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HRM Issues in Indian Organizations

HRM Project

Submitted to: Mrs. Tarannum Ahmad

Submitted by:
Nishant Bhati 15101

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Acknowledgement 3
Introduction 4
Problem Statement 5
Research Methodology 6
HR Issues and Challenges in Indian Industry 13
Strategies to deal with HR Challenges 18
Conclusion 20

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The report and analysis details which are being presented here are a fruitful
effort of many unseen hands that had continuously been a guiding force in
all conditions.

I, Nishant Bhati student of BMS 2C of SSCBS express my deep sense of

gratitude and we would like to thank Shaheed Sukhdev College of
Business Studies, University of Delhi, for giving us the opportunity of
working on this project and giving us the required knowledge in the field of
Human Resource Management during the fourth semester of our college.

We would like to express profound gratitude to our teacher and mentor,

Mrs. Tarannum Ahmad, for her invaluable support, encouragement,
supervision and useful suggestions throughout this project work. Her moral
support and continuous guidance enabled us to complete our work

Nishant Bhati Mrs. Tarannum Ahmad

(15101, BMS 2C) (Professor, DU)

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India, the worlds largest democracy and home to one billion people, is rapidly
emerging as a software powerhouse in the global IT arena and has come to be
regarded by developing countries the world over as a model for how they can
leapfrog stages of industrial development [1]. According to the National
Association of Software and Services Companies (NASSCOM), from 1995 to 2000,
the Indian software industry recorded a compounded annual growth rate of around
42% whereas its exports grew at a staggering 62.3%. The revenues earned by the
Indian IT industry have grown from US$1.73 billion in 1994-95 to US$13.5 billion in
2001-02. The NASSCOM-McKinsey study estimates that the revenues will reach
US$87 billion by 2008, of which software services exports will account for a lions
share of US$50 billion or 35% of Indias total exports.
According to NASSCOM, nearly two-thirds of the revenue of the Indian software
industry is from exports, with a much smaller domestic market. While more than
1250 companies are engaged in software services exports, the top 25 of them
accounted for nearly 60% of revenues in 2000-2001. Their major export markets
are the USA (62%) and Europe (24%). More than 185 of the Fortune 500 companies
have outsourced their software requirements to Indian software houses. Some of
the major factors contributing to the rapid growth of the Indian software services
industry include, reportedly the worlds second largest pool of English-speaking
scientific and technical professionals, low cost of labour, Indian diaspora in the USA,
familiarity with western business systems, and increasing government support in
terms of infrastructure development, simplified procedures and manpower
development. Currently, Indian software exports consist largely of low-end
software development services.
However, the leading Indian firms are making strong efforts to move up the value
chain by acquiring better software management capability and deeper knowledge
of business domains, and reducing costs and improving quality by developing
superior methodologies and tools [2]. They are also trying to reduce their
dependency on the US market by expanding their market base to include Europe,
Japan and Australasia.

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Problem Statement

This paper explores the burgeoning Indian software services industry by focusing
on one of its critical challenges: human resource management. Using in-depth
interviews of various stakeholders from a representative range of Indian software
services organizations, the authors investigate characteristics of Indian software
professionals and some of the key human-resource related issues and challenges
in the industry; namely, voluntary attrition, reluctance to make a transition from
technical to management positions, lack of managerial skills, difficulties with
teamwork, work preferences and maintaining work-family balance. Finally,
organizational strategies to effectively manage and motivate software
professionals, such as moving up the value chain, creating learning opportunities,
bifurcated career path, facilitating wealth generation and conducive work
environment are explored.

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Research Methodology

Following research methodology was adopted for the accomplishment of the

assigned objectives.

Data Sources

Secondary Data: The secondary data were collected from the internet and books.
Primary data was collected from various HRM officers by conducting an online
survey using a Questionnaire. The data were collected for getting first-hand
information regarding the study of consumer behavior for purchase/consumption
of biscuits keeping the tastes of consumers and possibility of a new entrant as a
major consideration.

