hr trend in it industry

7/30/2019 HR TREND IN IT INDUSTRY

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Document Title:-Project ReportCreation Date: 26/07/2011

Author:

Project Report - HR TRENDS IN IT INDUSTRY

Prepared by: Pooja Chandrakant.Borkar

Document Version: 1.0

HR TRENDS IN IT INDUSTRY PROJECT REPORT Page 1 of 69


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Document History

Version Date Reviewed By Remark

1.0 26-07-2011 Sandeep Parab

Project Lead (IMS)



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|| ACKNOWLEDGEMENT ||

I thanks to the people who helped and supported me during the making of this Projectand the report.

My deepest thanks to mentor Miss Beena Samuel. the guide of the project for guidingand correcting various documents of mine with attention and care.

I express my thanks to my college and professors for their guidance help and support.

My gratitude to Mr.Sandeep Parab of L&T Infotech where project was undertaken forthe support and assistance.

I would also thank to Prof. Sheikh without whom this project would have been adistant reality.

Place: Mumbai Pooja Chandrakant Borkar

Date:



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BONAFIDE CERTIFICATE

Certified that this project report titled HR TRENDS IN IT INDUSTRY is the

Bonafide work of Pooja Chandrakant. Borkar who carried out the project

Work under my supervision.

Sandeep ParabProject Lead IMS Projects

Date: - - / - - / - - - -

Place:



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Contents

1.0 INTRODUCTION ............................................................................................. 7

1.1 ROLE OF HR MANAGERS ....................................................................................8

1.2 LEADERSHIP AND EMPLOYEE INVOLVEMENT. ...........................................91.3 INNOVATIVE PRACTICES IN HR .....................................................................11

1.4 LINKING PAY TO PERFORMANCE ................................................................. 11

1.5 CHANGING JOB DESIGN IN IT COMMUNITY ...............................................131.6 OBJECTIVES OF STUDY .....................................................................................16

...................................................................................................................................... 16

1.7 RESEARCH METHODOLOGY ............................................................................162.0 HR IT SCENARIO .................................................................................................. 17

2.1 INNOVATION IS THE KEY ....................................................................18

2.3 4 Rs of HR in IT ................................................................................... 21

2.3.1 OBSTACLES .....................................................................................212.3.2 WHAT OTHERS ARE DOING .......................................................... 21

2.3.3 RETENTION FACTORS ......................................................................22

2.3.4 TAKING THE LEAD ..................................................................................222.3.5 SEARCH FOR TOMORROW ................................................................... 22

2.3.6 COMPETITION ..........................................................................................22

2.3.7 ATTRACTING .............................................................................................23

2.3.8 RETAINING ..................................................................................................232.3.9 PRACTICES ................................................................................................. 23

2.3.10 DEVELOPING ........................................................................................ 242.3.11 LONG TERM SOLUTIONS ..................................................................24

2.3.12 KEY SUCCESS FACTORS .................................................................... 24

2.4 OUT SOURCING .......................................................................................... 25

3.0 OVERVIEW OF PROBLEMS ................................................................................ 273.1 MAIN PROBLEM AREAS ........................................................................... 29

3.2 LONG TERM PERSPECTIVE ............................................................ 33

4.0 EMPLOYEE STOCK OWNWERSHIP PLAN ............................................344.1 STOCK OPTIONS ............................................................................................34

4.2 MERIT PAY ..........................................................................................................35

4.2.2 Advantages OF Merit Pay:- ............................................................................ 354.3 GAIN SHARING ............................................................................................35

4.3.2 What are the 'Gains' that are measured? ..........................................................36

4.3.3 What are examples of Gain sharing formulas? ................................................36

4.4 PROFIT SHARING .............................................................................................. 364.5 ASSESSMENT OF PLANS FOR BROAD-BASED EMPLOYEE

OWNERSHIP ................................................................................................................ 37



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4. 6 EMPLOYEE OWNERSHIP: COMPANIES PAY LESS FORWORKERS' ..............................................................................................................39

4.7 IT COMPANIES WRITE NEW ESOP STORY ..........................................41

4.8 ESOPs HARDLY BENEFICIAL - .............................................................. 424.9 EMPLOYEE STOCK PURCHASE PLANS (ESPPS) ................................. 44

4.10 ESOPS AND CORPORATE GROWTH .......................................................45

5.0 SURVEY BACKGROUND .................................................................... 455.1 RESPONDENTS PROFILE .......................................................................46

5.2 WHETHER HR NEEDS OF INDIAN IT INDUSTRY ARE DIFFERENT ....47

5.3 EFFECT OF NEW COMPENSATION METHODS .................................. 485.4 WHETHER IT INDUSTRY HAS POSITIVE ATTITUDE TOWARDFS

ITS EMPLOYEES ........................................................................................................ 49

5.5 STATE OF GRIEVANCES HANDLING IN INDIAN IT INDUSTRY........................................................................................................................................ 50

5.6 TOP MANAGEMENT AWARENESS ........................................................51

5.7 EMPLOYEE EMPLOYER RELATIONSHIP IN IT INDUSTRY ..............52

5.8 EMPLOYEES RETENTIVITY IN INDIAN IT INDUSTRY ...... ..535.9 HOW TO INCREASE EMPLOYEES RETENTIVITY IN INDIAN

IT INDUSTRY ..............................................................................................................53

5.10 APPLICABILITY OF EXISTING INDIAN LABOUR LAWSIN INDIAN IT INDUSTRY ......................................................................................... 54

5.11 EFFECTIVENESS OF OLD AGITATIONAL METHODS IN IT

INDUSTRY ..................................................................................................................555.12 EFFECT OF EXCESSIVE COMPETION IN INDIAN IT INDUSTRY ......56

5.13 ROLE OF TRADE UNION IN IT INDUSTRY ......................................56

5.14 OVERALL ASSESSMENT OF EMERGING HR TRENDS IN INDIAN IT

INDUSTRY ..................................................................................................................576.0 OVERVIEW ................................................................................................... 58

6.1 RESPONDENTS OBSERVATIONS ...................................................................60

6.2 CONCLUSION ...............................................62



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1.0 INTRODUCTION

1.0.1 Success of every business enterprise depends on its human resource. Money, material andmachines are inert factors; but man with his ability to feel, think, conscience and plan is themost valuable resource. At the same time human elements are most difficult to be inspired,controlled and motivated. The upcoming competition in India will demand high motivationallevel of its employees.

1.0.2 Growth of an enterprise is vital for the economic development of the country. This ispossible only by maintaining the enthusiasm and motivation of the employees, which is vital forcarrying out the operations in most efficient manner.

The most successful companies, all over the world have designed their business policies toachieve higher productivity by using potentiality and strength of people.

1.0.3 The basic aim of human policies is the genuine concern for the people. Proper design ofhuman policies is based on the higher responsibilities, personal and positive approach in thetotal perspective of organizational interest.

The world's best companies have established their strength with their people. The employeesidentify themselves with the company they are working for. This also helps in building up theirspirit, morale and spirit-de-cops which becomes strength of the company. The culture ofexcellence thus nurtured contribute to growth with stability and continuous improvement inproductivity.

1.0.4 Finding the right man for the job and developing him into a valuable resource is anindispensable requirement of every organization. Human resources are capable of enlargementi.e. capable of providing an output that is greater than the sum of the inputs. Properrecruitment helps the line managers to work most effectively in accomplishing the primaryobjective of the enterprise.

In order to harness the human energies in the service or organizational goals, every manager isexpected to pay proper attention to recruitment, selection, training, development activities inan organization. Proper promotional avenues must also be created so as to motivate employeesto peak performance. Thus, personnel functions such as manpower planning recruitment,selection and training, when carried out properly, would enable the organization to hire andretain the services of the best brains in the market.

