Report Printout 200710

Talent Management Challenges
faced by
Public Sector Enterprises in
India

AIMA‐Robert Bosch 36th NATIONAL COMPETITION FOR YOUNG MANAGERS
THEME : “Managing Organizational & Management Challenges in India.”
Team : 1)Jeetesh Bansod
2)Mansi Dubey
3)Sonal Bansal
Organisation: Bharat Petroleum Corporation Ltd.
Address: Plot no. A‐5 and A‐6, Sector ‐1, Udyog Marg,
Noida‐201301
Tel No: 09650130278
Fax No:
E‐mail: mansidubey@bharatpetroleum.in
Number of words: 3000
Date of Submission: 20.07.2010
Signature of a Team Member

AIMA – Robert Bosch 36th National Competition for Young Managers
Table of Contents

Introduction .............................................................................................. 3
Findings of the Survey & Analysis ............................................................. 8
Recommendations .................................................................................. 25
Case Study ............................................................................................... 28
Conclusion ............................................................................................... 31

Talent Management Challenges faced by Public Sector Enterprises in India 2

Introduction
In Peter Drucker's article, "The Future Has Already Happened," the
author predicts that the "dominant factor for business in the next two
decades, absent war, pestilence or collision with a comet, is not going to
be economics or technology. It will be demographics." People are the
differentiators when it comes to comes to competitive advantage. Jack
Welch further propounded the concept of right people in the right job
who are a competitive advantage. He said, “If you pick the right people
and give them the opportunity to spread their wings and put
compensation as a carrier behind it you almost don't have to manage
them.” But it is not as simple and as admitted by Jack Welch himself,
“My main job was developing talent”.
The term “talent” refers to a person that has demonstrated great
performance and is seen as having the potential to be promoted at least
two levels. While “Talent management is the additional management
processes and opportunities that are made available to people in the
organization who are considered to be ‘talent’”, (Dr. Eddie Blass, 2007).
It is a conscious, deliberate approach undertaken to attract, develop and
retain people with the aptitude and abilities to meet current and future
organizational need”
SHL’s survey of 280 HR managers reported several challenges faced by
HR departments in varying orders of priority (Pandit 2007) (see Table 1).

Table Challenges faced by HR departments.
Challenges Percentage
Retention of talent 73%
Identification and hiring of right talent 53%
Leadership and management development 50%
Compensation 45%
Staffing or availability of local resources 44%
Employee motivation 38%
Culture building 36%
Change management 35%
Succession planning 31%
HR effectiveness measurement 30%
HR technology and implementation 12%
M&A integration 11%
Industrial relations 6%
Table I
Our report looks at the issues and challenges facing PSUs with regard to
talent and its management, a topic which is particularly relevant at time
when the world is facing a `talent crunch’.
The public sector is in a crisis on the HR front (T V Mohandas Pai, 2006).
In the next five years about one third of the public sector employees will
retire. The public sector — with 85 lakh people and average age of 47‐

48 — has been downsizing and hasn't hired in 15 years. There's a big
challenge there, as the average age has crept up, and there is no
pipeline of younger people. And the public sector business is growing.
The pending wave of retirements and competitive recruitment
pressures from other industries are therefore the major challenges
perceived.
“PSUs attracted highly competent people in the past. It used to be a
prestigious thing for engineering graduates from leading educational
institutions to join corporations like NTPC, BHEL, BEL, HMT, HAL and the
like in the seventies and eighties”, ( T V Rao, 2009).The era of seventies
was characterized as the HR Leadership Era in PSEs.
However the recent trends indicate that the private sector is becoming
a preferable employer as compared to public sector because of good
compensation and better work environment. Also as indicated in a
combined study(The New Manager, Leaders in the making, 2008 ) by
Deloitte & AIMA, the following the paradigm shifts characterize the New
Indian Managers:
Managers Pre‐Liberalization Managers Post Liberalization
Knowledge of rules, regulations and Global Outlook

bureaucracy

Ability to work in hierarchical Manages innovation and

environment efficiency
Need to manage unions on one hand Seeks Empowerment
and bureaucracy on the other
Little incentive for innovation, Collaborates across

efficiency enhancement hierarchies, works laterally
Little appetite for risk Impatient with bureaucracy
National Focus. Little visibility to the Expects to be rewarded for