Area of study

Region under study will be urban & semi-urban areas. Pilot testing will be first done
on Delhi & NCR.

Sampling plan

Sampling Technique: Convenience Sampling is used in the research due to its quick
and inexpensive nature.

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State of Human Resources in India

According to NASSCOMs strategic review for 2001:

The number of Indian IT professionals has grown from an insignificant base of 6,800
in 1985-86 to 522,000 in March, 2002. 410,000 work in the software and services sector,
of which around 150,000 are in the exports segment. Their median age is 25 years and
nearly 80% of them are men. Thirty-seven per cent of them possess around five years
of work experience. Their attrition rate generally hovers around 15%. The annual
average compensation increase in their base salary in the last five years has been around
20%. Employers seem to be highly satisfied with the quality of software professionals as
they rate them above 9 on a scale of 1 to 10.

Since the IT industry is human resource intensive, its performance and global
positioning are heavily dependent on the ability to balance the demand for and
supply of IT professionals. In fact, the first window of opportunity for the Indian
software exports industry was to fill up the acute shortage of IT personnel in the
USA. Now, other countries, such as the UK, Japan, Germany, Singapore and Italy
have started their recruitment drive for Indian software professionals with fast-
track visa processing and other incentives. In the process, the Indian IT industry has
been suffering a brain drain as most of the Indian software professionals who go to
USA on H1B permits apply for a Green Card and opt to settle there permanently.
Many studies point out the shortage of IT personnel in India.

India reportedly has 2.5 million scientists and engineers with around 150,000
freshers being added every year. According to the Nasscom-McKinsey report 1999,

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India will require a minimum of 2.2 million IT professionals by 2008, excluding the
demand for another million by other countries. With the available pool fast
depleting with local and international demand, the future of the Indian IT industry
largely hinges on how it deals with the shortage and how it trains the professionals
in acquiring domain expertise. While there is a strong technical labor pool, there is
a shortage of middle-level systems analysis and project management skills.
NASSCOMs strategic review points out that the problem is more in terms of quality
than quantity.

While so far, the Indian software industry has enjoyed the low labor cost
advantage, estimated at being between 33% to 50% of the corresponding costs for
US counterparts, the industry can no longer rely on this temporary advantage as
new competitors are fast emerging. Spiraling salary costs that have been rising at
20% per annum have further eroded the cost advantage. Having realized that the
only sustainable competitive advantage in the long term is the quality and learning
mindset of its employees, the Indian IT industry is moving upwards of the value
chain and fostering the principles of learning organizations. To further harness
Indias advantage in the supply of IT professionals, it is imperative that there is a
concerted effort by the software organizations, universities, corporate and private
training centers and the government agencies to actively collaborate with each
other and contribute towards the development of human capital for sustaining and
strengthening the present growth rate.

The software industry is knowledge intensive. Since knowledge, particularly, tacit

knowledge, resides in individuals, they are the bedrock of a software companys

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future and are its most precious assets. However, these assets cannot be controlled
within physical boundaries and confined to commercial contracts of the
organizations walk away from the gates of the organization every day and to make
them come back and share their intellectual capital, organizations must find ways
to engage their hearts, minds and souls in fulfilling organizational goals.

Thus, any knowledge-intensive organization has to keep human resource

management at the core of its strategy to enable it to recruit and retain the best
and the brightest talent. This requires a close examination of the human resource
issues and challenges so that appropriate strategies can be developed and
deployed. Accordingly, this research is aimed at identifying and exploring key
human resource issues and challenges faced by the Indian software services
industry and reviewing successful strategies adopted by some of the key players.

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Characteristics of Indian Software

Studies have revealed that Indian software professionals exhibit the following
occupational characteristics:
Having invested heavily in gaining relevant knowledge over time, the
knowledge acquired by them becomes their self-concept.
They seek new knowledge on a continuous basis to experience a sense of
growth in their careers. Hence, they seek to work on new technologies, new
platforms and with new organisations to enrich their learning and career
prospects. They place their professional growth higher than organisational
They tend to be highly analytical and expect a clear rationale in everything
they do or the organisation does.
They tend to be high achievers and expect periodical and tangible feedback
and rewards. They value performance-based rewards. Equity is an important
consideration for them in reward management.
They value autonomy, professionalism and innovativeness.

