Thursday, February 26, 2009

Employee Training In India : Recession in Perspective

I have spent most part of the last few months in India, primarily because the current recession is forcing us to adopt a complete rethink of our business strategy. What seemed obvious a few months back seems extraordinarily complex at this moment. Besides, we built a high margin business by offering business communication training to organizations. It was nice while it lasted, but staking out resources on the same feels like going to the beach to watch the tsunami now. We are probably seeing the first glimpses of a turnaround, indeed, as things come close to March and revenues start shoring up. But, nevertheless, this is a moment to stop and reflect - it is obvious that this downturn will affect training and development, and we need to somehow estimate how much.

There are some rough estimates I got from a friend, a veteran in corporate training in India. Indian employee training market is estimated to be US $20 Billion, though parts of it are internally sourced. The initial expectation in training circles, when the recession hit India in late September, was that this would have an impact of about 20% contraction. The unfortunate fact is that it is looking a lot deeper now, and some of the top training companies have taken a revenue hit of more than 50%. The downturn, when it arrived in India, was almost tsunami-like in its suddenness. For months, Indian corporate executives were talking about India escaping the worst of the downturn. But after Bear Sterns went bust and rumours of a possible meltdown at the Citi, and some large Indian banks, reached the markets, the stock market and executive management hit the panic button in full force.

That was in October, remember, traditionally the worst month of training business in India because of festivals. So, suddenly, the market dried up for training companies. After that, there was sudden contraction of the workforce - caused by mostly psychological factors; I say this because India has huge unexplored capacity and the recession need not be severe here. One can justify the reactions of the export-based industries, including software services and Outsourcing companies, but they account for very little employment in India anyway.

The domestic businesses - telecom, insurance, banking, hospitality, retail - are significant contributors to training business turnover in India, and all of them are operating under-capacity and this downturn can not affect them too much. However, they hit the button driven by the media frenzy and banished training from the noah's arc almost immediately. They froze recruitment, cut the salaries and started reducing workforce - and created an acute talent shortage within their respective businesses.

So, what we have now is a paralyzed economy - which is dominated by the fear of fear itself. But, from talking to a number of executives in the last few days, I realize that we are reaching an inflection point. The downturn has resulted in a number of good things, like rationalization of executive compensation in India [which was way out of line of productivity] and a search for more efficient ways of delivering training [e-learning and blended learning are back in fashion], but this panic has accentuated the capacity issue. Take insurance, for example. Only a fraction of the population in India has enough insurance coverage. Besides, health insurance is an emerging area, and Indian providers have just started venturing out in these. areas. They need thousands of brokers all over the country, along with the attendant managers, actuaries and support staff. Being a critical and compliance led area, this will need high quality training and competent staff. All these plans have suddenly been frozen, for no rational reasons but for the apparent paranoia in the financial market.

This is almost certain to have a major impact on productivity. Most companies in question run with quarterly results, and the excuses will run out after the first couple of quarters. So, it will be a return to realism by April/May, this time on a more rational scale, and the capacity building will restart. Training will be back in agenda firmly then. Many companies will then need a sort of Marshall Plan for training - an intensive investment period to rebuild the talent pool - as early as April.

Admittedly, a different story is being played out in IT and IT Services sector. For many years, these companies were poster boys of the shining India. Suddenly, the shine is gone, as the Western Clients, many from the financial sector, have started cutting back on project commitments. The impact was somewhat muted in the first two quarters by a soaring dollar, but many companies are bracing themselves for the moment of truth end of March. The scandal in Satyam, which could have dealt a body blow in these troubling times, have been contained for the moment. But all of this will come to impact the wider economy - jobs, rents in boom towns, and public psyche - come April.

From the training perspective, this is an interesting moment. Many companies will shift their focus on domestic market, and the export-intensive ones will try to diversify their market focus. More importantly, to stay in business, these companies have to innovate and remain competitive. The days of getting easy money out of building sweatshops will be over. So, the focus will shift from prescriptive how-to training to training for innovation and leadership, for embracing the unknown. The basic facts will hold true - there will be rationalization and search for efficiency, a lot more of e-learning and a lot less love for fads - but training will be back on the agenda, with a different focus.

So, who could blame me for being optimistic about the Indian training market? I see greater efficiency, a lot more rational approach but a significant expansion in investment in the coming quarters. Training will become critical now, not just a feel-good thing. Training managers will now be far more accountable and integrated with the organization, and may find themselves sitting with the CEOs at the lunch table a lot more time than usual. As for the external providers, they have to cut the blabber and make sense, and they will now need to be lean and efficient. These companies will offer lot less black magic and lot more meaningful training in the coming days. If I have to attempt a projection, we shall get back to that US $20 Billion quite quickly - just that we have to be a lot more innovative and a lot more committed to do so.

2 comments:

  1. Interesting perspective Supriyo. Thanks! We should compare notes some time.

    ReplyDelete
  2. Thanks, Jeremy. Surely. I am in India now trying to get some data and ideas. There are a number of interesting opportunities. It will surely be worthwhile to get talking.

    ReplyDelete

Hi! I appreciate your comments - as this post was intended to start a conversation. I pledge to reply to every comment posted - and do come back again so that we can carry on talking.

However, kindly note that if the comment includes an unrelated web link, I wouldn't be able to publish the comment.

Creative Commons License

AddThis

Popular Posts