MBA students interested in joining these industries is very difficult.”

When it comes to technical education in India, the macro numbers look impressive – more than 450,000 technical graduates, 2.5 million ‘other’ graduates and over 350,000 post graduates every year. Of course, a consistent 8% GDP growth would need a disproportionate increase in workforce as newer industries catering to domestic demand yield lesser than IT/BPO exports in terms of revenue per individual. But clearly, the problem of talent crunch has less to do with quantity than with quality issues and inefficient resource allocation. What then are the underlying reasons for this quality deficit?

The Circle of Mediocrity

More than 80% of technical education in India is run by private institutions, hence it is important to look into the causes for an abundance of low quality schools and colleges for courses like engineering, commerce and business studies – most importantly, engineering.

All engineering schools are regulated by the All India Council for Technical Education (AICTE), which is vested with statutory powers to organize, plan, and administer technical education in the country. Among other things, AICTE dictates and regulates syllabus, fees and other administrative policies for engineering schools in the country.

Typical ‘regulated’ fees for engineering courses range from Rs.30,000 to Rs.80,000 per annum, depending on the state and the course. At the same time, AICTE does not permit the functioning of colleges from rented premises nor does it allow more than 60 students per discipline and multiple ‘shifts’ per day. The relatively low fees by global standards and added restrictions mean entrepreneurs cannot afford to buy land at market prices for setting up schools nor can they afford to pay teachers market rates for salaries.

From hereon a vicious circle of mediocrity takes over.
As a result of the suffocating restrictions, private education is mostly run by educational trusts or societies, which are entitled to benefits from the state such as land at concessionary rates and tax exemptions, due to their not-for-profit status. The regulatory framework presents a number of procedural hurdles. Approvals are needed from the university, the state government and regulatory bodies like the AICTE. This ‘educational bureaucracy’ can typically be negotiated only with political influence, as is reflected in the large number of politicians associated with or promoting educational trusts in the southern states and in Maharashtra. Establishing a private university requires an Act of the state legislature and is therefore impossible without strong political connections.

A candid Sanjeev Bikhchandani, CEO of Info Edge explains, “The problem is that to run an education institution you got to be a non profit organization. The government will give you cheap land. But the moment you say the land is below market prices then its supply is restricted. And therefore it goes to people who have access to power like politicians, bureaucrats and a few other influential people. They are not necessarily in it because they are committed to education or they are great educationists. They are in it either to dispense patronage or to run a business where they can make profit. They don’t have the competence in education. Also, because the government gives cheap land, it says that we will influence fees. If the government fixes my revenue, I will work backwards and ask how to profit under the given constraint. Hence, schools pay poorly to teachers, develop poor talent and don’t invest enough back in their infrastructure. Private sector higher education, barring a few notable exceptions, is stuck in what I would call a Vicious Circle of Mediocrity. We will give cheap land to friends who are not great educationists, who will then go out and build mediocre institutions for education. We will in turn control their fees; they will attract low quality teachers, pay them less and deliver poor courses. Hence it comes as no great surprise that only 15 to 25% of India’s engineers are employable.”

The picture that emerges is depressing - mushrooming private institutions, strong on political connections but low on educational quality, that demand payouts from students in the form of cash; a regulatory environment with many controls but unable to assure quality of education or equity of access; regulatory organizations whose very integrity is under question; and lastly, a Government content on taking credit for increasing enrolment and associated statistics.
Kapu and Mehta (Center for International Development, Harvard University) have highlighted this in their research “Indian Higher Education Reform: From Half-Baked Socialism to Half-Baked Capitalism”, that despite legal prohibitions on profit, growth of private engineering colleges is simply an artefact of politicians creating opportunities to collect rents. That is, private engineering colleges are organized and administered for profits in spite of legal prohibitions.