Software professionals typically exhibit characteristics attributed to scientific and

professional employees in that they perform work that is intellectual in nature and
requires advance education; they need to be self-disciplined and achievement-
oriented; they prefer considerable autonomy and that they tend to be

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cosmopolitan rather than local.

According to Peterson, as an occupational group, IT personnel exhibit certain

distinguishing traits, namely, youth, mobility, short tenure, intenseness,
adaptability to change, craftsman approach to work with a unique mix of
product/service orientation, sensitivity to work (as they see their output as an
extension of their personality) isolation and aloofness in relating to and dealing
with overall organizational environments, and association with absolutes with a
black and white approach to problem solving. As knowledge workers, they are
more loyal to their profession than the organization they work for. Considering the
global nature of the IT industry and technology, Indians are no different from others
as far as common occupational traits are concerned.

However, they also show some unique characteristics, particularly in the light of
the high cultural context of Indian society. Our study found that managing multiple
expectations is one such culture-based characteristic of Indian software
professionals. Apart from organizational expectations of working on any project
or technology as required by customers and self-expectations of technical
excellence and tangible and immediate rewards, Indian software professionals
need to manage expectations of peers and family members. Peers discuss, often
in exaggerated terms, how they are working on the latest technology and receive
substantial wage increases, particularly overseas offers.

Parents and family members of software professionals are influenced by the media
hype of the prospects of the Indian software industry and exert pressure on them

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to go for positions that offer big money, overseas trips etc. Settling abroad is
considered a status symbol in Indian society. These multiple pulls and pressures
create immense confusion in the minds of Indian software professionals and tempt
them to go for short-term gains, often at the cost of the technical excellence to be
gained by staying on in one position or organization for a sufficiently long period.
Multiple expectations create several HRM-related problems.

When being interviewed for a position, software professionals state that learning
is their most important objective. However, when being allocated for different
projects and locations, they lobby for positions that are seen as high potential by
their peers, family members etc. Due to exaggerated expectations, many of them
get disillusioned with salary increases and promotions and express their frustration
by resigning from their jobs. As mentioned by a senior manager:

Even though software professionals are no superior in their intellectual caliber to

other occupational groups, booming global demand has made them arrogant and
they expect to be treated like demi-Gods.

However, anecdotal evidence from HR managers suggests that the crash of dot-
coms and the current recession seem to have brought down these expectations to
realistic levels. It needs to be noted that Indian society is new to boom and bust
economic cycles and it will take some time for Indian software professionals to
manage their employment expectations in a cyclical economy and make
psychological adjustments to issues and problems associated with cyclical
unemployment or under-employment.

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HR Issues and Challenges in Indian Industry

1) Voluntary Attrition

Global demand for Indian software professionals has resulted in a heavy turnover
and spiraling salary costs for the Indian software services industry. As a result, there
are as many of them abroad as there are in India. The majority of Indian software
professionals aspire and tend to migrate overseas permanently once they acquire
about three years experience making it difficult for software organizations to staff
and particularly, lead projects. The shortage has created a vacuum in project
management skills and many US clients consider this missing middle layer as a
barrier to the growth of the Indian software services industry. While there is no
dearth of fresh engineering graduates aspiring to enter the software industry,
employers have to spend considerable time, money and effort to train them to suit
their needs only to lose them a few years later.

2) Give me the title not the job: reluctance for managerial positions

Most software professionals work in project teams and the quality of leadership of
these teams is one of the crucial factors in determining the success of the team. In
information systems (IS) departments, project managers are faced with
increasingly complex tasks that require more than a single set of management
skills. That is why the concept of hybrid managers, combining business, technical
and managerial skills, is gaining prominence.
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However, Indian software services organizations suffer severely from the lack of
quantity and quality of project managers. Our study revealed that the reasons are
many-fold. One reason is that since a considerable number of Indian software
professionals go overseas after acquiring three years or more experience, there is
a dearth of experienced professionals who can take up managerial positions. The
second reason is that software professionals dislike giving up their technical career
for management positions.

