REFORMING HUMAN RESOURCES

Submitted version of the article published in The Global ANALYST, October, 2014

Reforming Human Resources

M G Warrier

My article on RBI Governor Dr Raghuram Rajan published last year in The Global ANALYST (September 2013 issue), concluded with the following observation:

“To conclude, I must say, Dr Rajan has raised huge expectations. Can the new RBI Governor help the economy, besieged by a plethora of challenges including a weakening currency, burgeoning deficits, sluggish growth, runaway inflation, rising interest rates etc. regain momentum?

Well, only time can tell.”

During the one year that followed, many things have changed. Experts are analyzing and those in responsible positions are taking stock. Watching the events, responding to an article on Dr Rajan published in The Hindu (The man who turned the economic tide, September 5, 2014) I commented asunder:

“India was waiting for the kind of leadership Dr Raghuram Rajan and Modi are capable of providing. Both have some common qualities. Both are willing to work for the country's good. Both are good listeners. Both lead from the front. Both are willing to change course, if someone is able to convince that there are better options. In their respective fields, both have the advantage of age. Both are lucky to be at the right place at the right time.” 

These quotes are intended to comfort myself that India has awaken from the slumber and these two individuals in charge of Indian politics and economy ‘together can’ lead and help ‘WE THE PEOPLE’ to move forward. While expressing this hope about Prime Minister Modi I am relying on his loud thoughts expressed through the 65 minutes extempore speech from the ramparts of Red Fort and the ‘PM’s Pathshala’ telecast on September 5,2014(PM’s interaction with students and teachers of India on this Teachers’ Day).  Dr Raghuram Rajan’s media interviews on the occasion of completion of one year as RBI Governor and a communication addressed by him to his colleagues in the first week of September 2014 gave more insight into the RBI Governor’s self-assessment and future plans.

For India Growth Story to progress the way we want it to move, human resources management and development(HRMD) across government and public/private sector organizations is a crucial issue and  if attended to in right earnest, will reduce the discomfort levels of leaders and ‘CEOs’ to a great extent. Sooner than later, the RBI, government and public sector organizations will have to come to terms with the reality that their recruitment, training, placement and compensation strategies need a thorough revision, to fall in line with the changing face of the Indian economy. The fading borders and the immense possibilities for cross-migration of talent across geographies and sectors, make this task more relevant and adds to the urgency in handling the issue with utmost care.

A long-term solution may have to be found for the HR-related problems, including inability to hire experts at market related compensation (this is applicable up to the position of Secretaries/CEOs in government and public sector). There may not be a fit for all remedy, as the issues are as old as the institutions. The policy initiatives may have to take into account the need for and possibility of inter-mobility of executives and managers among comparable organizations. A Banking/Financial Sector Service could be evolved for institutions including those in the private sector and regulatory bodies in the financial sector.

Centre should consider coming out with a transparent and convincing guidance for remuneration packages and HR practices in the public sector based on paying capacity/need for skills for different sectors after opportunity being given to main  stakeholders to express their views .

Proposal for a five-fold increase in salary of MPs, RBI’s objection to some private banks offering fancy salaries to CEOs/top executives, high level executives with better qualifications and track record after long years of experience in the public sector shifting allegiance to private sector or lucky few among them getting accommodated abroad, and some employers researching to find out options to compensate for the lower salary they are forced to pay to their executives because of regulatory restrictions or other compulsions, all these and more made headlines in the recent past.

During a transition from a wholly controlled economy to one exposed to market forces, it takes time for things to stabilize. The move from total control to regulation and regulation to self-regulation under policy guidance is bound to be step by step and slow. The problem arises when government and regulatory authorities refuse to have a holistic approach and take a pedestrian position on serious policy issues relating to prices, costs, wages and income, handling each issue as it surfaces and go for first-aid type solutions. Put differently, as of now authorities start acting only when unhealthy symptoms surface and handle issues on a case to case basis rather than taking a policy approach on all interlinked issues.

 Politicians holding public office may have their own reasons for keeping their official remuneration low and this might have resulted in the present low salary of ‘employed’ politicians. If they want to correct the position, it is up to them. This should not stand in the way of market related improvement in the compensation package of senior government officials, executives of regulatory bodies, public sector undertakings, scientists and professionals in different areas where government has a say in deciding remuneration. The inadequacies in compensation packages are showing up in the form of reluctance on the part of competent candidates to accept/stay on in position or even highest level executives keeping an eye on better employment opportunities elsewhere/abroad.

A national policy on prices, wages and income for the country in the context of the open market path now accepted for planning and development, is overdue. This cannot come about without creating awareness among all stakeholders about the need for discipline and self-regulation within accepted norms even in an open market dispensation. Absence of such a policy leads to sporadic action when problems of national importance which have a bearing on the entire economy’s health crop up. Different ministries, industrial groups, media and those really affected by such off the cuff solutions talk and act differently in such situations.

