Based in Hong Kong, Chuly Lee is vice president and managing director, Asia Pacific, at human capital consultancy Watson Wyatt Worldwide.

In the past 20 years, she has worked with various multinational companies, advising them on business strategy alignment, transformation and mergers and acquisitions. In all these, Lee's predominant interest has been the HR factor.

Recently in India to analyse the human capital deficit here, Lee spoke with Govindkrishna Seshan on the need to tackle the people problem sensitively and predicted a further escalation in attrition across industries. Excerpts:

What is the biggest change in human resources across Asia? Is that different from what is happening in India?

In India and across Asia today the hottest topic of discussion is talent management. Across borders, boards, industries and sectors we are hearing more and more about talent shortage.

In India, especially, there is nothing hotter or more urgent than talent management. The demand for talent far outweighs its supply. Due to the rapid growth that they are experiencing, both India and China are facing massive talent shortages.

While other Asian countries also face similar issues, there is a better balance between supply and demand. In India and China, there has been an explosion in the market place. There is a phenomenal increase in job requirements especially for people who have domain specific expertise and for people in mid and upper level management.

Where will it end?

At present, since the market is tight, we are seeing a major inflation in salaries. The price that you have to pay for talent is increasing day by day.

However, what you pay is not necessarily equivalent to the skill sets that you get -- and companies are tolerating it, and paying a very high cost, because they are desperate for talent.

Sooner or later, though, the market will correct itself. We have seen it happen in many developed international markets and it happens simply because after a point, companies will not be able to support the high salaries.

So what is the way out for companies?

Companies will need to look at factors beyond immediate pay. It would then be about the work environment offered, the career choices offered and a range of similar factors.

Right now, by placing money as the key driver, companies are caught in a trap. More and more Indian companies are fast realising this and are trying to compensate employees through other methods like employee development. Companies like Infosys, Wipro and the Aditya Birla Group are all taking steps in this direction.

In industries like pharma, too, companies are clearly looking at more stable methods of finding and retaining talent. The financial services sector is another instance where companies focus strongly on career development solutions and succession planning. On the other hand, the IT sector still needs to learn its lessons, as it still tracks compensation only once every three months.

Employees' attitude to work has changed dramatically in the past few years: they're now willing to job hop. Doesn't this help recruiters?

No! (Laughs) Actually, the answer should be no and yes. Most people today leave their jobs out of curiosity: they are willing to switch industries and play different roles. But the process is becoming expensive for companies -- advertising, finding and training people attract a huge cost.

So when you have a revolving door -- where there is a flow of people entering and exiting -- a lot of money is wasted. Hence it is more of a disadvantage. Job hopping is not good even for individuals; they won't know in which direction their career is headed or what they will be doing in five years' time.

What measures do you suggest to companies that exist in high attrition sectors?

Higher attrition level in certain sectors is a global phenomenon. Insurance, for instance, experiences an attrition level of 30 per cent or more, the world over.

Hence, companies in these sectors first need to accept that they exist in a high-attrition sector and shall experience higher levels of attrition. If you operate in a sector that is experiencing an attrition level of 50 per cent, you need to hire 50 per cent more.

Also, planning will also have to get more sophisticated and companies will have to adopt newer models. Take a mass BPO, for instance. If an employee stays for a year in a BPO, the company recovers its cost. So today, companies in this sector focus their attention on getting employees to stay for a year or more.

Loyalty programmes, retention bonuses, deferred incentives and other such methods are used to push a maximum of their employees across the one-year mark.

What changes in HR do you anticipate in the Asia Pacific region in the coming years?

The demographics of most countries in the Asia-Pacific region is changing rapidly. People in Japan, Korea, Singapore, Hong Kong, Taiwan and even China are becoming old very fast. So as these countries age, companies from these countries are faced with the question, 'Where will I find my future talent?' Many of these companies are now beginning to turn their attention to India to replenish their own demand.

Hence, going forward, not only will Indian companies have to compete with companies operating from India but will also have to compete with companies from Japan, Korea and Hong Kong.

As these companies begin poaching talent, the depleting demographic trend will become clearer. We have already been advising our clients to watch out for the demographic shift. While this was earlier seen as an intellectual exercise, today, everyone knows that it is a real issue at their door-step.

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