Presentation by Malcolm Wagget, Chief Operating Officer HSBC Global Resourcing, South Asia October 7, 2005 Agenda Global/Indian ITeS-BPO Industry HR Issues & Challenges HSBC People Strategy Summary ITeS - BPO Industry ITeSITeS-BPO in India ± The Rising« In 2003, 300 of the Fortune 500 employed offshore resources« 2003 Have nots 40% Have 60% 33% increase in offshore penetration year over year Have nots 20% 2004 Have 80% «in 2004, this figure has risen to 400 Source: NeoIT.Com Global Players in India Research Analytics, Engineering Shared Services (IT / HR / FA) Customer Relationship Management Back Office Processing Data Entry / Transcription BFSI ICT Auto Healthcare Others 2004«Turning point Indian ITES / BPO ± fastest growing segment Forecasted to reach USD 5.7 billion in FY 2005 Domestic revenues are expected to double in FY 2005 Industry employee strength of over 250,000 and expected to grow by 40 percent in ¶05 Employment in sector to exceed one Million by FY ¶07-¶08 India remains the most widely used off-shore location and is expected to see maximum increase in spending in 2005««.Morgan Stanley source: NASSCOM «..Witnessing Unabated Growth« 1,800 USD billion INR billion Share in India's GDP 3.2% 1,200 2.7% 2.9% 978.3 1.9% 1.5% 600 1.2% 361.8 253.1 186.4 5.0 0 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 200405E 4.1% 3.5% 1,275.8 5% Grown at a CAGR of 28% over FY 1998-2005 3% Share in India¶s GDP has more than doubled from 1.9% to 4.1% expected to reach 7% by FY 779.6 657.9 565.9 2% 2008 13.4 16.1 21.5 28.2 6.0 8.2 12.1 Expectation of USD 50 billion in 0% export revenues by 2008 Source: NASSCOM «that is expected to continue Drivers of Growth Competitive pressure Impact on profitability Focus on more cost efficient business model Sustained cost advantage Delivery process enhancement and improvement Resource flexibility Large pool of technically qualified, English speaking resource Ability of Indian vendors to ramp up operations rapidly Expanding service offerings Shift towards high value services Issues & Challenges Issues & Challenges Cost Advantages Wage inflation & dwindling pricing Infrastructure challenges Data Security & Protection Data protection and IP rights issues Meeting International standards Intellectual Property Quality issues Meeting customers expectations But most importantly«.. People ± Attraction & Retention Quality Talent Language skills Controlling attrition Building the right culture Proper hiring on time Competency building HR Issues While average attrition rates of 40-50% in the industry is very high [cost of attrition is 1.5 times the annual salary]« And the demand for quality talent is accelerating [245,100 people employed in March 2004, vis-à-vis 171,000 in ¶03] The availability of quality talent pool is growing at a slow pace« [at an average, only 6 out of 100 aspirants are eventually recruited]. The Usual Tool Kit Approach« Group Medi-claim Insurance Scheme Personal Accident Insurance Scheme Subsidized Food and Transportation Company Leased accommodation Recreation, Cafeteria, ATM Flexible Salary Benefits Wedding Day/birthday gift Employee Stock Option Plan Corporate Credit Card Cellular Phone/Laptop Personal Healthcare [regular medical check-ups] Loans Educational benefits Performance-based incentives Flexi-time Regular get together and other cultural programmes Employee Referral Scheme But Why Do People Really Leave? * Others include: Main reasons for attrition: - Money ± 10% - Night shifts ± 25% - Monotonous/boring job-30% - Others* ± 35% No growth opportunity/lack of promotion For higher education Misguidance by the company Policies and procedures are not conducive No personal life Uneasy relationship with peers or managers Physical strain Source: NASSCOM ITES-BPO study HSBC People Strategy HSBC People Strategy People Strategy Our employee policies are geared towards attracting, developing and motivating talented people People are fundamental to our business and its success. Identify, develop & retain high potential talent. Strengthen the link between performance & reward. Progress diversity education & actions. Prioritise Learning & Development on leadership, sales & relationship management. Diversity Imperative HSBC¶s commitment to diversity Diversity is central to our brand. We have a competitive edge in the market because.. We value and manage diversity We understand and advocate the quality of individual service Of the way we treat our employees. We provide high quality customer services HSBC employs and manages diverse people which, makes us a more rounded and balanced organisation and enables us adapt to new situations. Best Employee Practices Internal growth opportunities: internal ads and promotions Committees: Sports, Culture, Environment Foreign assignments, migrations, cross training, secondments Employee Stock Options Savings Related Share Options Training programs Personal Development Plans Learning & Development «and not just training More organic and the joint responsibility of employee and HSBC. Learning and Development priorities are: To become more: Demand driven - Understand the needs of the business and be driven by your needs Pro-active - An agile attitude in the way we design develop and deliver new products and services Value adding - Products primarily focused on the areas that add the greatest value Connected - Working closer with the business to understand strategic and operating plans Reward & Recognition Superstar Award GIFT (Give It Fresh Thought) Extra Miler Quality Excellence Award OPERATIONS µMFG team of the Quarter¶ Award Team leader Awards Business Leadership Awards Customer Service Awards SUPPORT FUNCTIONS Team Leader Award Business Leadership Awards Customer Service Awards MFG Team of the Half Year Award Compensation & Benefits Cash Benefits Basic Salary Flexible Allowance Package Share Option Savings Scheme Bonus Deferred cash bonus Night shift allowance Other Benefits Provident Fund Gratuity Hospitalization Insurance Cover (Premium paid) Staff Referral Scheme Staff Discounts & Special Offers Personal Accident Insurance Cover (Premium paid) Transport Facility Etc. Valuing our People Employee satisfaction surveys, daily devotionals, coffee meetings with Senior Management Team Internal growth opportunities Employee committees: Community / Sports / Cultural Ideal balance of work/life; 5-day week, 34 paid leave per year Reward and Recognition program: For individual For team In Summary People strategy can no longer be about salaries ± its about the whole package. We need to : Find the right people for the job ± better recruitment processes Provide a balance between performance expectations and growth aspirations Provide a great work environment ± good and instant rewards, bonding programmes, flexible working hours and stronger career path. Provide access to higher education and ongoing learning for the employees. A more diverse workforce that includes age, experience and perspectives. Treat your people as you would treat your valued customers Thank You Any Questions?