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11 April 2009

Waiting In The Wings

... on a wing and a prayer

Perception, say some. Reality, say others. Recession, say some. Slowdown, say others. A few contradict themselves, moving from one question to another. What they all agree to consensually is that it does affect them. A report on the state of employment of fresh MBAs this year
Surajit Dasgupta

Parents of final year students of IMI waiting for hours on end,
hoping their wards will be placed... somewhere

In the plush lawns of International Management Institute (IMI) Institutional Area, Qutb Institutional Area, New Delhi, this correspondent runs into a bunch of listless students whiling away their time, playing cricket, after the institute failed to place them in any of the corporate houses that turned up for the placement season. That was as of Friday, the 13th, March 2009. “We have placed 62 of our 119 students in the first round of placement,” says Prof CS Venkata Ratnam, Director of the institute, surmising, “We hope to place the rest through our HR programme.” The programme had commenced on 20 January, he informs.

Prof CS Venkata Ratnam, Dir, IMI
Out of all the companies that had visited IMI last year, several did not turn up this year. Conspicuous in their absence were banks and Non-Banking Financial Companies (NBFCs). Those who came recruited less. The average annual CTC the recruiters offered witnessed a 10% dip from last year’s corresponding figure. Prof Ratnam expects the yet-to-be-placed candidates to have to do with a 25% reduction in remuneration offered. Worse, some BPOs that have hired MBAs from IMI are apparently reluctant to issue appointment letters to the candidates. The problem is: the institute is legally not bound to address the issue once the student accepts a placement, howsoever dodgy, and steps out of the campus. And how would the institute know beforehand that some recruiters would act funny once they know that the candidates have no fallback option?

Elaborating on the reasons for the poor show, besides the known worldwide economic condition, the director explains that several expected recruiters did not get a green signal from their headquarters. Further, now they have more choices. “It’s turned from a seller’s market last year into a buyer’s market this year,” he says, explaining that in 2008 they had categorically turned down any company that offered an annual pay package of less than Rs 6 lacs. This year they couldn’t afford to be that choosy.

Prof Meghnath Mukherjee, HR & OB, IMI
But nobody was caught unawares. Prof Meghnath Mukherjee, in-charge of Human Resource and Organisational Behaviour (HR & OB), IMI, informs that beginning September last year, students were being cautioned again and again about the impending critical employment scenario that would unfold when they would be ready to set foot outside the college. “Students were trained through FAQs and HR aspirants were imparted thorough knowledge of company laws,” he says. Prof Ratnam adds, “For the first time we hired professionals for psychological counselling.” Attending those sessions were, of course, voluntary and paid for, not mandatory. IMI had hired Illumenta Inc, a North Carolina-based behavioural training and development enterprise. The strategic alliance was meant to impart advanced behavioural skills to professionals in order to meet up with the new demand of international work culture. How much that helped remains a question though.

Devam Chandra, an IMI grad, placed in FINO
The students with long faces this correspondent came across outside the placement cell could recall no “special” counselling session. Even those who were successfully placed did not sound upbeat. “The media couldn’t quite predict and project the extent of the problem,” opined Devam Chandra, who found employment in Financial Information Network and Operations Private Ltd (FINO), a venture in which ICICI is a major stakeholder. What’s noteworthy, this was his first attempt at securing a job during the current placement drive of the institute. He obviously wouldn’t bear any grudge for IMI. But as he recounts that the average CTC offered this year is Rs 6.5 lacs as against last year’s Rs 8.7 lacs, he shares his worry of repaying an education loan to the tune of Rs 4 lacs through EMIs of Rs 10,000 and argues that it is for this primary concern that there was nothing outlandish about the kind of salaries demanded by his predecessors.

Ashutosh Agrawal (centre), an IMI grad, placed in IMRB
“The scenario worsened right before the placement season began,” says Ashutosh Agrawal, placed in IMRB, owing not only to his diploma from IMI but also to his prior work experience as an IBM systems engineer. On being questioned whether an engineer opting to learn business administration is a loss to the country as there are limited seats available in engineering colleges, Rajiv Kumar takes the call. “It’s the country’s problem that it offers better growth opportunities to a business manager than an engineer.”