1.0.5 The human resource management is very crucial in respect of information technologyservices than other manufacturing or marketing enterprises. The IT services are technical innature and at every stage the human touch is involved. Hence it is well motivated and devotedmanpower which is very much essential for the success of IT industry.



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1.1.4 Change Champion:-The constant evaluation of the effectiveness of the organizationresults in the need for the HR professional to frequently champion change. Both knowledgeabout and the ability to execute successful change strategies make the HR professionalexceptionally valued.

Knowing how to link change to the strategic needs of the organization will minimize employeedissatisfaction and resistance to change. The HR professional contributes to the organization byconstantly assessing the effectiveness of the HR function.

He also sponsors change in other departments and in work practices. To promote the overallsuccess of his organization, he champions the identification of the organizational mission,vision, values, goals, and action plans. Finally, he helps determine the measures that will tellhis organization how well it is succeeding in all of this.

1.2 LEADERSHIP AND EMPLOYEE INVOLVEMENT.

1.2.1 The main role of leadership was seen as creating a participatory process for employeeinvolvement, to build collective wisdom. Control has given way to collaboration and the oldparadigm of promoting competition and motivating through incentives shifted to creating co-operation and oneness amongst people.

This is a marked shift to build effective teams. Research shows that six out of every 10employees like to work in teams. 87 per cent of all Fortune 500 companies use parallel teamsand about 100 per cent of all companies use project teams.

1.2.2 Storytelling and appreciative enquiry are emerging as a new dimension in positive

motivation. Finding out what's wrong seems to be the trend. In Walt Disney, telling successstories is one of the important methods used to remind people of greatness and goodness of theorganization.

Leaders in Disney concentrate on quality, values and involvement. Speaking in the plenarysessions, Tom Peters said, We have transitioned from an asset-based economy to a talent-based economy. The new definition of lay-off is untalented go talented stay. Leaders mustrealize that talent is equal to brand". His new theory is EVP which means "Employee ValueProposition".

1.2.3 Rosa Beth Moss Kanter said, Human beings are good raw material, they become assetswhen you train them to increase their knowledge and skills". She added that only a feworganizations really train people to make them a success.

Seconding this, Mr. Peters pointed out how most organizations are not serious aboutdeveloping people. They spend on an average 26.3 hours per person per year on training. Asurgeon, a pilot or an athlete on the other hand spends 10-15 times more on training



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1.2.4 He also stated that the HRD department should be renamed TDFD (Talent DevelopmentFanatic Department) and wealth for this new regime will flow from innovation, notorganization.

Quoting Gary Hamel he said, only those employees will succeed who are "certified radical".Only those companies will succeed who create a cause, not a business. Leaders according tohim are living individuals, whom people can smell, feel and touch. Their passion for work mustbe infectious.

1.2.5 Another aspect of leadership if the decision to introduce fun in the work place. Researchshows that this reduces absenteeism and builds stronger, deeper and longer lastingrelationships. It appears out of every 100 Fortune companies in the last decade, 69 are deadand only 31 are alive.

In a Forbes Magazine study of around 100 companies from '17 to '87, only 39 companies werefound to survive. Management of Change:-Research proves that many change models don'tconsider the human experience during change. The overriding concern seems to be todownsize. It was found that most change processes go through four fundamental stages.

People try to resist or deny change They adapt, participate in the change They attempt to add value The culmination or formation of a new status-quo

1.2.6 A number of presentations revealed that leaders who initiate change must do so with onefoot in the future and the other planted in past values. Forgetting tradition must can devalueexisting strengths. The success of a change process depends on the skill of the facilitator tocreate a participatory process to enlist the support of people and address the issue of grief.

1.2.7 E-Learning: - Organizations like Ford Motor, Hewlett Packard, Intel and IBM are using e-learning to increase the knowledge of their people. Companies like Fordstar even manage timedifferences between countries while conducting virtual class rooms, chats, demos,presentations to communicate new concepts, product details, core values, issues of governanceand corporate communities.

1.2.8 CEO's are talking to their people about new ideas and enlisting their support throughforums and message boards. This is changing the way people behave and work. The advantagesof e-learning are many: It is self-paced, flexible, less expensive, and modular and has a huge

reach.

1.2.9 Universities like Cornell, MIT, Stanford, etc, have started emphasizing e-learning toattract a worldwide audience.

Web-centric universities are becoming the order of the day. William Taylor, editor andmanaging partner of the Fast Pace magazine, said, "There is no going back from back fromdotcoms". He was of the opinion that there is a merger taking place between computers andhuman beings.



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1.3 INNOVATIVE PRACTICES IN HR

1.3.1 The Innovative Practices in Human Resources study uncovered 12 practices that arereducing HR costs and improving service quality to employees. Key findings from this researchincluded the need for HR managers to streamline processes, lower overhead costs, and enabletheir departments to advance from transactional organizations to strategic partners in thebusiness.

1.3.2 Practices and technologies include:

Internet and intranet employee services Strategic human resources Centralized HR departments and call centers

360-degree performance appraisals HRIS systems

Employee self-service Voice response systems (VRUs) Resume scanning and Internet recruitment Kiosks Automated time and attendance systems Team policies and development Outsourcing Business process reengineering (BPR)

1.4 LINKING PAY TO PERFORMANCE

1.4.1 Most Human Resource professionals are familiar with the concept of strategy. There ismuch more concentration and focus today on the strategic outcomes of human resourceactivity than ever before. The area of compensation is no exception.

1.4.2 Pay for performance systems are becoming more and more popular as senior managersreach beyond the use of compensation systems to deliver pay. There is far more interest inmore closely linking the reward mechanisms to the achievement of corporate objectives.Motivation for superior performance is the goal.

1,4.3 In experience, most organizations will profess to a "pay-for-performance" philosophy as akeystone of their compensation system. Such a system requires solid grounding in a clear anddocumented link between performance and salary increases. Unfortunately, the link between

individual performance and pay is frequently nonexistent - "merit" pay is a hollow concept inthis regard.

1.4.4 A merit system demands that managers be willing to make distinctions in merit increasesbased on performance. However, several factors get in the way of this happening. First, theannual salary change is usually a small percentage. Giving the better performer 2% more thanthe cost of living has little motivation or recognition attached to it. Similarly giving the poorperformers 2% less than the cost of living increase is not that much of a penalty. So many



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managers don't make that distinction - it is too much hassle. So everybody gets the sameincrease.

1.4.5 Second, most performance appraisal systems are after-the-fact appraisals. In otherwords, at appraisal time, which is usually toward the end of the year, managers are required toevaluate the performance of their staff.

It means sitting down and trying to reconstruct what each staff member did, capturing it in anon-threatening way, communicating the evaluation without a fuss and finally, making a meritincrease recommendation. Sound like a familiar pattern? It is a process that repeats itself yearafter year.

1.4.6 The end result is usually a lot of avoidance behavior. Managers avoid the appraisal

process like the plague.

Although employees profess to want to "know where they stand" they often take issue with theappraisal. Besides, they don't listen to the evaluation, they wait until the penny literally"drops".

"What is my rating and how much do I get?" is a constant theme in merit systems where salarydecisions are tied so closely with the appraisal process.

1.4.7 You might well ask is there any way out of this mess? The answer is fortunately yes.Organizations that are the best and want to separate them from the rest are turning away fromthe merit system and toward an annual incentive system, particularly for middle and uppermanagement positions but increasingly for teams and individuals lower down in the

organization as well.

