Unsustainable Pay Raises

India has been a successful destination for knowledge based services. It wouldn’t be incorrect to say that it was the cheap but good talent that attracted many Multi National Companies (MNCs) to setup their operations in India. Over the years, this cost advantage of the India operations is slowly disappearing. I wouldn’t be surprised if the MNCs go to other countries that are cheaper than India. We already see the BPOs moving to Philippines, chip design moving to Singapore & China etc. If we analyse the root cause, it will be very evident that the steady, double-digit, year on year pay raises has minimized the cost advantage. Employee’s Cost to Company is only part of the overall cost. The rising infrastructure costs in India, coupled with energy costs further shrink the cost advantage. I restrict this blog to the potential impacts of ever increasing pay raises

India still has some cost advantage because of the pyramid structure of the organization. At the bottom of the pyramid are the new college graduates (NCG) who get the lowest pay in the company. At the top of the pyramid are the senior most managers of the company who would be paid, the most. In between, there are multiple layers or ranks. As we go up the pyramid, the pay increases but the number of people at each layer become lesser in number. The average cost to the company is still low, as there are more employees at the bottom of the pyramid. However, as an organization ages, it will have more senior people and thus the average pay moves up. Add to this, the ever increasing starting salaries of the NCG. The NCG’s pay has grown at a CAGR of 15% over the last 17 years. The pay in USA has not increased that drastically. The ratio of US NCG salary to India NCG salary has dropped from 20 to 4 in the last 17 years. Today, a few of the middle level managers in India get salaries that are in the similar ball park, as their colleagues in USA. While the cost competitiveness has been eroding, the talent pool with critical skills has been growing. This will be the saving grace for the MNCs in order to survive in India. However the rate of growth will slow down. The pay raises will drop. At senior levels it could stay flat or in some cases even decrease.

The number of critical high-impact positions, that justify higher pay, are limited. This means that not all experienced (# of years) employees can occupy these positions. Such experienced employees could be getting higher salaries based on their years of experience but their current position may not justify the same. In some sense, career stagnation happens. Sooner or later, these employees become overheads. The salaries of such employees could stay flat or even decrease. As the pay and benefits could possibly be linked to the job rank or the grades, even demotion of job ranks can happen. They may also be retrenched. Employees would prefer not to be in such situations, but it would be futile to ignore the possibility that it could happen to them.

There are choices that people can make. If they do not want to get into such a situation, then they should work proactively to enhance their careers and add greater value than their current role demands. Take up bigger challenges and deliver results. This requires employees to get out of their comfort zone and take risks. It also requires employees to broaden their repertoire. They should constantly look at upgrading their skill set and ensure that it is relevant, in the ever changing market environment. If they are not ready to face these challenges then they should also be ready to accept that their career and pay may get stagnant.

The unsustainable pay increase also impacts a person’s social life. With more salary, people tend to spend more and get used to a higher standard of living. Spending beyond the means, in anticipation of ever-increasing salaries can create liabilities. It also creates secondary effects in the society by increasing the cost of living.

Continuously upgrading ones skill and living within means can help in long term sustenance of a person’s life and work.

Happy Reading,
Ram

Sense of Urgency – A Cure for Complacency

In a fast-moving and changing world, a sleepy or steadfast contentment with the status quo can create disaster. For too often people are content with status-quo and are resistant to change. Complacency is much more common than we might think and very often invisible to the people involved. Success easily produces complacency. It does not even have to be recent success. An organization’s many years of prosperity could have ended a decade ago, and yet the complacency created by that prosperity can live on, often because the people involved don’t see it. Complacency is a feeling that a person has about his or her own behavior, about which he or she needs to do or not do. Almost always, complacent individuals do not view themselves as complacent. They see themselves behaving quite rationally. They can be creative in justifying their point of view. They pay insufficient attention to wonderful new opportunities and frightening new hazards. They continue with what has been the norm in the past. As an outsider, you may correctly see that internal complacency is dangerous, that past successes have created sluggishness or arrogance, but complacent insiders just don’t have that perspective.

To get over this complacency, organizations should create a high enough sense of true urgency among enough people. We live in an age when change is accelerating. The rate of change will continue to go up and up. To address the constant and continuous change, the sense of urgency will move from being an important issue every few years to being a powerful asset all the time.

True urgency focuses on critical issues. It is driven by a deep determination to win. When people have a true sense of urgency, they think that action on critical issues is needed NOW. A sense of urgency is not an attitude that I must have the project team meeting today, but that the meeting must accomplish something important today. Underlying a true sense of urgency is a set of feelings: a compulsive determination to move, and win, now. When it comes to affecting behavior feelings are more influential than thoughts. Thoughts are important, but whether it is contentment with the status quo, anger and anxiety, emotions influence action even more. Great leaders win over the hearts and minds of others. Martin Luther King Junior’s speech addressed not only the strategic plan that called for equality for blacks, but mostly it pounded away at people’s gut-level feelings with poetic rhetoric and passionate words about justice and morality.

Tactics for creating a true sense of urgency should aim at the heart. It should provide human experiences that work appropriately on all senses. People not only hear, but they see something in front of them or in their mind’s eye that helps raise urgency.

• Bring the outside reality into groups that are too inwardly focused. Reconnect internal reality with external opportunities and hazards. Bring in emotionally compelling data, people, video, sites and sounds.

• Behave with urgency every day. Demonstrate your own sense of urgency always in meetings, one-on-one interactions etc., and do so as visibly as possible to as many people as possible.

• Find opportunities in crises. Always be alert to see if crises can be a friend that can destroy complacencies.

• Deal with NoNos. Remove or neutralize all the relentless urgency-killers, people who are not skeptics but are determined to keep a group complacent or, if needed, to create destructive urgency.

To sustain urgency over time requires that it not only be created, but that it be re-created again and again. Sense of urgency leads to success, and success may lead to complacency if the sense of urgency is not re-created. The ultimate solution to the problem of urgency dropping after success is to create the right culture. Create the behaviors like being constantly alert, focusing externally, moving fast, stopping low-value added activities. When these behaviors become the norm, then a culture of urgency is instilled. People will then grab new opportunities, avoid new hazards, and continually find ways to win.

p.s This blog summarizes the learnings from the book “a sense of Urgency” by John P Kotter.

Happy Reading,
Ram