Kumar is credited with launching a concept that’s the first of its kind. His firm, Neo Knowledge, is working to enhance the “employability of graduate college students through a multi-pronged approach on the one hand and help the industry identify the ‘employable of tomorrow’ at an early (pre-recruitment) stage”. Through organised events that include seminars on the World Wide Web, he makes candidates meet those who have struck it big in the industry, where the latter mentors the former and picks up the best of the lot as per the respective needs of various corporate houses.

He explains that a company that approaches a B school pays a hefty sum to be there and often ends up with few candidates to choose from, that too based somewhat on the institute’s feedback. Kumar, who has succeeded in bringing together scores of business graduates, management teachers and recruiters onto a single, convenient platform of interaction, co-interviewed the directors of IMI and Indian Institute of Foreign Trade (IIFT) along with the Head, HR, of Dabur India Limited, giving this correspondent an opportunity to witness how his business works. The students he spoke to agreed to be a part of alumnus programmes of the institute, which would in a way help his business if he could get into their forum as a facilitator.

Shailesh Agarwal, an IMI grad, couldn't be placed till 13 March
Interestingly, no student blamed IMI for the sorry state of recruitment this year. Shailesh Agarwal, a BCom and ICFAI graduate who hails from Kolkata, rated IMI students to be at par with those of IIFT and found the teachers of his school better. Whether it sounds like ‘grapes are sour’ is a different question altogether, but Agarwal refused to be cowed down by the inability of his institute to place him (as of 13 March) as he quipped, “I am a Marwari and Marwaris don’t need training in entrepreneurship. It’s in our blood!”

Relying solely on ‘blood’ is, however, not the last resort of every B school candidate frustrated by the inability of the institute to place him. Facing a similar situation, Ankur Maheshwari from IMT, Ghaziabad, has come up with a unique concept in retailing and has struck a deal with Domino’s Pizza India Limited, Aadhar (the retailing division of Godrej & Boyce Manufacturing Company Limited) and Aditya Birla Retail. The retail sector being severely hit by the slowdown does not deter him. He finds Subhiksha’s closure a case of bad debt servicing.

Dr Amit Kapoor, MDI
Agrees management guru Dr Amit Kapoor, Honorary Chairman of Institute for Competitiveness and Professor of Strategy & Industrial Economics at Management Development Institute (MDI), Gurgaon. He does not attribute the aforementioned retail chain’s failure to sustain in the business to the economic downturn. In case of real estate, he found the pricing by “frenzied” contractors — he mentions DLF in particular — till last year overhyped. “This is, therefore, a year of rationalisation,” he says.

Sachinn Garg, student, MDI, looking for a career as a writer;
one title published already
Dr Kapoor has to his credit a student, Sachinn Garg, who has in a way pre-empted the possibility of the slowdown continuing till next year, when he will emerge with an MBA degree from MDI, by authoring a book, A Sunny Shady Life (Srishti Publishers & Distributors). Thinking out of the box, Garg is open to the idea of making a career out of writing as much as he wants to launch a publishing house, applying the skills his MBA degree would enable him with. Garg could find Srishti that was, unlike established publishing houses, keen on giving new authors a chance. Fortunately for Garg, his father, a government servant, welcomes his son’s idea of trying to establish a business of his own rather than looking for a job after the MBA.

Sachinn Garg's book, A Sunny Shady Life
Sitting next to Garg, his mentor Dr Kapoor repeats the question he had thrown at this correspondent two days ago, expecting an obvious answer: “Why do you think a company hires you for ten lakhs?”

“Because it’s scared your talent could one day pose a formidable threat to its business. And the moment you accept being hired, you actually give in to the company’s effort of killing your creative drive.” Dr Kapoor gives the instance of Google. “Had Yahoo foreseen the threat coming from what is now the most popular search engine, it would have bought up Google ten years ago,” he hypothesises.

Dr Kapoor looks upset with the state of B schools till last year that, according to him, had become an “employment exchange of sorts”. There is a tremendous need to “incubate companies”, he opines, a job that had been neglected by management graduates and recruiters alike till now.