1.4.8 They are adopting a system of annual incentive bonuses linked directly to theachievement of corporate and individual objectives in three specific areas.

The areas are corporate revenues and gains, cost containment and behavioral changes. Thefirst two areas are quantitative and the third area, which is gaining in importance, isqualitative in nature, and has a great deal to do with building managerial and individualcompetence.

1.4.9 Why Is This Transition Occurring? :-Well, there are many challenges facing businessestoday and these challenges are driving them to find better ways of linking pay and performance

to the achievement of corporate results..



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1.5 CHANGING JOB DESIGN IN IT COMMUNITY

1.5.1 The California State University (CSU) system is being challenged to meet increasingdemands for educational and administrative services through the innovative use of technologyand human resource systems.

Even though funding levels for higher education have been cut in recent years,public/taxpayer expectations and the demands for quality education, access, service, andaccountability have grown.

Technology initiatives within the CSU have resulted in significant advances and improvedtechnical capabilities and efficiency. Human resource and organizational systems are alsoneeded to capitalize on and thrive in this rapidly changing work environment.

1.5.2 In 1991, the CSU began a study to look at alternative work and job design approaches tomeet these challenges. The study focused on the information technology community and howwork processes and activities could be better organized to remove artificial barriers andimprove organizational effectiveness, a process often associated with the term "reengineering."

Secondly, the study focused on developing a job design approach that could adapt to changingskill requirements and that would promote the continuous acquisition of skills for knowledge-based employees in information technology.

The goal of improved organizational effectiveness and an orientation towards reengineeringand skills guided the development of the proposed job design approach.

1.5.3 This article begins by identifying several trends that led to the study, and then describesthe overall project within the context of an organizational effectiveness equation.

A new job design approach that was proposed as a result of the study is presented, including anew classification structure and competency dimensions and measures for defining andevaluating positions.

Finally, other supporting systems are described for an integrated human resources approach.The development phase of the project has been completed, and the CSU anticipates enteringinto negotiations with its employee representatives in the near future.

1.5.4 Three trends have had a direct impact on the development of a strategic job design

approach for the information technology community at the CSU: (a) diversification andconvergence of technology, increased demand for educational access and (b) changes ininstructional delivery methods; and changing work place demands and priorities.

1.5.5 The technology demands within higher education lead to a complex and dynamiccomputing environment. Academic and administrative computing strategies tend to be at cross-purposes in terms of defining systems requirements.



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This has resulted in widely diverse systems and technology within and across the CSU's twentycampuses. Increasingly, however, campus systems are becoming more integrated, as data areshared across multiple platforms on a network "highway" that is linked to external informationsources.

Networking and desktop computing have removed traditional boundaries for informationaccess, research, and decision-support purposes. Data, voice, and video technologies continueto be combined in more interactive and user-friendly formats.

1.5.6 In terms of educational trends, many institutions offer distance learning using varioustransmission media and are incorporating instructional technology into curriculumdevelopment.

Students expect guaranteed access to technology and to research databases, and this accesshas become an issue of social responsibility.

[1] Library and computing functions are becoming increasingly interdependent in "aninfrastructure of scholarly communication" within higher education.

[2] Workplace trends, as presented in Sustaining Excellence in the 21st Century: A Vision andStrategies for College and University Administration, well represent the outlook for the CSU.Two key issues are identified:

(1) Economics. There is increasing pressure to constrain administrative costs within the "laborintensive cost structure" that exists in higher education. Reductions in staff are occurring atthe same time as transaction volume and service expectations are growing.

(2) Decentralization of responsibility. With fewer people and greater access to information,organizations are moving responsibility for decision-making downward to the point of service.

Work organization is shifting away from job specialization and a task/procedure orientation, tomore generalized job responsibilities focused on outcome and greater participation on cross-functional teams

(3) Another central workplace trend is the "earning and learning" environment described by theU.S. Department of Labor in its Secretary's Commission on Achieving Necessary Skills (SCANS)report. To quote Thomas P.

Foley, Secretary of the Pennsylvania Department of Labor and Industry: Weve changed fromthe idea of "one skill, one job" to the reality of a range of skills that have to apply to a numberof different kinds of professions.

More to the point, workers must possess a skill that they continually upgrade just to keep pacein the professions they choose."



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(4) The influx of new technology and applications has created a demand for continual learningand adaptation. Due to the CSU's relatively stable workforce, maintaining skills to keep pacewith changing technology was identified as a critical goal.

Knowledge requirements are expanding to encompass a greater breadth of technologies andsubject expertise, as well as including process-oriented capabilities such as communication andnegotiation skills.

1.5.7 The implications of these technological, educational, and workplace trends point directlyto the need to reengineer organizational structures, work design, and processes.

Based on these trends and overall organizational goals, two key objectives were establishedfor a new job design approach for the CSU: flexibility and skill development.

Fundamentally, each campus needs the flexibility to achieve its goals by distributing workassignments in a way that optimizes its available skill mix and promotes individual skilldevelopment and initiative.



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1.6 OBJECTIVES OF STUDY

1.6.1 Following were the objectives of the study:-

1. To enlist emerging HR trends in Indian IT Industry

2. To review literature and research done in this area.

3. To find out lacking areas regarding the HRD in IT sector.

4. To measure the perceptions of IT sector employees in respect of application of HRD in theirorganization.

5. To suggest the measures to fill the gaps and improve motivation level of employees and HRmanagement in IT industry.

1.7 RESEARCH METHODOLOGY

1.7.1 The study was exploratory in nature. All published and unpublished available on thesubject matter was consulted. Interview and discussions were held with the various executive/Managers/ staff employed in IT sector. The HRD functions/ activities being undertaken in

different IT organizations were also studied. Primary and secondary data available with theseorganizations was also used for this project study.

1.7.2 In order to measure the employees perceptions of emerging HR trends in different ITorganization, the survey was undertaken. The survey was based on structured questionnaire.The questionnaire was mainly based on objective type close-ended question, but few openended questions were also included.

1.7.3 Firstly, the pilot survey on ten randomly selected respondents was undertaken. Then thequestionnaire was modified accordingly, if desired.

1.7.4 The final questionnaire was administered in person to the extent possible and through

mail if needed. The 100 respondents were selected among the executives and staff working invarious IT organizations. The convenient random sampling technique was used for the selectionof the respondents.

1.7.5 Finally, the results of the survey has been presented in Tabular form, analyzed andinterpreted to meet the required needs of this project study and presented in Report form.



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2.0 HR IT SCENARIO

2.0.1 The web is altering the HRD landscape beyond recognition. The key to corporate success

in the fast changing information era is thinking on your knees.

2.0.2 What is this thinking on your knees? Normally as the HR person you know what the

situation is and operate from there. A repositioning is required in your decision process with

questions like why, how and when and not just what.

At this point you operate on your knee i.e. with far more dynamism and with a lot more

effectiveness than thinking on your feet.

2.0.3 The employees are like gypsies, on the move all the time. They camp at some location,

enhance their skills, responsibility levels and move on. This is particularly true of the

professional from Software Industry.

Opportunities are plenty and the next job opening is only a mouse click away. The question is

not about what else you can do to retain an employee but it is about making him productive,

while he is with you.

The value addition will then happen for both the employee as well as the employer resulting in

a win-win situation. This means that the new strategy calls for the recognition that no

employee is expected to be permanently with you. Normal tenure in any organization is likely

to be between two to three years.



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2.1 INNOVATION IS THE KEY

2.1.1 Information technology and Internet have changed several equations. Reaching out to the

world market place is no more the challenge in achieving corporate victories. Out thinking the

competition at electronic speed is the key to winning corporate battles. The corporate success

is sum total of entrepreneurship practiced by your staff.

