What Worries India’s CEOs?

By Roy Maurer Aug 12, 2013

Indian CEOs are optimistic about economic prospects even though the Indian economy is growing at the slowest rate in a decade. However, they are troubled by several things, according to the PricewaterhouseCoopers (PwC) 16th Annual CEO Survey.

As India settles into slower economic growth, 38 percent of the CEOs surveyed were positive that the global economy would improve in the next 12 months. In contrast, only 18 percent of their global counterparts expressed that confidence.

Like other company leaders around the world, Indian CEOs are concerned about the increasing tax burden, talent recruitment and retention, and energy costs; but certain worries—such as infrastructure inadequacy, other nations’ protectionist tendencies, bribery and corruption, and exchange-rate volatility—are specific to Indian CEOs, the survey found.

Worrisome Issues

According to the survey findings, the top five concerns specific to Indian CEOs are:

*Lack of talent. Notably, 81 percent of the 73 Indian CEOs surveyed stated that the biggest threat to growth is the unavailability of key skills. “The war for quality talent has intensified, but the focus on hiring at any cost is diminishing,” the PwC survey report said.

*Protectionism. Protectionist tendencies around the world concern 77 percent of India’s CEOs, compared with 51 percent of business leaders globally and 64 percent in China.

Research shows that protectionism has been increasing, including in foreign direct investment, where screenings of mergers and acquisitions are gradually becoming more frequent, according to PwC.

*Inadequacy of basic infrastructure. Seventy-five percent of Indian CEOs are concerned by this, a sharp uptick from 58 percent in PwC’s 2012 survey. “Between last year’s survey and this year, the severity of India’s infrastructure problems was underlined in the power outage across the country in July 2012, which influenced 600 million people negatively,” the report said.

*Increasing tax burden. An increasing burden of tax compliance is worrying 75 percent of India’s CEOs. On the administrative difficulty of complying with taxes, the World Bank ranks India 147th out of 183 countries.

*Bribery and corruption. Seventy-four percent of Indian CEOs were “extremely concerned” or “somewhat concerned” about bribery and corruption in India, which is far above the global figure of 41 percent. In a recent report, Global Financial Integrity estimated that India suffered a black market money outflow of $123 billion from 2001 to 2010, which places the country at the eighth position in the world.

*Unstable currency. The rupee had a volatile 2012, swinging between 49 and 58 against the dollar. This raised concerns among 74 percent of India’s CEOs.

As part of this year’s survey, PwC presented CEOs with various probable disruptive scenarios. Indian CEOs were far more worried about the potential effect of social unrest and a natural disaster than about a slowdown in China or a breakup of the eurozone. Recession in the U.S. is also a top concern.

Talent Shortage Critical

Consistently around the world, nearly three in four organizations report moderate to great challenges in attracting critical-skill employees, and more than half report difficulty retaining them, according to the 2012-2013 Global Talent Management and Rewards Study conducted by global HR consultancy Towers Watson.

Despite a huge labor market, 92 percent of Indian employers reported challenges in attracting critical-skill employees, compared with the global average of 71 percent. Retaining critical-skill employees also remains a concern, as 86 percent of Indian companies reported retention challenges, compared with the global average of 56 percent.

The survey found some improvement in attracting recent university graduates, but retaining them continues to be difficult. More than half the Indian companies reported challenges in keeping recent graduates, as compared with the global average of 20 percent.

Drivers of Attraction and Retention

According to the Towers Watson study, employees in India value job security over career-advancement opportunities and base pay/salary as attraction drivers. Indian employers ranked career-advancement opportunities and a challenging work environment as the top two attraction drivers.

Workers and employers were more in agreement over retention drivers. Both view base pay and career-advancement opportunities as the key drivers, followed closely by convenience of work location and learning and development opportunities.

India fared better than its regional and global counterparts in providing improved career-advancement opportunities in sync with employees’ top attraction and retention drivers. Sixty-three percent of Indian employers believed that, over the past 12 months, career-advancement opportunities for most employees in their organization had improved, compared with the global and Asia-Pacific averages of 39 percent and 42 percent, respectively.

The Employee Value Proposition Solution

Part of the solution, for companies and workers alike, lies in the articulation and execution of a strategically designed employee value proposition (EVP), said Subeer Bakshi, director of Towers Watson’s talent and rewards practice in India. “A formal EVP and associated total rewards strategy will support the attraction, retention and engagement levels among employees needed to drive business success,” he said.

The EVP is still a relatively new concept for many organizations, according to Bakshi; but research clearly indicates “the return on investment from taking the critical first steps associated with articulating a formal EVP and total rewards strategy,” he said.

“This year’s research highlights that Indian organizations are taking a lead in design and delivery of their total reward promises, with a considerable effort on modifying the programs to suit different generations.”

The survey also found that Indian companies are increasingly adopting workforce segmentation. Eighty-five percent of these companies have adopted formal ways of identifying top talent, while this true of 72 percent of organizations in other nations, according to the survey report.

“Companies are also increasingly segmenting their high-potential employees and identifying employees with critical skills as a part of their talent management programs,” Bakshi said. “As employers endeavor to deliver profitable growth in a period of economic volatility, their focus needs to be on crafting and communicating an EVP that helps to attract and retain employees with critical skills and engage all workers by striking a reasonable balance between employee and employer needs.”

Roy Maurer is an online editor/manager for SHRM.

Follow him at @SHRMRoy

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