Dr Kapoor is optimistic about the Indian economy as he cites the case of Pepsico, which witnessed a growth of 28% last year, in particular, while speaking about the FMCG segment in general. The economy will be buoyed again by “this phenomenal internal consumption”, he thinks.

Covering an array of sectors, Dr Kapoor mentions Jet Airways’ overnight sacking of about 1,100 employees “a gimmick meant to attract government’s attention”. On banking, he believes valuation had gone awry, adding, “The private sector is more cautious now because their cost of funds is remarkably higher than that of nationalised banks,” as the latter can always look up to the government for support, which the former can’t.

Pragya Sinha, Vice President (Northern Zone), Human Resources, HSBC (India), agrees with Dr Kapoor’s analysis in principle. She says banks have had to bear the maximum impact of the worldwide recession. “In assets, we are not looking at growing our portfolios; in liabilities, we have changed the way a client is approached,” says Sinha. Like many other banks in India, HSBC has indeed slashed lending rates after the stimuli offered by the Reserve Bank. However, “there is reluctance to lend as the customers had been overleveraged earlier.”

Pragya Sinha, VP, HR, HSBC
The condition of the economy has affected the bank’s corporate planning as well, Sinha reveals. “Till last year, there used to be an annual plan. Now nobody is ready to predict the scenario of the fourth quarter (of the financial year), for example. We’re taking each quarter as it comes. Everyday is a new day,” states Sinha.

Sinha refuses to share any raw data concerning her employer vis-à-vis the employment scenario in her office but concedes that both lateral hiring and recruiting from campuses went down this year. Mercifully, “we could still offer the remuneration packages that we did last year to all those we hired,” she says. There is no retrenchment in HSBC, she informs. “We don’t believe in downsizing. Can we redeploy rather than fire? That’s the test of good HR personnel,” she says, claiming some credit for the department she heads.

Is the redeployment being witnessed across all sectors? Asim Handa, Country Head, Futurestep, is asked. This placement agency was founded in 1998 as Korn/Ferry International’s scalable, outsourced recruitment subsidiary to specialise in Recruitment Process Outsourcing (RPO) and professional recruitment.

Handa explains, “This year the companies are assessing every candidate’s talent, especially leadership qualities, more keenly. Earlier, the demand for quality workers was high, as it is today, but the supply was low. Now with decreased business activities and, hence, less opportunities that each company is finding itself with, and also due to low attrition for employees’ fear of a bad job market, the employers’ scepticism about workers’ stated claims vis-à-vis proven capabilities has risen.”

He echoes Dr Kapoor’s stand that the emoluments and allowances being paid to employees till 2008 were unrealistically high. Going by the recruitments Futurestep has facilitated, he says the basic industries have not seen any slump. Nor has the insurance sector.

It’s the otherwise grim scenario that Indian Institute of Foreign Trade (IIFT) had successfully predicted much in advance. The institute showed its prudence in appointing a former corporate person as its Corporate and Placement Adviser, Munish Bhargava (ex-Aditya Birla Group). And the result shows. Unlike IMI, IIFT had successfully placed 80% of its 168 candidates when this correspondent met with Bhargava on the same date — 13 March.

“Public Sector Units (PSUs) were the focus this year,” says Bhargava, adding, he had to take into consideration the government sector’s cumbersome protocols for recruitment, for which he contacted them right after Lehman Brothers Inc went bust. “So far, management institutions were not looking at PSUs; the students too used to turn down the few offers that came from government undertakings. As a result, the sector lacked go-getters in their ranks. Now that the employment scene is bad in the corporate sector, the students are looking for more security in their jobs. So, it’s a win-win situation for both.” Among others, GAIL, SAIL and BHEL have recruited from IIFT this year.

Munish Bhargava, Corporate & Placement Adviser, IIFT
A major section of the private companies that turned up during the placement season were those dealing in logistics, those trading carbon credits and those manufacturing farming products and rendering allied services, the three sections not affected by the slowdown. While banks had taken away 38% of IIFT’s graduates last year, this year the corresponding figure is 15%. Bhargava thinks a kind of uniformity with respect to sector-specific recruitment would emerge at the end of the placement season. Notably, placement had finished in a single day last year while this year it’s a “rolling process”.

