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Last Updated : May 16, 2017 11:26 AM IST | Source: Moneycontrol.com

Setting up a new captive–A 9 box model!

India’s compensation structure is different from rest of the world: Annual base salary in India is actually a summation of Annual basic (which is directly linked to position worth) and annual guaranteed allowances (House rent allowance, medical allowance, Leave travel assistance allowance etc.) which forms 60-70 percent of the Annual Total remuneration.


Sreemoyee Gupta and Mansee Singhal

India has been a favourable offshoring / outsourcing destination for long. Low costs of infrastructure, talent surplus, operational expertise, domain expertise and many more factors have lead to this steady growth of offshore centres. With changing macro - economic environment, there is an increased global in-house center (GIC) activity in India which is not just driven by a need to have greater control on some of the offshored processes but also to build domain capability which could completely change the kind of work which is delivered from these GICs. It is no wonder, therefore, today 750 plus captives operate out of India and the base is growing both in numbers and diversity from an industry stand point.

What started as a contact centre industry with GE setting its call centre, the industry has grown across domains – banking, pharma and life sciences, retail and with horizontals right from F&A  to analytics to technology operations of the largest banking set up.

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What goes into making a good global in-house centre, let us start from the foundation and work all the way up! Hence, what are some of the imperatives of talent during the build stage of a GIC?

Our 9 in a box approach finds the way out for HR leaders of this talent maze. The continuum of total rewards and talent management can be drawn along these 9 blockers during the build stage of a GIC or a particular process. The focus on each of these blocks would evolve and change as the organization moves from the build to the mature stage.

THE 9 BOX MODEL FROM INITIATION TO 18 MONTH JOURNEYMercer


When a global player plans to set up a captive or insource its operations, the first million dollar question is, the location of the centre and rightly so – the location will not only determine the short term ability to start from ground zero to become functional but also impact the long term sustainability and success through infrastructure costs, talent pipeline availability, leadership availability and managing the overall operations and governance of the centre.

Next is designing the local organization which has to be aligned the global or parent organization mostly to the parent function whose back office and /or offshored unit it operates as but also would need to follow the local structural norms – for e.g. while the global organization could be flat, the local may need multiple levels in the context of the industry as well as multiple quick levels to provide vertical movements.

Hiring for those levels, both in quality and quantity can be addressed by looking at talent maps within the country and concentration of kind of work in specific regions:

  • think NCR and BPO comes to mind perhaps boasting of the earliest contact centres

  • think Mumbai and the Financial capital of India comes to mind hence no wonder most banking captives operate out of there,

  • think South and IT Capital of India comes to mind hence most IT captives are based out of Bangalore, Chennai or Hyderabad (and in tier 2 locations as well).


Balance has to be drawn between cost and quality of talent to maintain a sustainable eco system.

At the initial stage GICs may also look at moving talent internally from the other parts of the world or India to the entity during the build stage of the organization. HR needs to be mindful of creating a separate framework of total rewards management for this set of talent as convergence of the two frameworks would create an imbalance in the ecosystem and disparity. The cost of buying talent from the shared services industry for the same role is considerably different as compared to the mainstream industry, with the differentials peaking at 70 percent across some roles.

Demographics of talent which is employed in this industry has led to localization or customization of multiple aspects of:

--Careers and sub banding; most GICs have on an average 9-10 bands, including sub bands to support such frequent expectations of career progressions.

--Staying competitive in pay is important, more so, when a new entity is being set up. GICs are known to be competitive on pay in comparison to the third party players. What is important however to understand and implement is:

global in-house centers Some of these allowances provide Income tax benefit with certain caps and hence many organisations allow employees to structure their pay by choosing the type of allowance and quantum they want in their salary.

--Differentiation based on job functions and skills has been prevalent in India, most global GICs have created differentiated pay ranges for different segments of work, for example one to support operations, another for technology and third to support to analytics hiring. Hence, leading to functional pay range structure, rather than a singular banding structure.

--It is common that companies stack up various components of salary and offer the same as CTC- Cost to Company- which is a common term in India. When someone mentions CTC, it may mean different things in different industries.

--Benefits in India have typically been hierarchy dependent and some most prevalent ones have been in-patient benefit with a family floater, accidental insurance and car. Though it is seen to remain relevant to the generation Z as well as carve out a distinct EVP, employers are taking strong and steady steps towards various innovative benefits like leave pooling or unlimited leaves, world class maternity leaves (recently updated) to new parents benefits, sabbatical leaves to experiential holidays and the whole hog.

An important dimension for GICs to address is the need for client / external facing titles in India, which sometimes can be a make or break issue given the sensitivity. Finally, to stay sought after, a GIC need to bring all their offerings under one compelling framework which truly differentiates it – and  through this the Total Rewards Framework gets defined, tying the pieces of competitive compensation, innovative and personally relevant benefits, compelling careers and learning opportunities and work life style to manage several coexisting yet sometimes conflicting priorities seamlessly! That is truly an EVP which attracts, binds and helps retain talent.

Finally, what is the individual value proposition of the GIC?  Is compensation the only lever to attract talent in India in this space? The answer is no, buying talent should not be a long term strategy for GICs because eventually questions on cost optimizations questions will come 5-6 years down the line. Hence, there needs to be balanced evaluation of all of the above aspects to create what will really attract and retain talent in the GIC in the first 2-3 years of set up.

A complex problem statement which stares the HR fraternity in the face in a 'millennial industry'. However, if one follows and focuses on the 9 box approach, there is a method of resolving this madness over a period of time.

Gupta is Senior Associate and ITeS Industry Leader, Mercer and Singhal is Principal and Cluster Leader, Hi Tech, ITeS, EDS, e-commerce at Mercer

 

 

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First Published on May 16, 2017 11:26 am
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