However, the HR managers reported that despite their dislike for project
management positions, Indian software professionals aspire for the title. As in
other Asian societies, titles and perks act as status symbols in India.

3) Difficulties with team work

Studies have found that lack of effective teamwork in Indian software services
organizations has its roots in the HR philosophy and processes, particularly in
selection, training and remuneration management. At the time of recruitment and
selection of software professionals, organizations tend to test and value technical
skills much more than soft skills. Considering the rate of technological obsolescence
in the industry, it is important that the selection process needs to emphasize
learning orientation than specific technical knowledge. While the HR managers
interviewed by us admitted that soft skills are equally important, they said that
software managers on the interview panel tend to prefer applicants with
appropriate technical skills so that they could be deployed in projects and start

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contributing straight away. Also, booming business and an inadequate supply of
software professionals meant that HR managers had to hasten the selection
process, often at the cost of selecting people without the right behavioral

The HR managers also revealed that whenever they arranged training programs on
soft-skills, such as inter-personal skills, project leadership, communication skills,
interviewing, performance management and counselling, the senior software
managers and project managers were reluctant to release their team members to
undertake the training and software professionals themselves disliked attending
these courses. Another possible reason for the lack of enthusiasm for teamwork
amongst Indian software professionals is that while most of the work is done in
teams, performance assessment and reward management still center around
individual contribution and that as judged by the immediate superior. Many Indian
software organizations have now introduced 360-degree performance assessment
but they are predominantly for self-development and not for determining rewards.

Many software professionals covered in our study expressed their reservations

about 360-degree performance feedback as in their view lot of maturity is required
on the part of the appraiser as well as the appraise to provide and receive feedback
in the right spirit. Further, team rewards are few and far between. Despite the
problems associated with teamwork, many software professionals in our study
clearly recognized the need for team structure in software organizations,
particularly in developing knowledge together and sharing the same with team

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5) Work preferences

Even though many Indian software services organizations are slowly but steadily
moving up the value chain, a considerable number of them still derive a substantial
portion of their revenue by servicing proprietary language and legacy systems and
outdated technologies. This programming experience may be of little value in the
outside IT market and software professionals feel nervous about its implications for
their career growth and prospects. Obviously, software professionals who are keen
to learn new technologies on new platforms for new-economy applications are
extremely reluctant to work on projects using old technology.

Currently, Indian software organizations derive most of their income from North
America. In recent times, due to recession and competition, these organizations
have increasingly sought new business opportunities in Europe, Japan and
Australia. However, software professionals prefer to work in the USA as it is
perceived to be their ultimate destination and is considered to be the industry
leader in terms of remuneration and opportunities to work on emerging
technologies. Further, they are relatively more familiar with the language and
culture in the USA compared to countries such as Germany and Japan. Due to these
perceived biases, Indian software services organizations find it difficult to bridge
the gap between organizational requirements and individual preferences.

6) Maintaining Work-Family Balance

Software development is mentally challenging. When they are engrossed in work,

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software professionals lose track of time and would prefer to continue working
rather than interrupting their mental process. They thrive and look forward to
intellectually challenging problems. Coupled with this occupational characteristic,
they also need to meet tight deadlines, often unrealistically agreed to by marketing
managers to win a contract. It is common for Indian software professionals to
spend 12 to 14 hours a day working on projects. Combined with inefficient
transport and other infrastructure, they tend to spend very little time with the

Over time, they tend to merge their personal identity with their role identity. The
vacuum created by lack of non-work life activities apart from work leads to
emptiness within and annoyance with the organization. Many software
professionals covered by the study observed that spending long hours at work is
the result of a combination of organizational reasons, such as unrealistic project
time estimation and poor project planning, as well as personal reasons, such as
poor time management skills, unproductive web surfing, internet chatting, playing
computer games, personal e-mail exchanges and the preference of young
professionals who choose to socialize more with peers by being at the office longer
than required. Some respondents also pointed out that while most organizations
in principle discourage over work, star performers who typically over work get
handsome rewards.