outside world outcomes v/s inputs
Silo focused Motivator and Mentor
Table II
Companies are now looking at ways and means of providing a work
environment which caters to the characteristics of New Indian Manager.
While PSUs are also remodeling themselves to attract and retain talent,
the pace is not fast enough as compared to the opportunities being
presented by the private sector. As per the findings of the study, this is
leading to an increasing challenge in attracting fresh talent and causing
migration of current talent to private sector.
A survey was administered to 80 senior management role holders (HR)
in various PSUs with objectives as stated below. Out of approximately
80 respondents invited to participate in an online survey, approximately
50 reverted giving a participation rate of 62.5%. The comprehensive set
of talent management practices were focused which influence
employee motivation and commitment that lead to organizational

performance. It was tried to ensure that the questionnaire covered the
broadest spectrum of various talent management aspects. As a result,
the questionnaire included items about the full range talent
management practices and challenges.
Objective
• ∙ To identify various upcoming challenges of talent management
• ∙ To establish upcoming trends in talent management.
• ∙ To identify the ways to retain the best talent.

Findings of the Survey & Analysis
A well‐known McKinsey & Company report coined the term "talent
mindset" to describe the "fundamental belief in the importance of
talent" that high‐performing organizations exhibit. If we look at the core
belief driving the talent management in PSUs it shows that it is mainly
skewed towards the acceleration of development of the high potential.
Figure I
This is the developmental perspective that proposes talent
management is about accelerated development paths for the highest
potential employees (Wilcox, 2005), applying the same personal
development process to everyone in the organization, but accelerating
the process for high potentials. Hence the focus is on developing high

potentials or talents more quickly than others. This shows that still the
“Talent Mindset” has not developed to the extent to which it qualifies
for the “cultural perspective” that believes talent management is a
mindset (Creelman, 2004), and that talent is needed for success
(Michaels, Handfield‐Jones, & Axelrod, 2001). This can be an
organization where the development of every individual’s talent is
paramount and appreciated, and allowing people to explore and
develop their talent becomes part of the work routine, (Eddie Blass,
2007).
It was found from the survey that most of the PSUs (80%) now have a
talent management policy and talent mapping is a regular process in
these organizations. The talent management has been regarded as a
highly significant issue by approximately 80% of the line managers. The
response of the senior managers to the significance of talent
management in their organizations is given by the graph below.

Figure II
When asked about which factors have contributed most to the growth
of their organizations then the following three emerged as the main
factors:
Figure III
It can be seen that although a sound business strategy which lies at the
core, is highly regarded by the senior managers as a major factor that

contributes to growth at the same time it is the high quality employee
under the strong leadership who lead to the success of the strategy.
Talent management as mentioned includes whole gamut of activities
involving attraction, retention and development of talent. It was
therefore inquired which are the areas of strength and weakness in
terms of attraction, retention and development of talent across
management cadres.
Attraction Retention Development
Junior
Management
Middle
Management
Senior
Management

Strength
Weakness

Figure IV
It is evident that PSUs need to gear up on retention of middle and junior
management cadre otherwise in years to come when approximately
15% baby boomers will retire in the next five years and 30% in next ten
years%( as indicated by the survey respondents) a huge talent deficit
shall be created.

Figure V
It is seen from the graph above that the major challenge that is faced by
the PSUs are mainly the factors that are contrasting to private sector in
India. The numbers of job groups/ grades are much more for PSUs than
any other private sector company. To top it all the promotion is
generally time bound. However, it’s time for PSUs to identify the ways
to get over these challenges. Companies like NTPC and ONGC have been
able to work on the strengths and right fit talent and are now widely
acclaimed for their talent management practices. DPE guidelines now
provide a lot of scope to work out innovatively in the defined
framework.

Figure VI
Figure VII

It is seen from the graphs above that many professionals believe that
retention is simply a matter of offering an employee better
compensation than another company.
Money is certainly a driver when employees are considering a change.
AACE International project controls professionals indicate that while
compensation and benefits are important, there are things that are
even more important. Survey by AACE shows only 19 percent of
professionals would have stayed at their last jobs compared to 24
percent who said they could have been retained if offered
development/advancement opportunities and 28 percent who would
have stayed if the culture/work environment was different. Therefore
the major dimension that PSUs need to work on is to improve their
attractiveness. There is a dire need to strengthen the internal brand first
to give a strong base to the External Brand. The employees within the
organization carry the image to external world.
Figure VIII