“Counselling students — a part of which was preparing them for a possible employment crisis — was a normal part of the curriculum, based on the prevailing market scenario at a given point of time. There were no special or extra sessions conducted for the purpose,” informs Bhargava. To be safe, IIFT contacted a larger number of potential recruiters this time.

On salaries, Bhargava tells this correspondent that the average package offered by recruiters to candidates from IIFT last year was between Rs 10 lacs and Rs 11 lacs. “This year, so far, the average is in the range of Rs 8 lacs and Rs 9 lacs,” he informs.

There is one factor that still makes it appear an employee is in the driver’s seat, points out Bhargava: Recruiters who offered slashed CTCs to MBAs this year now fear that once the economy looks up again, these candidates will leave for better paid jobs in hordes.

Bhargava had started hard-selling the virtues of his institute’s students early, telling potential recruiters that an IIFT candidate means one of 200 selected after a rigorous test which was taken by over 45,000 aspirants.

The hard-selling aspect finds resonance in the talks of A Sudhakar, Executive Director, HR, Dabur India Limited. “For the first time the B schools looked desperate. Their e-mails and telephone calls started pouring in long, long before the placement season. And once we (companies/recruiters) were there, they pushed each one of us to take more candidates. They reduced the normal fees that companies have to pay to attend their placement workshops.”

“It’s a blessing in disguise. The MBAs had become too arrogant for any employer’s liking,” opined Sudhakar. This opinion was shared by at least two other interviewees: Bhargava of IIFT and Dr Kapoor of MDI. The latter went to the extent of calling salaries that were being offered to fresh MBAs till last year “obscene”.

Dabur normally recruits an average of 15 fresh MBAs annually. This time the number dropped to six, one each from Indian Institutes of Management (IIMs) – Kolkata and Indore, SP Jain Institute of Management & Research and Narsee Monjee Institute of Management Studies – Mumbai, Symbiosis Institute of Business Management and Symbiosis Centre for Management and Human Resource Development – Pune. The first two recruitments happened through Pre-Placement Offers (PPOs). Dabur was placed in the first slot of recruiters by the remaining four institutes, which was not their practice till the last year.

A Sudhakar, Head, HR, Dabur
The drop has nothing to do with recession, insists Sudhakar. “We’ve had no attrition,” he explains. The claim must be true. After all, there is no palpable slowdown in the sectors where several of the products the company manufactures and markets are placed. Essentials like Dabur Amla Hair Oil, Vatika Shampoo, etc are just two examples. Moreover, leaving aside the US, the UK and the UAE, the countries to which Dabur exports — Nepal, Bangladesh, Egypt, Nigeria — are still witnessing a mere sluggish economy that cannot be termed recession. The only segment that has seen a slump is that of its premium juices. For, its major consumers are airlines and hotels, both badly affected by the international economic phenomenon. Also, the US dollar rose too high with respect to the Indian rupee in the last quarter, making Dabur incur some losses in commerce. “But (considering the) net, we’re comfortable,” Sudhakar says.

“Recession cannot be a perception; I have seen it in Dubai,” says Sudhakar. He tells this correspondent that a guest house which his company wanted to buy last year in the flagship city of the Emirates was priced at 3.5 m UAE Dirhams. Dabur had shelved the idea on being quoted such a steep price. “Now the promoter is offering us two houses for the same price. And our agent is asking us to wait a bit longer, expecting the price to fall further down in April,” he adds with a grin writ large on his face.

Another person who refuses to believe that worldwide recession is a perception is Ritesh Jain, CEO, Indian Business Academy. He says, “When we consider other economies like the US, Japan, Germany, etc, recession appears to be much of a reality, and India now being more integrated with the world economy is definitely feeling the heat.” But in India it could be otherwise. He goes by official indices, wondering, “Hard numbers like GDP growth rate, IIP, and negative growth of sales in key sectors like commercial vehicles suggest slowing down of economy, but there is subjective view among experts upon terming this as recession.”

