Building The Other Supply Chain - Made of People
It is clear that combining our economic model with a decentralized democracy will ensure that India's geography of work and skills will be much less clustered than China
Companies that aim to build differentiated sales and service people supply chains will align their entire ecosystems to target employee productivity
Building a people supply chain for sales and customer service is a strategic differentiator for companies targeting India’s domestic consumption
Most people recognize that there is a huge difference between a list of ingredi-ents and a recipe. While the list of possible ingredients that reduce a country’s poverty is large, India and China seem to be adopting very different recipes. China decided in the 1980s – with huge but unacknowledged inspiration from the World Bank – that the best way to reduce poverty was by manufacturing goods for export. This decision not only led to a huge clustering of people (China has 174 cities with more than a million people) but also a huge clustering of skills in low-skill manufacturing (45% of its labour force works in manufacturing relative to India’s 12%). While it’s early to conclude that India’s services and consumption model will lead to poverty reduction, it is clear that combining our economic model with a decentralized democracy will ensure that India’s geography of work and skills will be much less clustered than China. Staffing China’s export engine benefited from the relatively small transition from working on a farm to low-skill manufacturing. But companies who want to serve to India’s geographically dispersed consumers will have to struggle with huge people challenges in putting together geographically dispersed sales and services workforces. Businesses focused on domestic consumption in India will soon emerge as our biggest employers; BFSI, healthcare, consumer durables, consumer goods, pharmaceuticals, retail, telecom, education, engineering, and infrastructure.
We make the case that these domestic consumption companies, irrespective of industry, will be fishing in the same pond for talent and need to craft thoughtful and sustainable human capital strategies. An important speed limit on growth for these companies is their ability to build national sales and service organizations that balance the impossible trinity of cost, quality and scale. Many companies seem to accept the notion of no choice but lowering standards in the selection, training, and retention of their “sub-fifteen thousand rupees per month” employee base. This is not only dangerous – they risk outsourcing their destiny – but also wrong because many thoughtful domestic consumption companies are starting to create efficient, effective and sustainable solutions for staffing by taking a holistic view of the traditionally separate components of hiring, hygiene and productivity.
Companies that aim to build differentiated sales and service people supply chains will align their entire ecosystems to target employee productivity. But this is easier said than done; productivity is horribly difficult to measure. Companies with any real ambition to target India’s domestic consumption will have to get feet-on-ground in over 800 cities and towns. This is impossible to do solely with internal capabilities and requires working with partners. The current skill system in the public sector delivers uneven quality and it is hard – if not impossible – to sustain a completely employer paid training solution. The situation is further complicated by archaic labour laws and increasing divergence among states around minimum wages, shops and establishment acts, et al. So any people supply chain will have to deliver and align seven prime components: Assessment, sourcing strategies, training financing and delivering, temporary staffing, outsourcing and high importance of performance management processes.
Doing business in India requires companies to substitute for the state in many ways; generating power, providing transport and security, et al. Often this hardware has been a source of competitive advantage. But as the corporate landscape matures, companies realize that their true equity does not sit on their balance sheet but goes home every night. So, the sources of competitive advantage are shifting from hardware like machinery or distribution access – low hanging fruit that money can buy – to human capital. This creates an interesting challenge and opportunity for domestic consumption companies because India is too big and the million negotiations of democracy too slow for them to wait for public policy to fix the people supply chain.
The productive capabilities of a country are not like oil - which will run out - but like wind power which is potentially infinite. Similarly, individual capabilities are not like shoe size or height – which are cannot be changed– but like muscles which can be developed by working out. This supply chain view of a country or individual capabilities is not only an optimistic view of life – a better way to live your life or build a company in our view - but also a happy congruence of doing well by doing good. In fact, the companies that win will be those that act decisively, swiftly and boldly about their staffing. If strategy is defined as the art of creating an unfair advantage – a gun in the knife fight – it is clear that companies, who creatively create, configure and catalyze their people supply chains in India will create an advantage that is hard to replicate. Any takers?
7 PRIME COMPONENTS:
People Supply Chain
This implies effective binning of candidates and employees with identification of capabilities and potential. Traditional assessments have had the predictive efficacy of palm reading or astrology but many companies are making substantial investments in functional, industry and company assessment centers that find - or imply - better fits. Companies who win will also ensure that assessment is not episodic but a structured and formal process that continues through the employee lifecycle.
Companies with effective sourcing strategies for national sales and service organizations answer the difficult “what” before the obvious “how.” Difficult questions and trade-offs include fresher’s vs. experienced, trained vs. non-trained, lineup vs. filtered, nice to have vs. must have skills, et al. The unevenness of hiring standards across line managers of the same company currently accepted in the name of “long rope” has to stop because many use this long rope to go bungee jumping. Companies need to recognize fully loaded hiring costs, diversify sources and ensure effective on-boarding and induction.
It is now clear that companies cannot afford the complete training of every candidate they hire. India’s skill crisis means most candidates need some company, industry, or functional training. Finding creative ways to pay for this training – apprenticeships, tenure based reimbursements, government refinancing, credible certifications, et al – are important elements in finding non-traditional resources.
Domestic consumption companies have sales and service workforces that are too dispersed to get all employees to one location without being economically stupid. But delivering this training creatively – Para-skilled trainers, satellite delivery, e-learning, et al – is crucial to cost-effectively meeting learning objectives at scale. Repair programs for new employees must be complemented by upgrade or certification programs for existing employees delivered over the same infrastructure.
Employees – particularly those in the target group of sub-fifteen thousand salary - no longer view employment as a parent-child relationship that will last a lifetime but a taxicab relationship that is short and intimate. The ideal structure allows both sides to take each other a test drive. Companies never hire people to fire them but they obviously need a judicious mix of temporary staffing, permanent hiring, apprenticeships, consulting, outsourcing, et al, to balance flexibility with continuity.
Salary, Benefits and Compliance Hygiene
Many domestic consumption firms outsource the plumbing of salary and benefits for their sales or service force to their dealers. But wage transmission losses, compliance, benefit deduction but no deposit, et al, are common and the most cited reasons for the high employee turnover. So putting hygiene like Service Level agreements, multi-modal self-service (call centre, email or web), SMS communication, et al are important infrastructure that complements the more glamorous components of the chain.
Companies that do not hold their bad performers accountable and, on the contrary, punish their good performers are bound to lose on to good talent. Performance management systems like automated attendance, sales reporting, customer feedback, et al are often viewed as important inputs of fixed and variable compensation management. But their most important application lies in increasing the learning and self-healing abilities of supply chain components like assessment, training delivery and financing, and sourcing.
Manish Sabharwal & Ashish Prasad are Chairman, Teamlease Services and CEO, IIJT Education respectively