2.1.2 The key to employee longevity :-Todays most successful organizations recognize that

to fuel growth and sustain a competitive advantage, they must make recruiting, hiring and

retaining top talent, as the organizations major thrust area. Competent people deliver the

rest dont matter. Successful business organizations have no choice but to promote the

performers and let non-performers go.

2.1.2 Organizations recognized that that their ability to gather, manage, analyze, distribute

information and transform themselves into a learning organization will provide continuity and

ensures for them their leadership role. Systematic organizational learning should be central

corporate philosophy. Learning must be obviously followed by changes, which may notnecessarily be welcomed by veterans in the organization. But change is the only constant for

guaranteed success.

2.1.3 Points to note: The following points are important and must be properly understood.

People have a great deal of informational knowledge to contribute to the organization.

People are responsible

People desire opportunities to effect change, not just being expected to change.

Organizations need to create awareness amongst their employees about their vision

and then empower them to act on that vision.

Establishing a sense of urgency well ahead of the problem surfacing.

Form inter-functional core group. Encourage the group to work together as a team.



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Plan and create short-term win targets reward employees and recognize achievers.

Consolidate improvements through a knowledge base driven system and institutionalize

proven new methodologies.

2.1.5 New Paradigms In HR

Business plans must consider HR issues, focus and adapt.

Corporate goals must factor in individual career growth and personal growth must be

tied to corporate growth and vice versa

2.1.6 Job responsibilities must facilitate personal development and learning should be

institutionalized with well-established knowledge bases. Capturing experience and making it

available corporate wide should be a permanent feature of organizations.

2.2 WAR FOR TALENT

2.2.1 The worlds most popular people resource base seems to be falling short of numbers to

meet its own demands. With added pressures of migration and attrition, can Indias IT

industry achieve its software and services revenue target of $87 billion by 2008?

2.2.2 Country: India. Population: 1 billion-plus. If that sounds like too many people, think

again. Plug in English-speaking and low labor costs, and suddenly we can envision $50-billion

software exports target by the end of this decade. Not impossible, if we consider the scarcity

of IT manpower across the world. Take a look at the US, already with a 10- million-strong IT

workforce, which needs to fill 1.6 million newjobs in the next one year.

2.2.3 Japan is no different and estimates close to a million new jobs. Germany is looking for

20,000 IT specialists and Italy is seeking 15,000 additional manpower. Their choice destination

India.



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2.2.4 Ironically, the country which has been such a popular people resource for the IT industry

the world over, is struggling with numbers to meet its own demand.

To meet the overall software and services (domestic and export) target of $87 billion by 2008,

according to the Nasscom-McKinsey report, the country will require a minimum of 2.2 million

knowledge workers for its domestic needs.

This implies that the present strength, which stands at 12,00,000 (December 2004), has to

increase about twice, not just in quantity but in quality as well.

2.2.5 According to industry estimates, majority of the demand for manpower will be in the

area of IT-enabled services. While Nasscom puts the requirement at 11,00,000, MIT says IT-

enabled services and e-business will need 12,70,000 workers by 2007.

Experts insist that since this sector does not require very highly skilled manpower, we can

easily meet this demand. "IT-enabled services are a wonderful opportunity for India and for

such services you dont need highly skilled professionals.

You just need smart graduates who can speak English; all you need to do is train them. For

instance, in a call center, they need to be trained on accents and customer services,"



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2.3 4 Rs of HR in IT

Table 2.1

Recruiting

Signing bonus

Finders Fee

Alumniconnections

Non-techs

Students

Interns

Retaining

Retention bonus

Project pay

Reduct FTE/same pay

Telecommuting

Externs

Job sharing

Recognition programs

Retraining

Job rotation

Team assignments

Skill inventories

Competencydevelopment

Certification

Restructuring

Broad job descriptions

Flexible compensationprograms

Flexible jobs

Positive problem-solvingspirit

2.3.1 OBSTACLES

Denial (This is and long term)

Misalignment (Ramping up/Ramping down)

Timing

Treating everyone the same

Navigating the bureaucracy

Demographics

2.3.2 WHAT OTHERS ARE DOING

Pooling recruitment efforts

Increasing freedom at the dept. level

(On-the-spot hiring, broad banding, etc.)

Recruiting/retaining students

Identifying tech skills in all jobs/people(Skill Inventories/assessment)

Sharing staff



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2.3.3 RETENTION FACTORS

1. Quality of boss

2. Direction of department

3. Exposure to new technologies

4. Confidence in the company

5. Job security

6. Challenging work

7. Location

8. Access to capital resources

9. Caliber of co-workers

10. Empowerment

11. Department leadership

12. Ability to influence department success

2.3.4 TAKING THE LEAD

See ourselves as problem-solvers

Develop critical skills and competencies in ourselves, then others

Build compensation around results not tasks; competencies, not seniority

Involve everyone. Constantly align and balance resources to meet changing needs

2.3.5 SEARCH FOR TOMORROW

Attract, retain and reward the best performers (Encourage all to be the best) Increase flexibility Reduce fixed costs Reduce administrative effort (Simplify, simplify, simplify) Utilize the full range of individual talents

2.3.6 COMPETITION

Compensation stock options, profit sharing, incentives

Alternatives outsourcing



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2.3.7 ATTRACTING

Recruiting sign on bonuses

Relocation incentives

Recruiters

Reduced cycle time for hiring

Campus/ job fairs / referrals/ internet

2.3.8 RETAINING

Work environment

Communication forums

Telecommuting

Flexible staffing

Exciting projects

2.3.9 PRACTICES

Focus on value

Financial and human value

Commitment to core strategy

Linkage between cultures and system

Multi dimension communication



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Stakeholders partnerships

Mutual support and collaboration (teamwork)

Risk and innovativeness

Passion

2.3.10 DEVELOPING

Internship programs

Training programs

Career development programs

2.3.11 LONG TERM SOLUTIONS

Education, government, industry partnerships

Curricula: technical skills and career skills (teamwork and communication)

2.3.12 KEY SUCCESS FACTORS

Understand people

What they want

Long term perspective

Innovative

Coordinated approach

Career development



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2.4 OUT SOURCING

2.4.1 In the last few years, more and more companies around the world are looking towards

India for outsourcing their software requirements. The changing business environment is

demanding new applications. In particular, the spread of client-server computing in

decentralized organizations involves the development of applications specific to a user's

business.

2.4.2 Outsourcing is becoming a strategy for forward thinking IS managers. It is no longer just a

means for reducing costs, but a tool for adding value to business. It enables organizations to

concentrate on their core business, carry out business re-engineering and provide information

that is valid, timely and adequate to assist decision making at the management level and

quality and cost control at the middle and lower levels.

2.4.3 As a result, outsourcing has gradually grown beyond the traditional idea of "having a

third party running the data center". It has come to mean, "Any use of an outside contractor to

replace or extend in-house resources".

2.4.4 Outsourcing is closely linked with corporate strategy, since it must support the

organizations major initiative in using IS. It should enhance and add value to the business. A

rule of thumb to start and gain experience is, "if IS is low cost and of high value addition, keep

it within the organization, i.e. in-source. If IS is high cost and of low value addition, consider

outsourcing".

2.4.5 In the past few years, whenever organizations around the world have outsourced to

India, the Indian software companies have substantially helped to cut costs in software

development projects or MIS environments, while maintaining high quality. Moreover, all these

cost and quality advantages are coupled with the use of state-of-the-art technologies.