For historic reasons, number of employees in government and government owned/controlled organizations has been high and their salary structure from top to bottom remains interlinked irrespective of skills, tasks and output. Hierarchies will have to be restructured, excess staff in certain areas redeployed or pruned through appropriate exit mechanisms and recruitment, placement and in house skill development methods overhauled, simultaneously introducing a transparent system of industry/work area specific compensation and career development package. Opportunities will have to be created for in-house skill development.

There is an urgent need to bring some correlation between the pay, perks and incentives available in the private sector and the comparable public sector organizations. Time is opportune for a more meaningful nationwide debate on the present inconsistencies in the wage structure across sectors and hierarchies. The cause for several unethical practices including corruption in India can be traced to the anomalous costs, prices, wages and income structure.

When the first Indian President’s first month’s salary was fixed at a consolidated amount of Rs10,000/- the underlying thought was a ratio of 1:10 between the lowest and highest remuneration across sectors in the country. At that time, there were not many executives in the private sector also, who were drawing a higher salary than the President.

The argument is not that such a ratio should remain static. But, someone should look at the ethical inconsistency in a small Indian company paying two of its ‘employees’ every year a remuneration of Rs50 crore or above, when hundreds of executives in public and private sector who do much more work get paid much less than two percent of Rs50 crore.

With the changing face of India the responsibility of those who handle HRMD issues in government and organizations in public as well as private sectors also increase . Though some positive changes in approach have happened in higher education including IIMs and other management education centres, there has not been any perceptible change in the recruitment and training processes or in opportunities for career progression in government(both at the centre and in states), PSUs, financial institutions and statutory organizations.

The absence of talent in government and public sector is the product of a deliberate neglect of HR related issues by the government. The ageing top level in government and public sector is a serious issue.  In the present context when performance of government and institutions in public and private sectors is being watched by the world and judged almost online, HRD at the top across sectors should become a national priority. As a fire-fighting measure, there is a need for a comprehensive look at the manpower planning and deployment of available expertise among institutions across private and public sectors and related human resources development (HRD) issues which have to be handled without further loss of time.

The Government and public sector organizations may have to consider how best the ‘Cost to Company’(C to C) principles can be integrated into their existing recruitment, training, placement and career progression policies.

Inter-mobility of executives at higher levels among comparable departments of government and public and private sector organizations should be possible, on transparent norms and strictly based on merits. Changes may have to come first in the recruitment and training procedures for IAS and state civil services and management trainees in public/private sector undertakings including probationary officers in PSBs.

Specialized services like one for Banking/Financial Sector could be evolved for institutions including those in the private sector and all regulatory bodies in the financial sector.

The recent initiative by Reserve Bank of India making some changes in the recruitment process has this background. In the present scenario, the move to go for common-cadre of officers in RBI and making recruitment process more broad-based and professional makes sense. But, the hurry with which the RBI top management is trying to implement the well-intended measures may make its own path slippery. Till a decade back, RBI used to learn from its own experience and make corrections midway. The present move gives an impression that RBI has not learnt any lesson from the failure of its ‘Executive Interns’(2010) experiment, which was introduced by the then Deputy Governor Chakrabarty. In organizations like the Reserve Bank of India the temptation of birds of passage at the top to make experiments as they do not remain to see results has a destabilizing effect.

 One option to minimize damage could be to allow the existing staff(within certain age limit and having needed qualification) to migrate to the new cadre after testing their ‘fitness’ through an appropriate evaluation. Better still would be creating a Financial Sector Service on the pattern of IAS and Tata Administrative Service(accepting the better features of both) which could be common for financial sector regulatory organizations and public sector banks including State Bank of India. Such service should first absorb the existing talent within the organizations and go for further recruitment after two or three years depending on need.

A transparent guidance for remuneration package based on paying capacity/need for skills for different sectors and ensuring social security should come from government without always worrying about what will be the impact on Cabinet Secretary’s salary or trade union demands. If the government secretary deserves a higher salary, government should not raise budgetary concerns for not paying it. Instead, merger of some departments and utilizing the surplus manpower for new job opportunities should be a wiser option.

Time is ripe for both private and public sector organizations to have some introspection on their HR practices right from recruitment at the lowest level to selection of CEOs, remuneration packages, training facilities and social security measures for their employees. While organizations in the private sector may have to review the optimum pressure they can put on their executives and managers, government and public sector counterparts may dispassionately examine and modify their remuneration packages to ensure attracting and retaining competitive talent in the present market scenario. Let us not forget that the civil services, executives and staff of public/private sector undertakings have to supplement the skills of the increasing number of political masters who were not as fortunate to get trained or groomed.  The nation is immensely dependent on them for carrying out the development agenda on hand.

Till, perhaps till early 1990’s, employers could depend on a growing population of educated unemployed from which they could hire and fire candidates on their terms. Position has changed with the opening up of the economy and sooner we realize it and act, the better. Dodging real issues could take us back to pre-reform days.

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