Outdated, Bookish Curriculum

Another common criticism of the education system is an outdated curriculum and massive bureaucracy around the setting of curriculum. Says Pramod Bhasin “Students land in courses like commerce and accounting with absolutely no idea of how the world works, are then taught subjects in a purely theoretical setting with very little practical exposure and end up in jobs a few years later, lacking basic understanding of concepts.”

Emphasizing this is Dr. Uday Salunkhe, Group Director, Welingkar Education, “In my view, what business schools and corporates need to do is decide on the practical skills which any student need to have before he/she joins the industry and emphasize on the practical exposure more than the theoretical approach of getting more marks. This exposure can be made mandatory as part of the curriculum.”

Also, retooling teachers is as essential as reworking the curriculum. Bala Balachandran, J.L. Kellogg Distinguished Professor of Accounting and Information Management, is an outspoken critic of the lethargy in the teaching domain. “Curriculum and courses designed in the 1990's (and earlier) are still being taught in many colleges. There are many teachers who learnt their material in the previous century and have not gone for any refresher courses or updated programs and are teaching off the same notes. Thanks to the Internet, there is world class curriculum available online and faculty should be given facilities to be retooled…Get the teachers current and the students will be current.”

Growth…Here and Now!

The massive growth and diversification opportunities in new sectors is also creating a dangerous trend of companies building capabilities by poaching teams en-masse from established competitors as opposed to putting in the effort and investment in building a talent pool, thus enhancing the preparedness of the entire industry.

Says S. Padmanabhan, Executive Director (Operations), Tata Power, “Every company should invest in training people. This is of course an additional cost of investment. The regulatory system should recognize the efforts of training people and enhancing capabilities for the industry instead of companies poaching people, as investing in training people increases the overall talent pool for the industry and creates sustainable growth. The regulatory body should address this by incentivizing companies to invest, through the tax system where investments in building capabilities or skills are exempt from taxes.”

Even established and consolidated industries run the risk of losing people when there is a talent crunch in other industries. P. Dwarakanath, Director - Group Human Capital, Max India, elaborates, “In the early part of this decade there was a sudden and massive demand for professionals in telecom and hospitality. Barring professionals from Government companies in the case of telecom, there were very few experienced people eligible for sales, marketing and even general management positions in these industries. So, companies started poaching from the best available talent pool for such functions – FMCG companies like Hindustan Unilever, P&G, Colgate Palmolive”.

Solutions Galore

From the discussion above, some of the solutions seem obvious. The most important one would be to free technical institutions and colleges from the constraints and strictures they face and let market forces dominate the education segment, including salaries of teachers and professors. However, this has to be accompanied by a meaningful regulatory framework wherein accreditation by government agencies actually signals quality to prospective students.

Also the accreditation guidelines need to be re-worked periodically to ensure aged and irrelevant guidelines are weeded out. It is indeed ironic that as per current NBA (National Bureau of Accreditation) guidelines for assessment of faculty, a senior industry professional with 20 years of experience and an undergraduate degree would score lesser number of “accreditation points” than a fresh post-graduate degree holder.

Obviously, introducing market forces in a socially relevant and highly sensitive domain like education could lead to fees spiralling out of the reach of many families. It is here that a carefully thought-out policy becomes important. For instance, reducing the confusing number of ‘Common Entrance Tests’ and creating a transparent procedure for disbursement of government scholarships could go a long way in ensuring access to quality education.

Also, India has a strong system for disbursement of education loans through public sector banks, with roughly INR 20,000 crore budgeted per annum. However, fact remains that most of these loans are granted for professional courses (MBAs) and overall, less than 3% of Indian students fund their studies using student loans as opposed to more than 75% in countries like the US and UK.

Private banks perceive more risks for educational loans with respect to repayment and collections. (It is not unsurprising to see the names of some prominent business leaders on the defaulters list in the post offices of premier institutes in the country!) An effective operational mechanism could involve banks, schools and companies whereby loan repayments are deducted from salaries and employees with student loans can be ‘tracked’ as they move companies. This could help in reducing risks for banks and ensuring a smooth flow of funds for education, thus mitigating the ugly after-effects of a price rise for private education in a market regime.

