Good companies do not go in for layoffs

Mathematics often finds applications in the oddest of places, as do mathematicians. Ten years ago, it was a mathematics major that the Watson Wyatt board chose as CEO and since then John Haley has steered the 130-year old firm with a strong actuarial lineage into a $1.8 billion consulting major with expertise in human capital and financial management.

The journey has taken it public, with a NYSE listing in 2000, a pioneering step in the consulting world. Today, the firm’s market capitalisation is close to $ 2.5 billion, and it has a presence in more than 35 countries with more than 50% of its revenues coming from outside US. The next level of growth will come from emerging economies and in line they are investing heavily in both India and China.

Having spent 30 years in the business, Haley has seen HR evolve from a side-show into a key function that’s of utmost importance in any CEO agenda and in the process he has gained deep insights into the function. The transformation of HR, India and China, and CEO compensation. and some key points are listed below:

It is often said that if the 1990s belonged to IT, this is the decade of HR. But there are a set of people who say HR is dead with many functions being outsourced, automated, or taken over by other functions. But others claim HR is more important that ever before so ‘Long Live HR’. What can be considered?

Any business, the HR people will be there to make sure that people were paid on time, etc. They were all handling the relatively unimportant parts, taking care of the sanitary things. No major company would have the head of HR as part of the inner circle at the top. What has happened since then is a lot of these functions have been made mechanical. Companies have put up processing centers to handle them or have outsourced.

That has freed up the head of HR to think strategically. They have got the freedom to mull on the next generation of leaders, the freedom to think about where to locate operations to attract the right kind of people. Nowadays, the head of HR is expected to be somebody who has quantitative skills. It is now common to see the head of HR as part of the inner circle of companies. The best leaders understand that globalisation and technology are amplifiers of small advantages in HR.

Many companies resort to lay-off plans while changing gear and the implications or inferences can be,

Progressing companies take a long-term view and most of them have good people but they don’t fire them just because the companies go through hard times. That is when they hire from competition. Companies that lay off people during down turn, normally under perform during good times.

Market entry is an interesting subject. When A CEO must look around at the places where they are strong and at places where they are not as big. In the case of a company they found that in the latter case, we were not there early. It is dangerous to let the market grow for ten years and let competitors be there and not be in it. It is relatively easier for some because they source resources from all around the world. The firm has local people working on all their projects and can’t afford to allow competitors to get ahead of them.

That’s one of the problems in markets with a lot of intense competition for talent. If you hire good people, they have lots of options and high mobility. Good companies prefer to have a bit of more stability in case of their talent.

The similarities between the Indian and Chinese markets is the size is an obvious similarity. But the demographics of the two countries are somewhat different. After 2014, the size of the Chinese workforce will actually be declining. Even though both countries have a lot of people, the demographic outlook is different. The Indian workforce will continue to increase for a long time now. On the other hand, the percentage of skilled workers in India has been growing lower than it has in China. By 2020, China will have the most skilled workers in the world and US will be second. But India will be behind both.

Clients have become more strategic and they now look for more sophisticated solutions. Good firms like smart clients. Over the years, the turnaround time has changed. Nowadays, people expect you to email solutions in a couple of hours. Now companies are expecting you to get expertise from around the world. In all this, technology is acting as the big amplifier.

A lot of people complain about the value of pay packages at the time of granting of options. Here you don’t see much link between pay and performance. Two, a lot of horror stories revolve around severance issues. Companies have to be careful when it comes to severance plans.

Complexity is good for consulting firms. It obliges clients turn to specialists. It makes projects fun and you can attract better people because you are offering them better careers.