Saturday, August 05, 2006

Management Challenges - Compensation and Benefits

The idea of putting my thoughts on this topic came as a result of my completion of 1 year in this corporate world. I read first about Comp and Ben (as it is called in short) in the third trimester of my PGDM in the HRM subject. That was the time when I had absolutely no understanding of how it works and hence my appreciation of this topic was very minimal. Only now after a year, I am able to appreciate the importance of this subject.

This is the wage hike season for almost every sector. Normally the increase in the cost for the company due to wage inflation comes into picture only in the 2nd quarter but provision for such a hike is made in the first quarter results itself. For all the IT companies wherein there is no CAPEX, wage hikes is the major component which hits the bottom line most. One of the major question which arises here is how to balance this inflation in the interest of both the company and its associates.

For an IT organization, the biggest challenge lies in two areas. First aspect is retaining the customer and ensuring the profitability in terms of the billing rates. The second and probably more important aspect is the attrition rate. Attrition is a word which came into lot of prominence only after IT companies came into existence. This word got into fame when the people started hopping from one company to other in search of better salaries. Most of the times this is where the organization loses the most.

In the past 1 year I have seen many organization's attrition statistics and talked with a number of people who were leaving some very good organizations and joining smaller organization. One of the major things which I have seen is that the attrition at the junior management level which is something like the team lead, project lead, consultants, module leads, junior project manager is pretty high for most of the companies. Look at the attrition level at the Project Manager and above level like the kinds of AVP, VP and SVP and we are in for a change. In this category the attrition level is considerably low because of the simple fact that the incentives at this level are considerably more than the incentives at the level of PL, TLs or MLs.

Generally AVPs, VPs etc grow with the organization and reach this level only because they have been working in the organization right from a developer stage. Hence they enjoy significant benefits over their subordinates. Here is where the major gap comes into picture.

At the end of the day for any IT company, the real work or should I use the term software development ends at the level of PL only. Only in extreme cases that the PM participates in the software development and related tasks. So its a very general feeling among the people till the level of PL that they only do the entire set of tasks for the company and that their increments should be the best. But most of the time it does not happen.

For any IT company, people in the range of 1.5-5 years of experience are the most important assets. These people also constitute the set which is in very high demand in the current market and can command any amount outside their home company. Its very easy to gather people fresh from the engineering colleges and give them a paltry sum, sign a bond and retain them. But when it comes to people in the 155 group (Exp range from 1.5-5) retaining them is the key for the growth and stability of the project and thereby the company. Any amount of discrepancy in their C&B (compensation and benefit) can literally give a hit to the project. Also it could bring down their motivation levels and this would end up in cribbing about the company. Its more like a chain reaction, because if leader starts cribbing about the company, it will be followed by other team members and soon it will affect the way work happens within the organization. Freshers even if they leave the organization it does not make a difference because they can always be supplemented by if not better the same quality. People at the level of PMs, AVPs and VPs generally do not make a quick shift because of the benefits they derive, their adaptability to the workplace, the power they possess and the most important one that they are more or less stable in their career now. But what about the people in the 155 group???? Any answers.

To be continued.

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