Point of View

The Great Resignation: Can our industry survive the great talent dearth?

December 21, 2021

The Situation: Demand for accessing talent at scale continues strongly, but where will we find the talent to deliver, and how will we retain the talent as The Great Resignation rages on?

In the last couple of years, most organizations have been forced to undergo some fundamental transformation for the first time in order to function in a virtual business environment.

We’ve had to step up and address decades of technical and process debt, switching to remote work environments, driven by the survival instinct of operating through a pandemic. While we’ve all been in a race to cloudify and automate, a talent war being termed the “great resignation” has seen many initiatives screech to a grinding halt. Suddenly people stuck at home can switch jobs at rapid speed, tempted by attractive wage hikes, or simply a change of virtual scenery, burned out by the relentless intensity and grind of the remote working culture.

As demand for third party services soars, the movement of talent reaches unprecedented highs

We can’t get to our virtual promised land without the help of smart folks who best understand our businesses to help us figure it all out. Enterprises need talent now more than ever. This is presumably a good thing for the global IT and business services industry because it means demand for their services is going up. Our latest market data from the H2 2021 HFS Pulse study shows 85% expect an increase in IT budgets over the next 12 months with 7.3% anticipated growth in third-party technology and business services spend from 600 Global 2000 enterprises in the next 12 months.

But as an industry, where will we find the talent to deliver on this demand? Entering the final quarter of a difficult year, the global IT and business process services industry is very much in the midst of a talent crisis. Staff turnover is a global challenge, but the problem is acute in India. The average global attrition rate for Q3 2021 is 20.4% for announced results. While these officially reported figures are not India-specific, we believe India’s attrition rate is far higher. Anecdotally, we hear that companies’ attrition rates in India are hovering anywhere between 30% and 50%, which is undoubtedly more elevated than the last few years. Against this backdrop, HFS held a digital roundtable featuring eight tech and services leaders and eight enterprise leaders on the biggest change agent of them all, our talent.

Unpacking how we got to the talent crisis: Strong enterprise demand for talent and weak employee value propositions all around

These key reasons contributed to this talent crunch across Indian IT and BPO markets:

An unexpected pandemic demand surge as global clients try to pivot their operating models to respond to numerous market changes, not least seeking cost savings, is emptying the talent pool. The supply side as a whole underestimated this comeback in demand following last year’s initial slowdown. The result is a lack of ready talent within the enterprise, as most providers maintain a lean bench of resources. “Software is the alchemy for every industry, and every industry is going to embed software and technology into its products,” shared Ravi Kumar S, President, Infosys, adding, “…there are ways to bridge the skills gap – there will be more re-skilling investments, there will be pivot from degrees to skills, labor participation will go up as people who are not participating will do so as they move from full time to part time, and consulting firms like Infosys will lend value chain of human capital – we will have to help customers, enterprises to re-skill their human capital.”

In addition, finding talent with the right skills to cater to the rising demand further fuels the “talent demand-supply gap.” Indeed, with demand coming roaring back, the roundtable delegates were confident that the industry has a long future ahead of it. But the key will be rethinking our approach to talent management. Sandeep Dadlani, Chief Digital Officer at Mars, was feeling optimistic, “The demand for tech, right-sourcing, software led processes, upskilling, process intelligence and automation….is infinite…There’s so many levers to unlock for the next few years, and this industry has a lot of value to offer for a long time to come.”

The employee value proposition is in jeopardy for many service providers. Due to the pandemic, the priority for leaders has been on business survival and sustenance. For many, employee experience, communication, and engagement weren’t on the top of the list! In addition, working from home has only made it harder for employees to feel a sense of “connectedness” and “be part of a corporate culture.” So, when the market demand surged, and opportunities lined up, experienced resources now ask for higher compensation, more flexible work-from-anywhere environments, healthcare, and other perks that are not always a given, especially in India.