On the matter of placement by his B school, Jain admits, “Final placement of students has become little tough and Institute’s Placement Assistance Team is working rigorously towards the same.” Then he adds, “The positive side of this slowdown is that the number of queries for admission has gone up as compared to last year. We expect more students with work experience, who have lost their job due to meltdown or those who see this as an ideal time to hone their skills, to apply.”

Ritesh Jain, CEO, IBA
To the question as to what measures his school had taken to face the present employment crisis, he says, “We introduced new subjects like service excellence, innovation management and investment banking for the students so that they could be more productive for the industry. There have been at least three seminars in the last five months for the final year students in which different speakers from industry shared their ideas with students. Based on these seminars, two credit courses have been designed and students have done self study on these topics. The idea is to make the students more ‘employable’ in the market.”

He thinks that the graduates opting for IT and BPO sectors earlier for decent packages are likely to opt for PG programmes now, as the “jobs in these sectors are drying and these candidates may decide to further their studies in professional areas.”

“The quality of intake will go up in management institutes this time,” Jain presumes. As on 16 March, IBA had placed 90 students out of a batch strength of 173.

Now that two widely travelled Indians had classified the international scene as recession, it was time to cross-check it with an expatriate. The question was hence put to Ashwin Kumaraswamy, a venture capitalist operating from Preston, Manchester and Rotherham, the UK, who migrated from Bangalore several years ago. He is now an Investment Manager at Enterprise Ventures.

Through an e-mailed response, Kumaraswamy replies: “There is no doubt what we are seeing is recession, but the quantum of recession is slightly exaggerated. I should say good business opportunities can still go out and raise money, but the timelines are long.”

But he contradicts himself when asked when the economy would recover: “When people stop talking about recession that is when economy will be in good share!”

A clarification is sought for the mutual anomaly in the answers to two questions. Kumaraswamy writes again, “It is not a perception, it is real. But that does not mean good investment opportunities, especially in the technology business, will not get the requisite funding. The timelines are long because the bars on investable business opportunities are higher now. Also, there might be a need for syndicated investment. In short, quality business opportunities will still find money, but getting the money at the right time and for the right price will take time.”

We move on to the sector that must concern an investment manager like him: banking. He writes, “Here in the UK, Bank of England has slashed the lending rates drastically to inject growth in key sectors. In contrast, in India, government is still a key driver of growth. And infrastructure being its primary focus, the government can’t subsidise the sector more to encourage growth; hence the reluctance.”

The slowdown has affected Kumaraswamy’s portfolio companies in various ways, elongated sales cycles being one instance. He explains that companies need more money to achieve their set targets and raising money in this market is proving very difficult and “we don’t see any realistic exit valuations”. All these factors mean pressure on current investors to bank roll the company, which, in turn, means more resources have to be allocated to the portfolio companies vis-à-vis new investments. “This increases the risk on portfolio and eventually the returns we can offer to our investors,” he concludes, adding in a subsequent mail that the views above are his own, not of the company he works for these days.

The only section of society this correspondent comes across that vehemently disagrees with the proposition that in India it’s a mere slowing down of the economy and not recession is the job seeking students of IMT, Ghaziabad. “It’s election time and the government is trying to allay all employment and inflation-related fears by harping on this theory,” says a student under the condition of anonymity and adds with seeming bitterness, “Our economists and management gurus are hand-in-glove with the government, lending credence to this tomfoolery.”

Hitesh Arora, a fresh MBA from the group who has been placed in LMJ International (an export house), disagrees. As he enumerates the rural and FMCG sectors, he is outshouted by the lot (see the group photograph of freshers from IMT, Ghaziabad). Arora is happy with the Rs 30,000 p.m. package offered by his first employer. Equally calm is his friend Vinod Johri who has got a job with Bharti Airtel Limited which, in fact, hired six candidates from his batch.

Ankur Gupta, IMT grad, placed in Maruti Udyog Ltd
More fortunate (or qualified?) were Ankur Gupta, who will shortly join Maruti Udyog Limited in its IT department — it was a PPO — and Soumyadip Pal who is joining Ambujex Technologies, a software firm. It was Pal’s first attempt and he almost defied the market by claiming an annual CTC of 8.05 lakhs. Had it been last year, he wouldn’t have demanded less than Rs 12 lakhs. He looks at his yet-to-be-hired friends and sighs, “Every company that came last year recruited, on an average, six to seven candidates. This year it was three or four.”