Even though no specific studies have been conducted, anecdotal evidence suggests
that burnout, stress and other health hazards are increasingly becoming important
employment issues affecting the industry.

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Strategies to deal with HR Issues and

1) Moving up the value chain

Moving up the value chain requires organizations to develop capabilities and

competencies to understand the business strategies of client organizations, to
define business solutions and then provide software support in terms of design and
development of technical architecture and programming codes. Accordingly, many
Indian software organizations have been recruiting business management
graduates who work with clients to understand their business strategies and design
business solutions. Software professionals support these projects by designing
technical architecture and programming. Skills and competencies required to work
on different segments of the value chain are different. Professionals working on
higher segments of the value chain are expected to have superior levels of software
knowledge and domain knowledge, and are naturally, paid more.

2) Creating learning opportunities

Moving up the value chain is a powerful way of creating learning opportunities. In

addition, Indian software organizations are investing substantial amounts of time
and resources to help their organizational members to learn what they value and

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what is relevant for the organizations. Some of these learning-oriented initiatives
are described below: Many software organizations spend about 5% of their HR
budget on training. In the recent Business Today, Hewitts study of the 25 best
employers in India for 2001, ten of them were from the IT industry and between
them, they offered an average of 48 hours of training/year to their employees. The
workplaces of many organizations resemble a campus-like learning atmosphere in
huge self-contained townships with environment friendly facilities, informal
meetings on the lawn or in the cafeteria, well equipped library buildings,
information-rich intranets, regular work and hobby related workshops and
activities, town hall meetings with top management etc. In these organizations, the
work environment is informal, the work ethic is meritocracy based and
remuneration is performance based at the individual, team and organizational

3) Facilitating Wealth Generation

Many Indian software organizations have realized that one of the keys to retaining
software professionals is to enable them to generate wealth for themselves. This
fits in with the expectation of software professionals for tangible rewards and
entrepreneurial ambitions. Increasingly, Indian as well as multinational
corporations operating in India use employee stock option schemes (ESOPs) to
share wealth with their employees. Indian organizations also use notional shares,
having a lock-in period of two years. The difference in value of shares at the end of
the locking period is paid to employees. Many Indian organizations are providing
encouragement, and venture capital to their employees to become entrepreneurs.

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Indian software services organizations have come a long way in just few years and
are poised to continue their spectacular growth in the near future. They operate in
a knowledge-intense industry where knowledge workers hold the key to their
future and therefore, successful HRM philosophy and systems are critical success
factors for their survival and growth. In their short history, they have had to learn
the ropes fairly quickly and break away from the traditional Indian management
philosophy and systems rooted in an inefficient, unproductive and bureaucratized
environment, to become part of a globalized, technology-intensive and highly
competitive industry. They have faced daunting human resource related challenges
in the process, from recruitment to retainment, compensation to career planning
and technological obsolescence to turnover. Considering that the Indian software
industry is relatively new and that very little research has been done on managing
knowledge workers in the industry, the key HR issues and challenges discussed here
are exploratory in their scope and nature.

They have important implications not only for Indian-owned software

organizations but also for IT-related MNCs operating in India and other
organizations around the world, which are increasingly outsourcing their IT
activities to India. However, future research on the topic needs to be more broad-
based and longitudinal to unearth the key variables and incorporate differences in
organizational size, ownership pattern, organizational culture, length of work

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experience of software professionals etc. to make a more meaningful contribution.
Many key strategies discussed here are more suitable for large organizations.
Future studies should incorporate best practices applicable to different sectors of
the industry, including companies that cater to domestic industry as well as IT
departments of non-IT companies.

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