  • It’s just that easy to switch jobs right now. If employees are disengaged from their organizations, a quick Zoom interview or two later, and they are able to secure a new employer. Aloys Kregting, CIO, Akzo Nobel spoke about this harsh reality, sharing, “For so long, we have had people that are working from home, including those that have recently joined, don’t know the culture of the company or have a sense of belonging. It’s gone. That fuels people resigning and trying somewhere else, being disappointed in the company.”
How do we address the talent crisis as an industry? What are the emerging strategies in play?

#1: Instating flexibility as a core component of the employee experience

Employees want human connections, and they also want flexibility…we’ve reached the Hybrid Paradox! Flexibility is also about “why you want to work,” “who you want to work with,” not just “when you work.” HFS has observed a marked shift in thinking on this subject among enterprise leaders, evident in our Pulse market data over this year. In H1 and H2 2021, we asked 800 and 600 enterprises about their expected work from home ratios for the coming 12 months. We’ve found that the weighted average stays the same through this entire year – ~40% are expected to work from home in the average company. But what’s interesting is that there’s an increasing desire to drive up the physicality of our work interactions in the last few months. 16% of enterprises now believe that less than 10% of their workforces will WFH this coming year, vs. less than 1% believing that in H1 2021 (see Exhibit 1).

Exhibit 1: An increasing number of enterprises are sensing the need to return to physicality

Sample: 800 respondents (H1 2021) and 600 respondents (H2 2021) from Global 2000 enterprises
Source: HFS OneOffice Pulse Study, H1 2021 and H2 2021

The roundtable delegates acknowledged the uncertain nature of WFH mandates tied to the pandemic. However, the consensus was that there is no ‘going back’ to 100% office working cultures, but some elements of workstreams will need adjusting. Cliff Justice, Partner, US Leader for Enterprise Innovation at KPMG, shared, “I don’t necessarily see the desire to return to a Monday-Friday type of office job. But the level of creativity and problem solving that has to occur with the increasing challenges and opportunities in the current environment require more of that interaction…people getting together in group settings, whiteboarding together, in a collaborative environment. It’s just very difficult, stressful, and draining to do that in remote video conferencing environments.”

At the same time, companies will need to manage a balancing act on providing employees flexibility in their jobs. We need to provide avenues for enhancing the employee experience, and thanks to the pandemic, flexibility is emerging as a critical pillar of employee satisfaction. To the extent possible, enterprises must focus on employee experience (EX), recognizing and enabling the mode of working that suits each employee based, based on their work profile. Aloys Kregting, CIO, Akzo Nobel, rightly recognized the need for offering flexible work options since every employee is different. He shared, “I found out fairly quickly that some people love working from home. A lot of people don’t necessarily enjoy interacting with other people every day. They love this situation…What is important is that you have a customized approach, those that miss the interaction should be able to subscribe to digital lunch dates, and other ideas. It is unavoidable that we will see a higher level of WFH, and need to compensate for that as leaders, human beings, to different ways of working.”

Tiger Tyagarajan, CEO, Genpact, summed it up by saying – “Any rising tide separates winners from losers than no change. Enterprises as well as service providers will grab this as an opportunity and be able to attract and retain talent because of culture, orientation to purpose because they have orchestrated a vision for ESG that is absolutely real, that they walk the talk on serving stakeholders.”

#2: Finding ways to share culture and a sense of belonging in a hybrid world

Work cultures cannot be forced; they develop organically. They also traditionally evolved around the watercooler, the informal gatherings and conversations, and shared experiences at the workplace. During the pandemic, many of us put “softer” elements of culture and shared company values on the back burner, while keeping operations ticking took precedence. Almost two years later, the talent crisis is a sure indicator that enterprises need to rethink how to develop and share what makes working for them unique, and culture is a great place to start. Mattijs Backx, SVP & Head of GBS, PepsiCo, had profound observations on the topic of culture, “As an industry, we need to adapt and think, how do we orchestrate performance in more of a hybrid model. Culture building that was historically tied to an office is very different now. One of our biggest challenges there is creating belonging. Looking at HFS’ market data on attrition being 20%, that means a year from now, half of our employees, most of them will not have worked in a physical office. How do you create culture in that environment, or belonging?”