Far from the mostly glum, frustrated and angry faces, this correspondent meets the director of the institute, Dr BS Sahay, who sees nothing to worry about for several reasons. (Dr Sahay is likely to have joined the MDI by the time this feature goes on print) He begins by talking about the traditional Indian practice of “saving for the rainy day” and moves on to quote the IMF World Economic Outlook report, 2009, that predicts most developed countries to have an annual growth rate of – 2% (negative) while India would hit 5.5% and China would make it 6.7%. He considers the domestic market “strong enough to weather the storm”. While talking about the real estate, Dr Sahay sees the builders and contractors not ready to cut rates and adds, “This is no fault of the government.” Then he cites the 1.5 million new connections in the telecom sector in the country and asks matter-of-factly, “So, where is the recession?”

Dr BS Sahay, Dir, IMT, Ghaziabad
This correspondent’s meeting with Dr Sahay was significant for a marked difference in the philosophy of economics. Though I had heard of the advantage an institute (IIFT) had had for approaching the public sector from Bhargava, it was here that an advocacy of socialism was noticed. Dr Sahay lamented the fact that while the entire developed world was going back to its old ways of bringing more and more industries under state control, it was in India that there was an incorrigible, unending push towards privatisation.

But before Dr Sahay could be labelled as a socialist came a paradox. Like his peer Dr Kapoor, he wondered why students were not taking this as an opportunity to launch their own businesses. Well, if an overwhelming number of students turn entrepreneurs, they wouldn’t hand over their companies later to government, would they? So, whatever will happen to the state-control of industries?

That’s a hypothetical situation which may not materialise, given the “resistance from family” and a reluctance to ‘sacrifice’ a well-paid job — the two factors that Dr Sahay finds as commonplace in a large section of Indian society.

There was of course some praise for PSUs in one of the earlier interviews. Jain (of (IBA) had said, “The robustness of PSUs and monetary policies introduced by the RBI over a period of time, coupled with government policies may prove to be the silver lining.”

Before submitting this report, it was checked if the story could end in an optimistic and not a sombre note. Prof S Parashar, Chairman, Placement Cell, IMT, Ghaziabad, was called on phone to get the latest placement figures. It was a pleasant irony that the institute from which I received the angriest of reactions fared the best in employment. IMT witnessed the highest annual salary of Rs 21 lacs being offered to a student by an MNC. The highest ‘bidder’ from the domestic market made a call to the tune of Rs 13 lacs. The overall average of annual CTC offered was Rs 8 lacs. The largest recruiters, in sector-specific terms, were telecommunication and insurance companies. Most of the 348 students had been placed as on 21 March and the “remaining shall be placed this week and the next,” Prof Parashar sounded confident.

MBAs from IMT, Ghaziabad. None except Soumyadip Pal (extreme right
on the bench in an Adidas T-shirt) could be placed. Ankur Maheshwari
(first left, standing) has taken this as an opportunity to be an entrepreneur

The boy who had categorically called it recession and accused the government and economists of “tomfoolery” was contacted again. He has now been placed in an FMCG company. He mumbled on phone, “I would still call it recession. So what if I have found a job? Er… Sir, please don’t name me in the report!”

The writer is a mathematician, linguist and journalist. He teaches maths, does translation and interpretation for various government and private sector companies. In reporting, he has so far covered the beats science, information technology & telecommunication and is now a business correspondent covering the areas jobs, education, lifestyle, retailing, consumer banking, real estate, travel & tourism and small businesses. As an editor, he has handled edit and op-ed pages of a mainstream newspaper for three years. After a stint of nine months in the corporate affairs department of a telecommunication infrastructure company, he returns to journalism with this report for a business magazine

1 comment:

ayush said...

I hav always been a great admirer of the detailed analysis you bring out on the topics you present, another excellent post

I had been looking for your take on the General elections this time round , but you have been conspicous by your absence :) ... or have i missed your analysis somewhere else ?

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Surajit Dasgupta treats no individual, organisation or institution as a holy cow.