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Talent Management in Indian Real Estate Sector – Contemporary issues

This article is written by:

Mr. R.K.Rao, Vice President – HR

Urban Infrastructure Venture Capital Ltd, Mumbai -400 021

He can be reached at rk [dot] rao [at] urbaninfra [dot] com


In the integrated world economy, the last US financial crisis has had a cascading effect on almost all industries across the countries & continents to a varying degree; the Real estate sector in India was no exception.

With over 1 billion plus population in India, Real Estate sector is the 2nd largest employment generator after agriculture. For last few years, the Real estate sector was growing at 30 % annually, moving away from the seller’s market to a buyer’s market.  It has attracted unprecedented investment in the real estate both domestic & international through private equity & FDI.  80% of the construction is residential; rest is office, Hotels, Malls and Hospitals etc. Housing sector alone is contributing around 5% to the GDP. It is estimated that, one unit increase in real estate, can generate five fold increase in the income. Around 250 additional industries such as Cement, Bricks, Steel, Paint and Building Material etc get affected either way by the real estate industry, so the magnitude is stupendous. Presently 33 million people are engaged  in the  Indian construction industry, with potential to increase employment multifold.

During the boom time, Real Estate companies inclusive of Fund Houses grabbed the best skills available in the market. With over- ambitious vision of timely execution  of projects, coupled with nascent  nature of industry  that  was attempting to  hurriedly  professionalize  its operations in the over heated market, resulted in many companies chasing few people  with requisite skills leading to high cost compensation payout. ROI was not an issue with them until the downturn started. The scenario  changed  with  downturn, which  impacted  the Indian  real estate sector tremendously  in terms of slowdown of construction activities, shelving of projects/ restructuring loans and  over night loss of jobs  leading to disappearance of buyers from market , though we initially believed that Indian economy  was quite insulated from any such forces. Economic crisis resulted in cost reduction by companies, which in  turn lead to large scale layoffs; even the best of  employees were laid  off  perhaps to help improve the company bottom-lines as a survival strategy.

Problem persisted for months & few quarters of 2008-09 and it is only recently that after quarterly results & Capital Market revival that the Real Estate market began to pick up moving away from earlier the negativity. Accompanied by Govt stimulus, low bank rates, lower property prices, affordability orientation of builder – developers and return of buyer / investor to the real estate market has again started fuelling the hope of millions of Indians to acquire a roof over their head.

With the revival of interest both for residential and commercial  premises, it is obvious that  the construction industry  would accelerate it’s activities in the coming months to meet  the new  as well as the pent up demand  to cater to  increasing urbanization at 40%, population growth at 1.5 % per annum, rising income levels and  new risk profiles. According to 10th five year plan, there is a shortage of 22.4 million dwelling units, translating in to construction of 80 – 90 million housing units for middle class. Both the National building Organization & Deutsche Bank report  put the shortage  at 20 million units  and  new  requirements at 10 million housing units per annum till the year 2030. Further the McKinsey report estimates average profit from construction in India at 18 %, which is  rather double than in US.

With the above backdrop of huge demand – supply gap and profitability for the investors, the developers &  real estate investors began to re-look at ramping up their operations and acquire human capital /  talent  in the near to medium term; the activity as such  has already gained momentum. But the companies in their anxiety to acquire best talent should not go overboard with erroneous assumptions without putting in place certain recruitment fundamentals as the direct & indirect cost of bad recruitment is tremendous with its negative cost & consequences.

The prerequisites to check are Knowledge, Skills and most importantly the ‘Attitude of a person to perform the job, as the saying goes…. You are hired for the aptitude, but fired for the attitude.

Firstly, one need to do the ‘Requirement analysis’  to  identify  whether the position can be handled by the existing internal person as an add on responsibility  before embarking on the recruitment from outside &  once it is established that, new  incumbent is required, it advisable to create the fundamental job descriptions, functional requirements  of job  together with  required behavioral specifications, which would help identify short listing of  right candidates and focus on role clarity when they join.

Secondly, after receiving applications either through consultants, website or advertisement and referral, the applicants need to be filtered to ascertain the exact  facts before the candidates meet up with the interview panel, which also helps in further reducing the short listed volumes.  For identifying skills/ aptitude, one should not  only go by what is stated in the  bio-data,  but actually test the skills through psychometric tests,  besides time tested  instruments ( like TAT, MBTI & FIRO-B), lately the battery of reliable & accurate instruments  by Thomas International are found to be very useful to reasonably predict the future outcome of job performance, which include Profiling of  a  person on DISK theory, TST Ability  test,  HJA profile – Behavior required on the job or Person – Job  Compatibility , further his  fit with the team and prevailing  Corporate culture. Through the basic Thomas tests, one can filter the candidates as per the agreed benchmarks to decide which applications are to be taken forward for interviews / selection.

Thirdly, the interviewers should  have interview plan  to test the specific competencies by probing through Behavioral Event interviewing techniques in the Quan-com competency frame work to assess the  motivational check & degree of future success of a person on the job. This would prevent lot of  performance headaches  at later stages as  most of the issues crop up due to incongruent job-competency fit and results in attrition & replacement cost.

Fourthly, the Interviewing is an art and comes at a massive cost, if we review the time & resources being spent on the activities right from sourcing talent, short-listing, filtering to final interview stage to selection. Therefore, organizations should get ready for  this institutional initiation with all seriousness, if required take professional help as the  direct & indirect cost of bad recruitment is colossal. Further, interviewers should be well trained to identify the required competencies for the job rather than enamored by Halo effect of candidates or do ‘hit & miss’ recruitment. This could  be true  of most sectors.

Next comes the structured Induction, Mentoring and continuous productive engagement of new joinees which is a crucial factor in assimilating them into the organizational culture. Organizations should also periodically review their Recruitment metrics  like attrition rate , retention rate, cost of filling jobs, Number of persons applied, short listed verses selected candidates etc  to improve these ratios continuously to help re-engineer their internal processes.  As the Real estate domain is still evolving, organizations should create avenues for continuous learning for employees inclusive of much needed ‘soft skills’ to facilitate greater effectiveness & also help as a retaining strategy.

Finally, the Compensation & benefits should be structured to take care of the need of the person with greater emphasis on pay for performance having a linkage with Individual & team deliverable in the context of  benchmark pay outs and  Individual length of service  with the Organization. It has to be a balancing act, any anxious attempt to grab a superior talent from the market  at any cost may have long term  effect on the morale & motivational aspects of existing employees, though under paying would  reversely lead to avoidable attrition.

The Edelweiss June ’09 –Pan India Job Survey, latest D &  B survey and  CRISIL – Aug ’09 outlook also points out that large order inflows are expected due to improvement in economic conditions and increased outlay in the Budget for development of infrastructure coupled with easing of liquidity pressure would further propel construction activities. All these coupled with Govt impetus  to the sector through proposed regulatory  mechanism  means the business  is expected to grow further in a more transparent way requiring talented people in terms of large number of Civil Engineers, Architects,  Marketing / Sales force, Finance,  Legal  & other support functionaries  to man the  activities  through leveraging the newer construction technologies  to meet our  huge demand-supply gap in Realty, rising aspirations &  increasing appetite of large Indian middle class.

Good Talent Management leads to capability building at Micro level which help achieve Organization’s sustainable competitive advantage .Talent Management should always be aligned with corporate strategy particularly in service industries to serve as a great differentiator for superior returns.

One Comment

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