The above chart indicates that the major focus area for the talent
management should be the junior management. It is imperative to
realize the needs of GenY so as to enhance their engagement levels.
Efforts should be made in the direction that an emotional connection is
established. In a study by Deloitte‐“Do You Know Where Your Talent is?
Connecting People to What Matters, 2008” an important proposition on
the connection part has been touched. Three kinds of connections
matter most when it comes to performance: connecting people to
people in ways that promote personal and professional growth,
connecting people to a sense of purpose, and connecting people to the
resources they need to do great work. The “connect” model is shown in
the figure below:

Figure IX

Steps that could be taken to Improve Employment Strategy
Figure X
It was largely felt that there needs to be a focused approach towards
the employment strategies that should cater to the critical positions
which cannot be risked at any cost. Also the prospective employees
need to be made aware of the opportunities and innovation in PSUs.

Figure XI
“With increased success of liberalization, the country realized that there
is no alternative to talent management. The PSUs have come to terms
with reality. Given the difficulties in compensation, there is a
recognition that PSUs cannot come to compete with MNCs for salaries.
They however recognize that their CTCs are underestimates of what
they really give to their employees. This recognition coupled with the
reforms in PSUs has put pressure on the new HR manager in PSUs to
create a performance driven culture as shown in the figure XI. Today,

almost all PSUs have Director‐level positions for HR. The directive from
the DPE appealing to all PSUs to revamp their PMSs and make them
more robust and transparent, especially in view of the introduction of
performance‐based pay, is laudable and may give rise to some
innovations and accountability.”
(T V Rao, 2009)
Figure XII

A frequent problem arises when the high potential is not adequately
compensated and therefore there is a requirement felt to reward and
accelerate the high performers as shown in Figure XII. As per the survey
report by 2nd Pay Revision Committee, “44% CPSEs favour for complete
autonomy in the pay structure. Nearly 66% of the CPSEs feel that there
should be broad guidelines for pay structure but the issue of finalization
of perquisites may be left to the individual organization. So far as Perks
are concerned, 58% respondents are in favour of autonomy in fixing
perks. 44% of the CPSEs are of the view that as the pay and perks of the
employees in the organization has to be generated through internal
resources these may be decided by the individual organization.
For retaining the talent, About 33 % of CPSE`s have suggested better
pay packages, Perks & benefits like offering ESOPs, Profit linked
incentives etc will help, 32 % have asked for continuous training &
development efforts for up‐gradation of technical skills and remaining
(35 %) have said that they should be given higher status, more
autonomy & better services condition along with full responsibility &
accountability of their related area. PSEs are losing their management
level employees to the private sector due to non‐competitive pay levels.
To recruit the top in the job market, companies must understand the
local salary market and what companies are offering Indian recruits to
ensure competitive salary levels. As the demand for talent continues to

increase, the companies which do not offer competitive salary packages
risk losing talent.”
Following are the obstacles pointed by the respondents
preventing talent management programs from delivering
from delivering business value
Percentage 20% 40% 60%

Senior management
don’t spend enough
12.73%

high quality time on
talent management
Line managers are not
sufficiently committed
12.73%
to people

development
Organization is ‘siloed’
and doesn’t encourage

constructive 9.09%
collaboration and
sharing of resources
Line managers are
unwilling to

differentiate their 14.55%
talent as top average
or underperformers
Senior leaders in

organization do not 5.45%
align talent

management strategy
with business strategy
Line managers do not
address chronic
9.09%
performance

effectively
Succession Planning
and/or resource

allocation are not 29.09%
enough to match right
people to roles
CEO and/or senior
team do not have a
5.45%
shared view of most

pivotal roles

Others 1.82%
Table III
Another significant concern for the public sector as shown in Table III is
succession: as seasoned professionals leave, who will take their place?
Attracting experienced talent is difficult in today’s competitive climate.
Other industries have initiated aggressive marketing and attraction
strategies to acquire top talent. Senior leaders across the public sector
understand these challenges, and are beginning to respond effectively.
Analysis of Critical Positions in PSUs

The most critical people/talent issues facing PSUs
Percent 20% 40% 60% 80% 100%
Retaining key
16.22%
talent