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2.4.6 In 2004-05 more than US$ 2500 million worth of software development work was

outsourced to India (The total software exports from India during the year was US$ 4085

million).

This was 56% higher than outsourcing orders in 2003-04. It is estimated that the quantum of

outsourcing may jump to US$ 5 billion and reach as high as US$ 10 billion by 2010 A.D.



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3.0 OVERVIEW OF PROBLEMS

3.0.1 The IT revolution is sweeping the world, particularly the western world in for nearly a

decade now, creating enormous employment opportunities in this area. India joined the

bandwagon well in time and smoothly though it is yet to entrench itself strongly in terms of

corporate identity and significant share of global revenues in IT.

3.0.2 Our main contribution seems to be in the less glamorous areas of value addition,

maintenance, Y2K, quality assurance and customization of existing packages. The sudden

eruption of opportunities in this area left no time for development of human resources in a

planned manner and also software solutions which tended to be more ad hoc than being

assured of quality.

3.0.3 With the enormous opportunities for employment, entrepreneurship with low capital

investment and low gestation period for turning profitable, higher returns per employee and

large return on investment/EPS, sustained encouragement from government, a very large

number of organizations - large, medium, small - have been established. Correspondingly a

large number of training establishments and cyber cafes have come up, most of which are in

the cities and towns to cash in on the enthusiasm of the urban middle class.

3.0.4 A number of higher level courses have also been started mainly through private

organizations besides the existing government (State/Central), university and autonomous

institutions.

There are about 500 private engineering colleges besides IITs, RECs, universities, colleges

offering courses such as MCA, M.Sc., M.E., and M.Tech. In view of the apparent demand that

appears to be exaggerated, most of the programmes (barring a few by government institutions

and IITs) are very expensive, almost beyond the reach of a middle-class student. Yet

candidates and their parents strain themselves financially to pursue the courses hoping to get



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an attractive job (financially) which remains a mirage by and large. The problems are further

compounded by a lack of proper teaching faculty in most colleges and franchises.

3.0.5 Except in well-established institutions, job-placements are poor. Even those trained in

reputed institutions find their jobs monotonous, leading to depression.

Jobs offered by the software industry have demonstrated the above factors as they are able to

carry out the projects with persons of any background and levels of attainment, but with a few

months training either prior to employment or a short training during probation.

3.0.6 Despite these deficiencies, students prefer software jobs mainly with an eye on the pay-

package and urban locations. The employee- retention period even in good companies has been

shrinking and is found to be three to six months.

The companies also try to devise methods to make their employees almost captive with surety

bonds, bank guarantees, employee's stock option (ESOP) and housing facilities, among others.

The employees, for their part, resort to innovative methods to wriggle out of their contracts.

There does not appear to be any respectable ethics even among companies as well as the

employees in this type of free for all market.

To go abroad and become rich has become the motive of most of the employees even if the

job does not offer any intellectual satisfaction. The manufacturing and hard-core engineering

sector has also shrunk in terms of job opportunities and attractiveness.

3.0.7 Even those software professionals, who are offered good financial packages, spend their

earnings on expensive lifestyles, vehicles, and credit card syndrome and find themselves

disenchanted on all fronts including the intellectual front.

It should also be a cause for concern to project beyond the present software boom as to what

happens to these entire if the opportunities decline. The scenario appears to be quite fluid

with a predominant western bias in all the activities concerning software profession with scores



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of Indian boys getting lured and sucked into the vortices created by the opportunities in this

area

3.1 MAIN PROBLEM AREAS

3.1.1 The significant problem areas which may be contributing to the present scenario and can

be addressed can be identified as given in the succeeding paragraphs.

3.1.2 Recruitment process:-Without going into the deficiencies of the present practices, the

following suggestions are made to improve the process in terms of efficiency, availability ofmanpower and equity to all the aspirants irrespective of the fact where they got educated. The

various steps of the proposed approach are as follows:

i. Aptitude tests could be conducted by reputed institutes like IITs/ private organizations/HR

agencies for prospective professionals preferably ``on-line'' like GRE, GMAT etc. or physically

at regular intervals and scores are given. If it is no on-line, the periodicity can be a month or

two and the validity can be for an year or so which can also be fixed based on general

agreement.

ii. Based on scores and preferences of the candidates (career counseling), companies can ask

for a video clip for subsequent interview if required. Interviews can also be conducted

simultaneously either physically or over the phone or by video conference and selections

completed.

iii. Once selected and the candidate joins the organizations, all member organizations should

adopt a code of conduct such that the candidates stays at least for a period of one year.

iv. Small companies can form some kind of a cooperative society wherein software

professionals' services can be tapped and steer clear and manpower shortage (less than critical

mass levels).



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v. The selection can be conditional that he acquires certified skills in the required areas either

through training in house or through approved training agencies and establishments. This will

also avoid the unnecessary expenses for (which are high) the candidates, who are presently

spending lot of money with a hope of employment. This will also ensure that there is a focus on

proper training and optimal deployment of time, effort and finances.

vi. The selection process can thus be continuous and commensurate with the requirements thus

avoiding idle inventory.

Vii.There can be general norms of pay packages depending on the reputation of the companies

(classifying them as A, B, C, D by any reputed management institute like IIM etc.) with the

ratio of maximum pay within reasonable and realistic limits.

3.1.2 Post employment care:- The companies/organizations should take adequate interest in

the career development of the employee by suitable HRD approaches which should include the

following:

i. Opportunities for creative work in the first phase particularly for those who are bright, and

have an aptitude and come with a good pedigree say from IITs.

ii. Opportunities to lessen the monotony and improve interpersonal relationship and mixing and

group activities.

iii. Periodic rotation of the rolls and jobs if possible.

iv. Opportunities for retraining and upgrading the skills.

v. Conducting effective career development programs regularly.

vi. Incentives like ESOP, lucrative assignments and challenging projects, opportunities of higher

education.



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vii. Make the employee more versatile with wider perspective and flexible for easy deployment

in areas needing strengthening.

viii. Encouraging simplicity and excellence.

3.1.3 Advantages:- The suggested processes in 4 and 5 above can be expected to have the

following significant advantages:

i. Cost effective and efficient process.

ii. Proper deployment of skills optimally.

iii. Idle employment can be minimized.

iv. Retention can be improved.

v. Particularly useful for small firms which can also operate in the cooperative society mode.

vi. The candidate's skills are moulded to suit the needs of the job and need not waste time,

money and efforts.

vii. Equitable opportunities to all aspirants irrespective of location, pedigree and background.

viii. Reduces the mushrooms of training shops with inadequate faculty.

ix. This may also give the manufacturing and core engineering sector jobs reasonable chance

to attract willing and bright candidates.

x. The process is ideally suited for candidates to plan their careers with adequate

preparation in core areas.



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xi. The process also enables realistic assessments of needs and demands regularly and meeting

them even at short notices.

xii. The aptitude tests can become richer and more representative over a few years and as the

question bank becomes larger and random on-line questioning can be introduced which is more

objective like GRE, GMAT



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3.2 LONG TERM PERSPECTIVE

3.2.1 These tests can be conducted at the end of 10+2 level or B.Sc. level also and train the

candidate with or without stipend in courses where he could get admission for his degree.

This will help in decreasing the pressure on engineering education as otherwise the skills

acquired by the candidate at a great cost in branches other than computer sciences are wasted

and lost for good if employed by the software industry.

3.2.2 It may be a good idea to have a National Test for Software Talent similar to sciencetalent test which can be sponsored by NASSCOM and such other interested groups

3.2.3 The idea of forming a cooperative society by small firms may prove to be beneficial as

the facilities and manpower can be shared optimally. While otherwise they may face the

problems of lack of adequate manpower (below the critical mass level) because of less

attractive pay and perks they are able to offer.

