Manage the slowdown as it unfolds

Mr.B, whose firm is involved in board and senior level appointments only, says many companies are looking for candidates who will not only drive growth in the long term but also be able to manage the slowdown as it unfolds. The earlier focus was on growth, growth and more growth. It is a subtle shift in thinking when it comes to leadership hiring.
There are, however, many who say that some of the pessimism is no more than a knee-jerk emotion. There is uncertainty and there is possibly some pain still left for Indian companies, but things are not so bad. The consumer durables company is doing quite well and has kept its hiring plans on schedule. It has recruited 90-95 candidates from the country’s B-schools this year, which is the same as in the past few years.
The salary increments (which LG gives in January) will also be maintained at last year’s average level of 15 to 16 per cent. It is nothing but panic reaction to a problem that does not exist that much in India. LG grew 60 per cent last month year-on-year, and expects to grow 40 per cent this month. For LG’s employees, nothing has changed and they believe if you have been stable with your policies and not in¬dulged in irrational exuberance, things are fine with you.
In 1997 when LG India’s Korean parent was in deep trouble following the East Asian economic crisis, many thought the company would put off its India entry plans, but it stuck to its original plans and look where they are today. A recent Harvard Business Review study says companies usually tend to stop recruitments, and slash promotion budgets and expansion plans during a slowdown, but that is a horrible strategy. Great companies should use the opportunity to ramp up presence at a time when real estate costs are low and decent manpower available at a reasonable cost.
The CEO of Aditya Birla Group’s Financial Services, says this is a good time to build businesses to tap the huge long-term potential. When businesses are built with a long-term view, they should be less concerned about the short-term impacts. The basic growth rate in India, the high savings rate and low penetration of financial products suggest there is a huge yet-to-be-tapped opportunity. The company has been expanding and beefing up its manpower. To that end, it has just acquired a brokerage firm.
There are many others who have read the tea leaves and taken early steps to meet the challenge. Take ICICI Bank. After years of heady growth, India’s largest private sector bank had decided to go slow in extending retail loans. As a result, operating expenses were flat at Rs 532 crore in the first quarter of this financial year.
The bank was the first to announce in April that it would skip annual rituals like promotions and large-scale bonus payouts this year. The consensus at that time was that ICICI Bank was being foolish as the talent shortage and emergence of new job opportunities would trigger an exodus from the bank. The bank’s move also went against the projections of all leading global consultancies that Indian employees would bag the biggest global salary increases this year an average of 15 per cent. ICICI Bank however went ahead and gave a moderate 8 per cent increase in salaries (11 per cent last year), skipped promotions, and slashed bonus payouts.
ICICI’s group head of human resources, says sound economic logic was behind the decision. For a bank with a large retail portfolio, the thumb rule is that operating expenses can not exceed 45 per cent of total revenues if the bank has to deliver profitability. And a third of that 15 per cent should be the wage cost.