Developing

leadership 27.03%
talent
Attracting

specific types of 8.11%
talent
Attracting new
12.16%
talent

Keeping up with
9.46%
market needs

Managing

diverse 5.41%
workforce
Increasing
demands for
10.81%
work life

balance
Managing
virtual / remote
1.35%
work

arrangement
Compensating

for inadequate 1.35%
skills
Retirement of

baby boomer 4.05%
generation
Increasing

workforce 4.05%
diversity


Table IV
Most critical roles in terms of attracting and retaining employees
1(very 5(not
Question Score 2 3 4
critical) critical)
1. Project 2.000
Management
2. Technical work 2.222
3. Business 1.583
development
4. Project lead 2.462
5. Field 2.174
operations
6. Research and 2.593
development
7. Innovation 1.760
8. Business unit 1.500
leadership
9. Senior 1.480
management
10. Programme 2.520
Management
Table V
Critical Positions as shown in Table V are the senior leadership
positions. However the leadership development is an important factor
that would help in reaping the benefits of the critical positions. PSUs

today require leaders who can initiate process of transformation by
bringing transformative shifts in the mindset, outlook and perspective
of their followers with their visionary appeal. Gill et al. (1998) believe
that the new post bureaucratic organizations will require
transformational leadership that enables flexibility, horizontal networks,
high trust relationship, adaptability to change and uncertainty,
innovation and empowerment of employees. Their leaders in the
competitive environment need to be transformational who are able to
protect their vision powerfully and create support for it maintain a
momentum and empower others to take responsibility for realizing
their vision (Vishalli and Kumar, 2004). This requires paradigm shift in
leadership.
Recommendations

The major findings can be listed as below:
• There is high level of attrition being recorded at the junior
management level
• Senior Management Roles are significantly important to deliver
the results and drive the junior and middle management.
• There is a dire need for image overhaul and to increase the
attractiveness
• Culture with a talent mindset needs to be developed which
values performance and drives engagement
• Focused approach towards management of right talent
To address to the above pain points, it is suggested that the following
actions points(Figure XIII) to be taken up on priority.

Figure XIII

Case Study
NTPC (source: Economic Times, June, 2010)
25,000 die‐hard loyalists,

“The power major employs about
who take pride in the 35‐year‐old brand and its empowerment

attributes and are die‐hard loyalists . Call it branding through

inspiration‐setting up power stations in record time, lighting

every fourth bulb in the country, manpower productivity et al.
That may explain the ultra‐low 0.9% attrition and the highly
efficient 0.82 man‐to‐megawatt ratio.

The company's 22 townships are a major draw. These are

fully‐equipped townships with schools, hospitals, swimming

pools, auditoriums, stadia and the works, which are owned
and maintained by the company.

NTPC shuns from lateral hiring at middle and senior levels. It

prefers to recruit "action‐oriented" people over those who are
"articulate". So far as policies go, along with the Right to

Information, NTPC regularly uploads them on the company

intranet and strives to create a transparent culture. And to
and non‐executives further,

blur the line between executives
level with a well laid out

it has a quality circle at the plant

participation forum‐the core of the quality circle is the plant
While the quality circle looks the regional as
council. While the company is now developing a pipeline of
well as the corporate level.
leaders for key leadership positions with its homegrown

Leadership Assessment and Development System (LEADS), it has
While the company is now developing a
pipeline of leaders for key leadership
also come up with a system of rewarding exemplary ideas from
positions with its homegrown Leadership
within. The Idea Portal of NTPC (IPoN) and NTPC Open
Assessment and Development System
Competition for Executive Talent (NOCET) are sterling examples.
(LEADS), it has also come up with a system
of rewarding exemplary ideas from within.
While IPoN deals with in‐house suggestions on productivity
The Idea Portal of NTPC (IPoN) and NTPC
improvement, NOCET is more focused, wherein the chairman and
Open Competition for Executive Talent
directors throw up theme/s for the year, for which innovative
(NOCET) are sterling examples.
solutions are sought from employees' teams”
While IPoN deals with inhouse suggestions
We see that NTPC has leveraged on the strengths and have
on productivity improvement, NOCET is
achieved in high engagement levels of the employees.
more focused, wherein the chairman and
directors throw up theme/s for the year, for
Development of talent and Innovative practices clubbed with
which innovative solutions are sought from
senior management commitment has worked wonders for NTPC.
employees' teams.