3.2.4 Renowned organizations like IITs, IIMs and MNCs, and can play a catalytic roll in

streamlining the processes for an efficient HRD in this vital area of software manpower which is

a national resource.



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IT SECTOR COMPENSATION METHODS

4.0 EMPLOYEE STOCK OWNWERSHIP PLAN

4.0.1 Employee Stock Ownership Plan (ESOP): is a defined contribution employee benefit

plan that allows employees to become owners of stock in the company they work for.

4.0.2 How does ESOP work?

1. The ESOP operates through a trust, setup by the company that accepts tax deductible

contributions from the company to purchase company stock

2. The contributions made by the company are distributed to individual employee accounts

within the trust.

3. The amount of stock each individual receives may vary according to pre-established formulas

based on salary, service, or position.

4. The employees may cash out after vesting in the program or when they leave the company.

The amount they may cash out may depend on the vesting requirements.

4.1 STOCK OPTIONS

4.1.1 Stock Options: The right to purchase stock at a given price at some time in the

future. Stock Options come in two types:

1. Incentive stock options (ISOs) in which the employee is able to defer taxation until the

shares bought with the option are sold. The company does not receive a tax deduction for this

type of option.

2. Nonqualified stock options (NSOs) in which the employee must pay income tax on the

'spread' between the value of the stock and the amount paid for the option. The company may

receive a tax deduction on the 'spread'.



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4.1.2 How do Stock options work? An option is created that specifies that the owner of the

option may 'exercise' the 'right' to purchase a companys stock at a certain price (the 'grant'

price) by a certain (expiration) date in the future.

Usually the price of the option (the 'grant' price) is set to the market price of the stock at the

time the option was sold. If the underlying stock increases in value, the option becomes more

valuable. If the underlying stock decreases below the 'grant' price or stays the same in value as

the 'grant' price, then the option becomes worthless.

4.2 MERIT PAY

4.2.1 Merit Pay is an incentive plan implemented on an institutional wide basis to give all

employees an equal opportunity for consideration, regardless of funding source. The merit

increase program is implemented when funds are designated for that purpose by the

institution's administration, dependent upon the availability of funds and other constraints. .

4.2.2 Advantages OF Merit Pay:-

Allows the employer to differentiate pay given to high performers.

Allows a differentiation between individual and company performance.

Allows the employer to satisfactorily reward an employee for accomplishing a task that

might not be repeated (such as implementation of new systems).

4.3 GAIN SHARING

4.3.1 Gain sharing is a technique that compensates workers based on improvements in the

company's productivity.

4.3.2 How does Gain sharing work? A Company shares productivity gains with the workforce.

Workers voluntarily participate in management to accept responsibility for major reforms. This

type of pay is based on factors directly under a workers control (i.e., productivity or costs).

Gains are measured and distributions are made frequently through a predetermined formula.



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Because this pay is only implemented when gains are achieved, gain sharing plans do not

adversely affect company costs.

4.3.2 What are the 'Gains' that are measured?

Increases in production with equal or less effort.

Equal levels of production with less effort.

4.3.3 What are examples of Gain sharing formulas?

Calculate gain in hours: The actual hours worked minus the expected hours (for the given

level of output) equals the gain in hours.

4.4 PROFIT SHARING

4.4.1 Profit Sharing is an incentive based compensation program to award employees a

percentage of the company's profits.

4.4.2 How does Profit sharing work? The company contributes a portion of its pre-tax profits

to a pool that will be distributed among eligible employees. The amount distributed to each

employee may be weighted by the employee's base salary so that employees with higher base

salaries receive a slightly higher amount of the shared pool of profits. Generally this is done on

an annual basis

4.4.3 How to Choose an Employee Stock Plan for Your Company:-Many companies we

encounter have a pretty good idea of what kind of employee ownership plan they want to use,

usually based on specific needs and goals. However, sometimes they might be better served by

another kind of stock plan. And yet others say they'd like to have an employee ownership plan,

but they're not sure what it might be. This article will start you down the path to choosing and

implementing the plan or plans best suited to your company.



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4.5 ASSESSMENT OF PLANS FOR BROAD-BASED EMPLOYEE OWNERSHIP

4.5.1 Let us begin by quickly reviewing the main possibilities for broad-based employee

ownership. A "broad-based" plan is one in which most or all employees can participate.

4.5.2 An employee stock ownership plan (ESOP) is a type of tax-qualified employee

benefit plan in which most or all of the assets are invested in stock of the employer. Like profit

sharing and 401(k) plans, which are governed by many of the same laws, an ESOP generally

must include at least all full-time employees meeting certain age and service requirements.

Employees do not actually buy shares in an ESOP. Instead, the company contributes its own

shares to the plan, contributes cash to buy its own stock (often from an existing owner), or,

most commonly, has the plan borrow money to buy stock, with the company repaying the loan.

All of these uses have significant tax benefits for the company, the employees, and the sellers.

Employees gradually vest in their accounts and receive their benefits when they leave the

company (although there may be distributions prior to that). Over 8 million employees in over

11,000 companies, mostly closely held, participate in ESOPs.

4.5.3 A stock option plan grants employees the right to buy company stock at a specified

price during a specified period once the option has vested.

So if an employee gets an option on 100 shares at $10 and the stock price goes up to $20, the

employee can "exercise" the option and buy those 100 shares at $10 each, sell them on the

market for $20 each, and pocket the difference. But if the stock price never rises above the

option price, the employee will simply not exercise the option. Stock options can be given to asfew or as few employees as you wish. Perhaps 7 to 10 million or more employees in thousands

of companies, both public and private, presently hold stock options.



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4.5.4 An employee stock purchase plan (ESPP) is a little like a stock option plan. It gives

employees the chance to buy stock, usually through payroll deductions over a 3- to 27-month

"offering period."

The price is usually discounted up to 15% from the market price. Frequently, employees can

choose to buy stock at a discount from the lower of the price either at the beginning or the end

of the ESPP offering period, which can increase the discount still further.

As with a stock option, after acquiring the stock the employee can sell it for a quick profit or

hold onto it for a while. Unlike stock options, the discounted price built into most ESPPs means

that employees can profit even if the stock price has gone down since the grant date.

Companies usually set up ESPPs as tax-qualified "Section 423" plans, which means that almost

all full-time employees with 2 years or more of service must be allowed to participate

(although in practice, many choose not to). Many millions of employees, almost always in

public companies, are in ESPPs.

4.5.5 Section 401(k) plan is a retirement plan that, unlike an ESOP, is designed to provide

the employee with a diversified portfolio of investments. Like an ESOP, however, a 401(k) plan

is a tax-qualified plan that generally must include all full-time employees meeting age and

service requirements.

The employees can choose among several or more choices for investments, and the company

may make a matching contribution. Perhaps several million employees in a few thousand

companies participate in plans with a heavy company stock component; company stock may be

an investment choice for the employees and/or the means by which the company makes

matching contributions. 401(k) plans may be combined with ESOPs (these are called "KSOPs"),

where the company match is an ESOP contribution.



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4. 6 EMPLOYEE OWNERSHIP: COMPANIES PAY LESS FOR WORKERS'

Study has found that employee ownership companies have lower workers' compensation

insurance rates than comparable non-employee ownership firms. Leslie Hakala

authored the study. She began the project as an NCEO research intern and completed

it for a thesis requirement at Harvard University. The study was unable to ascribe a

specific causal relationship between employee ownership and lower workers'

compensation costs, but it did find that these costs declined as employee ownership

plans matured.