Sandeep Sacheti, EVP, Wolters Kluwer summarized it well, “It is clear that employees are asking for a different level of engagement from their leaders. They are asking for connection, learning, and growth. Fortunately, at Wolters Kluwer we are creating a culture of talent who are addicted to learning and growing with us while connecting the dots to their work and creating pathways for development.”

#3 Revisiting how we think about skills

For the last few years, the outsourcing industry has spoken about skills mostly in the context of digital technology and data skills. And rightly so. As emerging technologies quickly embed themselves into the core operations of every industry and business function, talent bases – no matter what work they do – must become data and digital proficient. As HFS, we refer to this skill set as “digital fluidity.”

Tiger Tyagarajan, CEO, Genpact, had an interesting take on the need for digital fluency with the rise of ‘trilinguals,’ sharing, “Everyone wants skills, now, and to drive change. Those are such great problems to solve…It’s clear that digital, data, and building insights to help decision making is no longer an enabler; it is the business. Become trilingual, across 1) the domain you know, 2) the language of data, and 3) that of digital technologies. Reskilling around this allows better solutions to be built.”

As an industry, we’ll always be in a learning mode when it comes to digital fluency. Whether you graduated from college a year ago or a decade ago, the pace of technological change and its adoption into business is not slowing anytime soon, meaning learning must become an intrinsic part of work. In fact, Ravi Kumar S believes the days of earning a traditional college degree may soon be numbered, stating, “Why do we need degrees? If the life[span] of skills is so short, the world will pivot from degrees and skills—and education will be intertwined with the model of work.”

Digital and data skills are a here-and-now need, but they are far from the only skillsets and work competencies the industry needs to be prepared for the future of work. In a recent study, we analyzed what skills will be required for the OneOffice, mapping seven core skillsets, including initiative, values, problem-solving, digital fluency, appetite for change, social influence, and interaction. As a part of the study, we surveyed 500 global enterprises on what they believe are the most important skills and how they prioritize investments accordingly. As Exhibit 2 shows, most of the seven skills are thought of as critical for survival. But we still don’t see the requisite levels of investments across most categories.

Exhibit 2: Enterprises are not investing adequately for skills considered critical for survival

Sample: 500 Global 2000 enterprises
Source: HFS Research, 2021

Shiva Ramani, CEO at iOpex, made similar observations and shared his company’s experience with skills training during the pandemic. He recounted that most employees requested training, which was met by iOpex’s increased budgets for internal and external coaching and certifications. But what was interesting was the type of learning people wanted to undertake. Shiva shared, “We didn’t set constraints on specific skills that people needed to learn.” As a result, employees started showing interest not just in digital technology skills, but soft skills. “Personality growth was a big one, with employees stating, we want to be bold, we want to take a holistic view of transformation.”

While much of the talent drain has been losing people to similar firms for higher wages, there has also been a noticeable exodus of people to start-up organizations which offer the lure of stock options and “unicorn” culture.  According to Srikrishna “Keech” Ramakarthikeyan, ​CEO Hexaware​, “True innovation needs talent that goes to unicorns.  ​How to attract and retain that talent needs creative solution approaches”.

In short, innovation must be encouraged as both hard and soft skills are developed and refined. Kelly Chambliss, SVP of Americas and Strategic Sales at IBM, stressed that it is “so important to recognize and reward both types of skills, as hard skills such as machine learning can become less relevant quickly, but soft skills like collaboration, communication or curiosity are more important than ever and are more likely to determine our success in achieving a goal. And so, it is really important that we factor those skills into our learning and development programs and our mindset and ways of working. One of the best ways to do that is to create an environment where we apply our curiosity in our way of working and how we come together to solve problems.”