ONGC ( source: Corporate Indian Companies: Forging New Talent

Pipelines and Creative Career Pathways November 2008 SHRM
India)

“ONGC is a leading oil exploration and production company,
ranked No. 1 in Asia and No. 3 globally (Platts 250 Global Energy

Companies List 2007), with interests in refining, liquified natural

gas, power and petrochemicals. ONGC, the only Indian

corporation in the Fortune Magazine’s list of “World’s Most

Admired Companies 2007,” operates in 18 foreign countries
through its wholly owned subsidiary, OVL, and has a workforce

of around 32,800 employees. As a state‐owned listed company,

Oil and Natural Gas Corporation (ONGC) has traditionally

operated on the practice of lifelong employment. Yet, keeping in

sync with the changing mindsets of today’s young people, ONCG

now offers four‐year term appointments at higher remunerations

to meet the demands of frontline field operations, as well as

reemployment of former employees. Further, with an overall

focus on the company’s young workforce, ONGC offers
development opportunities and challenging assignments. ONGC

has also introduced a new career option—the dual career

ladder.”ONGC has kept pace with changing scenario realizing the

expectations for GenY and at the same time engaging people
across all levels.

Conclusion
Public sector HR needs to work harder at selling itself to attract talent.
The cases of NTPC and ONGC clearly show how despite having similar
challenges as faced by other PSUs, they have been able to carve a niche
amidst public as well as private sector industries.
“The sector has to combat the negative perception that its jobs are
inferior to those in the commercial world”, said Thomas Burke. "The
private sector is seen as dynamic and fast‐changing," he said. "Unlike
the public sector, it is regarded as the place where ambitious people go
to work". A cultural change encompassing performance orientation,
transformational leadership, and strong leadership pipeline and
challenging assignments would be imperatives for PSUs.
The public sector must work with a focused approach to reap the
maximum benefits. Talent Management needs to be addressed on
priority to meet the challenges posed by rising talent demand supply
gap and surviving in the age of excessive global competition.


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be economics or technology. It will be demographics." People are the

two levels. While “Talent management is the additional management

The pending wave of retirements and competitive recruitment

pressures from other industries are therefore the major challenges

compensation and better work environment. Also as indicated in a

Knowledge of rules, regulations and Global Outlook

Ability to work in hierarchical Manages innovation and

Little incentive for innovation, Collaborates across

National Focus. Little visibility to the Expects to be rewarded for

of talent management practices were focused which influence

employee motivation and commitment that lead to organizational

the questionnaire included items about the full range talent

This is the developmental perspective that proposes talent

management is about accelerated development paths for the highest

potential employees (Wilcox, 2005), applying the same personal

for the “cultural perspective” that believes talent management is a

(Michaels, Handfield‐Jones, & Axelrod, 2001). This can be an

organization where the development of every individual’s talent is

paramount and appreciated, and allowing people to explore and

these organizations. The talent management has been regarded as a

Talent management as mentioned includes whole gamut of activities

involving attraction, retention and development of talent. It was

terms of attraction, retention and development of talent across

Attraction Retention Development

management cadre otherwise in years to come when approximately

retention is simply a matter of offering an employee better

AACE International project controls professionals indicate that while

development/advancement opportunities and 28 percent who would

have stayed if the culture/work environment was different. Therefore

organization carry the image to external world.

people in ways that promote personal and professional growth,

development efforts for up‐gradation of technical skills and remaining

Following are the obstacles pointed by the respondents

preventing talent management programs from delivering

Percentage 20% 40% 60%

Other industries have initiated aggressive marketing and attraction

Percent 20% 40% 60% 80% 100%

1. Project 2.000

2. Technical work 2.222

3. Business 1.583

4. Project lead 2.462

5. Field 2.174

6. Research and 2.593

7. Innovation 1.760

8. Business unit 1.500

9. Senior 1.480

10. Programme 2.520

positions. However the leadership development is an important factor

bringing transformative shifts in the mindset, outlook and perspective

that the new post bureaucratic organizations will require

high trust relationship, adaptability to change and uncertainty,

innovation and empowerment of employees. Their leaders in the

momentum and empower others to take responsibility for realizing

• Culture with a talent mindset needs to be developed which

25,000 die‐hard loyalists,

That may explain the ultra‐low 0.9% attrition and the highly

and non‐executives further,

level with a well laid out

to work". A cultural change encompassing performance orientation,

transformational leadership, and strong leadership pipeline and

maximum benefits. Talent Management needs to be addressed on

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