The Rising Talent Crunch

If jobs are back can hikes be far behind? And when it comes to chief executives, it is more than salary.

CEOs are now moving from one sector to another more frequently say head hunters and are negotiating more that just salary. Stock options, performance linked incentives, cash inventive, and long term payouts are now discussed more than just basic salary. Sign on bonus amounts are also on the rise. One candidate apparently negotiated and got a sign on bonus of Rs 40 lakh apart from annual compensation of Rs 65 lakh.

The rising talent crunch along with rapid industrial growth in India has led to a sharp increase in the salaries of CEOs.

While the average increase in CEO salaries was about 9% in sectors like power equipment manufactures and pharma companies, salaries rose by 18% said the latest Ma Foi Randstad Compensation trend survey.

The research was conducted among 148 organizations – 76 from manufacturing sector and 72 from the services sector in the last quarter 2010.

In the manufacturing sector the average increase in total compensation for FY 2010-11 was 14%. The highest increase was 18% among the power equipment manufacturers closely followed by the pharma companies. Power particularly has been riding on strong projections of growth.

In the services sector, the average increase in total compensation for FY2010-11 was 12%. The banking financial services and insurance (BFSI) sector leads the pack with the highest increase of 14%.

This year compensations rose steeply because people had been weighed down by the baggage of the economic slowdown. We have seen compensation hikes of 30% to 40%. But then during 2008 and 2009 salaries were being slashed up to 40% and there was certainly no question of annual hike.

CEO compensation scenario will see some sort of stabilization only by next fiscal. However, there will be steady double digit growth in this space given the growth of the economy.

After the last two years of quiet time compensation has been increasing by 14% to 17% with base salary figures being hiked by almost 25%. The top three lucrative sectors for CEOs are BFSI, IT & ITeS and health care / life sciences.

As for MNCs Indian CEOs are no longer poor cousins of their global counterparts be it South East Asia, the US or Europe. Those with global exposure earn as well if not more than their international peers.

As for sectors that ill be most lucrative to CEOs in the years to come, BFSI will continue to be the front runner. Ma Foi Randstad is betting on manufacturing. Through this study we have established that, in the aftermath of recession, there is heightened focus on the manufacturing sector. There is a greater interest generated in this sector as the results of innovations that are made possible in the sector. Also, with the international economic downturn the focus in the services sector has shifted to bottom lines.

If the two sectors are to be compared manufacturing has not only been less adversely affected during the recession but has also seen a growing demand for talent due to Greenfield entrants and brown field expansions.

Besides the service sector has come under intense pressure on margins. These factors together explain why, perhaps for the first time in many years, the manufacturing sector has performed better on compensation increases than the services.