#4 Taking a broader and more creative approach to sourcing talent

At the end of the day, the global IT and business services industry found its origin and maintains a core part of its value proposition around providing talent at scale. When the very founding pillar of the industry shakes, it shows. The great resignation has taught us that as an industry, we need an entirely new approach to traditional recruitment engines or even the concept of full-time equivalents as a pre-requisite for success.

As explained by Suzanne Leopoldi-Nichols, Chief GBS Officer at WPP, “the buy-side has had to make a shift from seeking the ‘right talent’ to seeking ‘the talent’ and the last 18 months have caused a fundamental shift in how we engage talent and our stakeholders. Whether we’re looking at education, ESG, mental health, growth, and opportunities, we have to ensure with our partners that they are looking at the same things as well, to ensure we don’t have the turnover and have a consistent process and outcomes for our companies.”

Exhibit 3: The pandemic has taught enterprises that talent management strategies need a complete re-haul

Sample: 400 Global 2000 enterprises
Source: HFS Research, 2021

Let’s be honest; the hiring practices in our industry primarily rely on recruiting fresh talent straight out of college or poaching talent from each other’s firms. Indian outsourcers have become tremendously proficient at hiring and providing training and onboarding en masse to university talent.

Sandy Khanna, Global Head of Shared Services at Anglo American, said, “We all poach from each other. I know we do. But having spent some time on both sides of the fence in industry, and particularly given the world we have all just lived through, focusing on the 4Cs, as I call them, has been key. It’s important we look at the inclusivity and diversity of hiring and the 4Cs that make the difference in my environment – companionship, collaboration, creativity, and culture. These are the four things that, if we focus on the right way, will really allow us to attract, retain and develop the people we want to invest in. I have found that focusing on those four, as well as the vision and well-being agendas we all drive to demonstrate the depth of career paths in our companies, is one way we can all differentiate in attracting and retaining additional talent outside of this industry. It is critical, CRITICAL, that I do this so that I don’t compete with my ecosystem partners who I need to succeed.”

Robbie Dagger, People Director at Tesco, added, “What you stand for as an organization was always important, but now, people are making choices about things now based on this – it really matters.You’ve got to make some big bets, some hefty long-term investments on capabilities and upskilling. It needs to be about everybody learning together.”

As the talent crisis persists, the industry will need to find mechanisms to recruit talent from other industries, as well as seek creative new ways of sourcing skills and expertise. Stephanie Trautman, Chief Growth Officer, Wipro, shared their unique approach, “We’re using new sources of talent. We do have access to talent today we didn’t have before due to the hybrid work environment…At Wipro, we have platforms to reach talent just in time, reach niche skills and really engage the gig economy to address urgent needs. These are some of the creative approaches we’re all taking…but it is certainly a challenge to attract and retain challenge, you have to give people an incentive to want to join and stay with you and create innovative and exciting careers for them.”

In terms of differentiation, Jay Desai, VP and Head of GBS at JTI, stressed that differentiating your organization in terms of who you are is key. “Creating the employer branding experience and making sure you have a truly unique employee value proposition is key for us. Flexibility, choice and agile ways of working are foundational to what we are building.”

So are we in a bubble or is this how it is going to be? Co-CEO and Co-Founder of Celonis, Bastian Nominacher stressed “I don’t think it’s a short-term bubble. I think this is here to stay… we all need to work together from different angles: People topics, like how we upskill, culture, as well as from the technological side. We’re in a storm, and as an entrepreneur, you have to embrace it, take it head-on and make the best out of it.”

The Bottom Line: Enterprises need talent now more than ever

The Great Resignation is teaching us that to have a shot at attracting and nurturing talent sustainably in the future, the global IT and business services industry needs to completely rethink its current understanding of employee experience, culture, skillsets, and talent sourcing.  If attrition worsens further, delivery of services is going to become impacted to such an extent there could be a wholesale backlash against outsourcing.  As much as we want to rely on technology to substitute the need for people, the pandemic has taught us that people collaborating is where innovation happens, and there is no substitute for the idea creation and energy people can bring to the table.

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