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Background: - In 1989, the last year for which we have data, U.S. employers spent over$48 billion on workers' compensation costs. These costs grew at 16.9% per year in the

mid-1980s. Cost increases were partly attributable to increased benefits mandated by

state workers' compensation insurance reforms. At the same time, as employer

provided health care coverage has declined, more employees sought to cover health

problems under workers' compensation. Many people believe there has been increased

fraud as well.

Workers' compensation programs vary from state to state, but in most programs,

insurers attempt to provide employers with an incentive to limit safety problems by

developing an experience rating. The ratings compare an individual firm's experience

with other firms of its type. If the rating is better than average, insurance premiums

will be lower; if it is worse, they will go up.

In this study, we looked only at California firms. In California, employers are assigned a

"manual rate," an insurance rate expressed as a percentage of every $100 of payroll.

Rates are assigned to all companies based on their industry classification. These rates

are then adjusted for companies with a premium above a certain level according to

their actual experience. This means smaller and less risky firms are not assigned an

experience modification rating. The experience modification rate is set for each year

based on three years of past experience, excluding the most recent year (because data

are generally not yet available). The experience modification rate is determined by

looking at actual experience modified by a size weighting factor. For larger firms, the

adjustment may be very small; for smaller firms, actual experience is given a lower

weight because a single incident can skew results dramatically. This weighted

experience rating now becomes the "experience modification" figure.

Theoretically, the average experience modification factor for any business

classification should be 100%. A company with a good record would have a rating under

100%; a bad record would rate higher. These numbers are then multiplied by the



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manual rate to set the premium. In practice, the average rating is somewhat under

100.

4.7 IT COMPANIES WRITE NEW ESOP STORY

4.7.1 Will I ever get to exercise my stock options? It's the one question haunting IT industry

professionals sitting on piles of employee stock options.

All those who happily grabbed at ESOP's issued by their companies last year, have now been

left holding pieces of paper that are, in some cases, worth a fraction of the price at which

employees brought into them.



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Except for a few who have benefitted from older schemes like Infosys 1994 scheme, the great

ESOPs dream is turning out to be a nightmare. Last year, if you were given ESOPs in an IT

company, your friends, neighbors and everyone else went up like a blimp, companies issued

ESOPs in cartloads. And employees brought into them, even at the higher prices that the grants

came from.

4.7.2 According to a study carried out by Nasscom , there were more than 10,000 IT staff

last year holding around 18 million ESOPs valued at roughly Rs 12,000 crore($3 billion) at

February '00 prices. But all this was merely on paper.

4.7.3 A year later, the situation's something like this. Employees who were given ESOPs at

the prices prevailing during the IT boom, had to sit back and watch their share prices hit the

roof while they waited out the lock-in period.

Now, they can exercise their options that are selling them, and pocket the difference between

the exercise price at the time of the grant, and the current market price. It's resulted in a

situation where employees have been left holding NIIT options which they would have to

exercise at a price of Rs 1,593 or Silver line options, which they would have to exercise at a

price of $25. At Visual Soft, for instance, all employees who were granted options have

returned them to the company. Consequently, the company has terminated the ESOP scheme.

4.7.4 Theoretically, an employee who exercised his option now would have to buy at the

exercise price, sell at the current market price, and pay out the difference.

4.8 ESOPs HARDLY BENEFICIAL -

4.8.1 At the height of the IT euphoria in the markets, those employees saw their company's

scripts scaling new heights, they could not benefit as the ESOP's had 1-2 year lock-in periods,

and could not be sold.



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The lock-in period, also known as the vesting period in industry jargon, in the period during

which the employee cannot convert his or her option into shares.

To make matters worse, some companies has specified that the option had to be exercised,

that is converted into shares, within a specified time frame after the locking period expired.

For instance, this was one year in the case of Silver line, and 10 in the case of Aptech.

Table 4.1

ESOP IN INDIAN CONTEXT

Recent ESOPsNo of

Shares

(Lakh)

Plan Exercise Plans

(Rs)

Vesting

Period

Current Price

(Rs)



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(Yrs)NIIT 18.1 Aug '04 1,593 1 162Silverline 10.0 Nov '04 425 1.5-3.5 41Patni 5.5 Dec '04 245* 1 54HCL Infosys 30.2 Aug '04 289 NA 72SSI 1.5 Sep '04 555 3 164Wipro 3.5 Oct '04 2,397 1-2 1,485Infosys 19.6 Oct '04 6,249 5 3,532Visual Soft 0.2 Aug '04 NA 1 116Polaris 8.5 Aug '04 480 5 120

4.9 EMPLOYEE STOCK PURCHASE PLANS (ESPPS)

4.9.1 Employee stock purchase plans (ESPPs) include both tax-qualified "423 plans,"

which about 2,400 companies offer, and nonqualified plans, which about 1,500 companies

offer. Our estimates are based on data from Share Datas Equity Compensation Trends in

America (1991), Hewitt Associates' On Employee Stock Ownership (1996), Hewitt Associates'

Survey Findings: Employee Stock Purchase Plans (1998), and the National Association for Stock

Plan Professionals' Stock Plan Design and Administration Survey (1998), especially the morerecent studies.

To estimate the number of employees covered under the plans, we took the total number of

companies offering plans, multiplied those numbers by the average number of employees in the

companies (13,207 for 423 plans and 17,790 for nonqualified plans), and multiplied that

number by the average percentage of participation in the plans (34% for 423 plans and 17% for

nonqualified ESPPs). Almost all companies with ESPPs are public.

4.9.2 Multiple Plans: Many companies offer multiple e plans, and many employees

participate in more than one plan. For example, many ESPP participants are also in 401(k),

stock option, or other equity compensation plans. Hence, the total number of participants in



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all these plans is definitely not the total of the numbers in the "Number of participants"

column.

4.10 ESOPS AND CORPORATE GROWTH

4.10.1. A 2000 study by Joseph Blasi and Douglas Kruse at Rutgers University found that

ESOP companies grow 2.3% to 2.4% faster than would have been expected without an ESOP for

sales, employment, and sales per employee. The study looked at all ESOP plans set up between

1988 and 1994 for which data was available. A 1987 NCEO study of 45 ESOP and 225 non-ESOP

companies found that companies that combine employee ownership with a participative

management style grow 8% to 11% per year faster than they would otherwise have been

expected to grow based on how they had performed before these plans.

4.10.2 Subsequent studies by the General Accounting Office and by academics in

Washington State and New York found the same relationship. A 1999 study for Hewitt

Associates by Hamid Mehran of Northwestern University found that the returns on assets for

382 publicly traded ESOP companies was 2.7% per year greater than what a model of their

predicted performance would have been.

4.10.3 Studies on participative management alone find a small positive impact on

performance, but not nearly enough to explain the synergy between ownership and

participation these other studies have found.

SURVEY ANALYSIS

5.0 SURVEY BACKGROUND

5.0.1 HR management gets best out of its employees to meet the organizations goals. And

employees are the best judge of the HR policies of any organizations. IT sector is fastly growing

industry in India and HR requirements of Indian IT Industry are quite different from traditional

industrial sectors.., A major characteristic of modern socio-economic development has been



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the increasingly dominant role of service sector .and IT belongs to service sector. So, its HR

needs must also be properly identified..

5.0.2 Indian IT sector is contributing a large in employment and foreign exchange. A developing

country like India can ill afford continued conflict ridden; rigid and litigation oriented Industrial

Relations. What employees perceive about the emerging HR trends of the IT organizations has

been measured.