Glass Half Full…

Obviously there is a bright side to the whole story. The demand for quality workforce – sales people, general managers, trained professionals, agents, workmen in sectors like financial services, hospitality, retailing, construction has thrown open a host of business opportunities for pragmatic entrepreneurs.

The most promising and obvious one is the area of vocational training – for a host of skills that were previously in the unorganized domain. From English language training to retail and hospitality executives to professionals in insurance, nursing and beauty, workmen for construction, there is a vast opportunity for dedicated training centres that can establish scale across Tier-I and Tier-II cities and across disciplines.

To this extent, the NSDC (National Skills Development Corporation), a Public-Private Partnership (PPP) Enterprise launched last year, is intended to foster private sector industries to encourage skill training in 21 high growth sectors and has been mandated to skill 150 million people by the year 2022. Besides the Ministry of Finance, many prominent industry bodies have contributed to the initial INR 1000 crore capital of this 51:49 venture between the private sector and the government, with a targeted corpus of INR 15,000 crore over the coming years.

A ‘market mechanism’ for bypassing shoddy institutional accreditation procedures is the evolution of credible online platforms that provide information on educational institutes, their quality, previous employment record and a parallel ranking mechanism based on in-house research and meaningful surveys. Such platforms could go some way in providing transparency, which could reduce (what economists term as) adverse selection failure and lead to low quality institutions being ‘priced out’ of the market.

Also, a growing number of new quality institutes are beginning to by-pass the AICTE altogether and can thus aim to provide world-class education in an Indian setting at a higher price. The parallel evolution of serious educationalists and thought leaders in taking such bold steps and of internet entrepreneurs in setting up platforms that can disseminate credible information at relatively low costs, could together provide enough impetus for a parallel education system, high on quality and with freedom to adopt to market demands of education.

Another interesting approach to address skills gap is to work with temporary staffing solutions. Though it is not a new phenomenon globally, it is a relatively new concept in India and with more and more MNCs starting operations, the trend is growing rapidly. Temporary staffing brings with it advantages of scale, ‘outsourced training’ and of candidates trained in successfully executing specific functions. An upbeat Manish Sabharwal, co-founder of India’s largest staffing solutions company, TeamLease Services, elaborates “It is important to remember that there is no business model right now for employers to manufacture their own employees. More than 60% of our employees have gone onto permanent jobs within a year with the improved employability that comes with experience.”

Over the last decade, an increasing number of companies have also begun to work closely with educational institutions in curriculum development, industry-student interaction sessions and in some cases, funding for infrastructure and research. As Dr. Ritu Anand, VP & Deputy Head, Global HR, at IT giant TCS says “We work closely with institutes from where we recruit to conduct student development programs and faculty development workshops. This helps us align education with industry needs and enhance the suitability of the talent pool.”

Aquil Busrai, Executive Director Human Resources, IBM, took us through the entire gamut of IBM’s collaboration with schools and colleges. The company today provides mentoring, consulting, financial and technological assistance to a wide range of educational institutions across the country — ranging from small municipal schools to premier institutes like the IITs.

In the end, however, no solution would work to its fullest potential without the active involvement of the government. Companies can help alleviate some of the problems by increasing spending on training and working more closely with schools. But when it comes to adding 50 million more quality people to the workforce, the results of these well-intentioned, but disparate efforts will just not add up.

There is hope based on renewed vigour with which the new HRD Ministry has gone about attending to some of the major systemic and structural problems facing us in higher technical education. Unless this surge in activity leads to concrete policies that break from the current bureaucratic and policy mess, the Indian economy stands to lose hundreds of billions in terms of GDP and much more in terms of social costs as a result of this massive talent crunch that we face.
Institutional apathy, it seems, is all that stands between the people of India and their true potential.

 

Topics: Skilling, C-Suite

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