5.0.3 To measure the success and failures of emerging HR trends of Indian IT Industry a

structured questionnaire was designed for this purpose. The questionnaire included both open

ended and close ended questions. The questionnaire used is placed at Appendix "I".

The procedure adopted for data collection was interview with the employees randomly

selected from IT organizations to the extent possible and also through mail. . The responses

given by the respondents were recorded on the questionnaire. The views expressed by the

respondents have been analyzed in the succeeding paragraphs. About 100 respondents were

selected by convenient random sampling technique.

5.1 RESPONDENTS PROFILE

5.1.1 The main features of the employees randomly selected sex-wise, education-wise and

type of functions wise has been provided here in the succeeding paras. The 54 per cent

of the respondents were Male and 46 per cent of the respondents were Female

5.1.2 IT industry requires higher level of education standards, both non-technical and

technical. The education qualification wise distribution of the employees who agreed for

responding to our questionnaire has been given below in Table 5.1.



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Table 5.1

RESPONDENTS PROFILE - EDUCATION-WISE

(%age)

Respondents' Qualification Percentage OfRespondents

Non-Tech Graduate and Below 11%Non-Tech Post Graduate 23%B.Tech/ BCA etc. 34%M.Tech/MCA Etc. 32%TOTAL 100%

5.1.3 In the similar fashion the job wise profile of the respondents has also been compiled and

the same is tabulated below in the Figure 5.2. As per Figure the IT industry is dominated by

the software professionals And next computer hardware and marketing services of IT are

sharing the other half.

Only 13 percent are working in HR and Personnel Management area. Hence, the HR needs of

IT industry must look after the software professionals at priority.

5.2 WHETHER HR NEEDS OF INDIAN IT INDUSTRY ARE DIFFERENT

5.2.1 Through the Question No.2 of the questionnaire the respondents were asked to

comment whether the HR needs of Indian IT industry are different from traditional HR

Management systems.

It was a direct question in Yes/NO/No comments format and IT professionals selected for

survey were asked to tick one of the choices as mentioned. The responses have been tabulated

in Table 5.3.



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The majority of respondents (69%) view that HR needs of IT industry are different from old

economy sector and HR managers in IT industry has to keep this into mind. Being highly

educated employees are very sensitive in pride and behavior.

TABLE-5.3

Emerging HR TRENDS OF INDIAN IT INDUSTRY

ARE DIFFERENT

(%age)

Respondents' Observation Percentage Of Respondents

Yes 69%No 23%Can not say 08%TOTAL 100%

5.3 EFFECT OF NEW COMPENSATION METHODS

5.3.1 The IT industry has been devising newer compensation methods like Profit Sharing/ Stock

Options etc. to increase employee welfare and retentively. Whether these new compensation

techniques are positively effecting or not was the key point in our next question.

As per Figure-5.4, 46% of the employees opined that newer compensation methods has a

positive effect in IT industry while 19% said that it has a negative effect on employee

welfare.



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26% view that it has no major effect and 9 percent has replied in CAN NOT SAY. . In the initial

stages when IT Industry was sunrise it was mostly welcomed by the employees and when IT

industry share prices has gone down. It has a negative effect.

5.4 WHETHER IT INDUSTRY HAS POSITIVE ATTITUDE TOWARDFS ITS EMPLOYEES

5.4.1 It has been found that in many organizations the management ignores the employees

welfare for their profit sake and does not give proper attention towards employees career and

prospects.

What is the state of affairs in IT Industry in India was quizzed from our valued learned

respondents. The respondents views are given below Table 5.5.

The results are mixed one. While 48% of the respondents' replied in negative and 43% gave a

positive reply. So, there is a profit motive operating more than employees proper welfare

management in Indian IT Industry.

TABLE - 5.5

WHETHER IT INDUSTRY HAS A POSITVE

ATTITUDE TOWARDS ITS EMPLOYEES

(%age)

Respondents' Observation Percentage OfRespondents

Yes 43%



50/69


Author:

No 48%No comments 09%TOTAL 100%

5.5 STATE OF GRIEVANCES HANDLING IN INDIAN IT INDUSTRY

5.5.1 The respondents responses to the status of grievances handling mechanism was

through an indirect approach. In the Question No. 5 of the questionnaire the respondents

were to comment upon the positive hypothesis that grievance handling is done properly in

the IT organization. The five choices provided were strongly agree, agree, no comments,

disagree and strongly disagree. The data collected is given below in Table-5.6.

TABLE - 5.6

GRIEVANCE HANDLING IN

INDIAN IT INDUSTRY IS PROPER

(%age)

Respondents'Observation

Percentage Of Respondents

Strongly Agree 12%Agree 39%No Comments 14%

Disagree 26%



51/69


Author:

Strongly Disagree 09%TOTAL 100%

5.5.2 Only 12 respondents strongly agree to the statement and similarly a small number of 9

respondents strongly disagreed with this. Only 14 percent have nothing to comment. 39

percent agree that the grievance handling IN Indian IT industry is done properly and remaining

26 percent disagree with it.

5.6 TOP MANAGEMENT AWARENESS

5.6.1 Whether top management awareness about working conditions of the employees and

state of working conditions in the organization was measured through next question. Table-5.7

shows the response.

65% of the respondents view that the top managements are not aware or little aware about

the employees working conditions in the IT organizations Only 6 percent vouched that top

management is very well aware about the nature of working conditions and 18 percent say

"Much Aware".

Table 5.7

TOP MANAGEMENT AWARENESS

(%age)

Respondents'

Observation

Percentage Of Respondents

Not at all aware 20%Very little aware 45%

Somewhat aware 11%Much aware 18%Very much aware 06%TOTAL 100%



52/69


Author:

5.7 EMPLOYEE EMPLOYER RELATIONSHIP IN IT INDUSTRY

5.7.1 Cordial employee employer relationship is very essential in the upcoming highly

competitive economy. The state of employee employer relationship in Indian IT Industry was

measured through the next question. The state of employee-employer relationship is not very

encouraging.

Table 5.8

STATE OF EMPLOYEE EMPLOYER

RELATIONSHIP IN IT INDUSTRY

(%age)

Respondents Grading Percentage Of Respondents

Excellent 14%Very Good 44%Satisfactory 28%Poor 14%



53/69


Author:

TOTAL 100%

5.7.2 58 percent of the respondents has graded it very good and above. While 42 percent

consider it satisfactory and below.

The employment of modern technology requires more positive and effective relationship

between management and the employees. Indian IT Industry has very effective employee

employer relationship.

5.8 EMPLOYEES RETENTIVITY IN INDIAN IT INDUSTRY

5.8.1 The most of the employees of IT sector are highly educated and sensitive in nature.

Moreover, the opportunities outside are very attractive, whether Indian IT Industry is able to

retain its employees was the next opinion query from the randomly selected IT industry

employees. Their opinions in this regard are presented below in "YES/NO/NO COMMENTS"

format in the Figure 5.9.

5.8.2 61% of the employees view that Indian IT companies are unable to retain its employees

due to most attractive avenues outside. Only 23% viewed that they are able to retain the

employees.

5.9 HOW TO INCREASE EMPLOYEES RETENTIVITY IN INDIAN IT INDUSTRY

5.9.1 As has been observed in general and also concluded in previous paras that the IT sector

employees in India are very quickly jumping the employment. So, what the employers has to do

for retaining its professionals was asked from the respondents. Few suggestions were listed and

one column was open ended to express their any other suggestion. The Table 5.10 list outs all

the suggestions. I

TABLE- 5.10

SUGGESTIONS FOR INCREASE RETENTIVITY

HR TRENDS IN IT INDUSTRY

hr trend in it industry

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