The Indian services sector some day in the future will thank the global meltdown for helping it derive better value for its people advantage. It seems far-fetched now, even as the sector is grappling with the effect of the meltdown. But the services sector is sure to look back and mark the changes that were ushered in post the global meltdown. And the changes would sweep not just the export oriented sectors but also the inward focused sectors like retail, travel, real estate etc.

Services sector has been the lead player in the India growth story for nearly two decades now. In the early ’90s it began with IT and business services.

Beginning with a head start, IT/ITES sector did get to pick the best of the talent. Talent moved from across all other industries into this sunrise sector in huge numbers to the extent that the world believed that all Indians were software programmers!

Liberalisation in the late ’90s across the transportation, communication and insurance sectors led to a quick turnaround in these sectors. New airlines were launched, insurance JVs set up, new hospitality ventures announced and media houses expanded. Then came telecom, retail and realty that have been growing at a scorching pace as though making up for the late arrival.

All offered enticing career options for raw and experienced talent. The surge in demand for pilots, airhostesses, hotel staff and media professionals continued unabated until recently. The IT/ITES sector saw the tide of people turn the other way, leading to sky rocketing salaries and hard-to-manage attrition. There were serious concerns about the viability of India sustaining its ‘preferred destination’ status as the IT/ITES industry was fighting the twin battle of salary inflation and high attrition.

Giving credit where it is due, the Indian IT/ITES sector led the way in bringing the much touted demographic dividend to India with its focus on new age talent management. However, a considerable portion of this advantage has been eroded over the past couple of years due to the spiraling salary levels and discovery of the same talent pool by global MNCs.

Even as the established technology sector was fighting this trend in its own way, the other new service businesses too found the going tough. Until recently the talent grab across all sectors was fierce and the ‘war for talent’ was getting dirtier. Then came the global recession, which brought the much-needed pause and rationalisation of skill to salary matrix.

Post global meltdown, the challenge is not going away as India embarks on its next phase of growth sooner than we anticipated. In fact, this phase of growth will demand a different and more sustainable approach — newer business models which do not price talent on time and material basis, but focus less on job work and more on finished products, offering more services targeting the domestic market especially the bottom of the pyramid.

All these would require more innovation from our talent base, not just better execution. The change has to happen not just at the level of the senior management but across the enterprise. Now, as the economy takes a breather, could it be the best time to look at this transformation? Right approach to talent management is a make or break issue here.

The fundamental issues plaguing the services sector have been:

* Low productivity when compared to the West. The math has been — two in India for one in the US— two software engineers in India for every one in the US or two financial services specialists for every one in the US and the list goes on.

* Fast career growth resulting in lesser management bandwidth especially at the middle management level.

* Conventional hierarchical structures with overemphasis on designation and span of control unsuitable for knowledge-based industries.

* Global organisations with very little management capability to recruit and retain multi-cultural teams.

With a new approach, India could retain its people edge in global services sector and more importantly realise better value for its talent resources.

So, what is it the services sector needs to do on the talent front? Recently we have been seeing the smart moves of the Tata Group in the realty and hospitality sector. Even as the rest of the hospitality players were focusing on the top end of the tourist population, Tatas have quietly expanded their network of budget hotels. This strategy is a paradigm shift from a Group whose mainstay business has been to cater to the luxury clientele.

As the price point changes, so does the need to utilise manpower optimally. Indian services sector, especially the mid-sized ones need to shift gears at the strategy level and therefore needs leadership, which can think differently and further execute on transforming the existing approach to talent in the services sector.

to be a conscious effort to improve per capita productivity with a focus on utilising talent well at all levels. This demands a mindset where we move away from throwing out more people to training people to solve problems and demanding their accountability.

It calls for a relook at the organisational framework and have flatter empowered team structures with a conscious effort to move away from high brow designations. This will trigger a change in the social structure and push the new generation into a work environment which stresses more on meritocracy and less on entrenched power structures.

It would help to have an open approach to talent from across the world, which could perhaps begin with overseas locations, so that there is increased learning through cross pollination of ideas and approaches. This will also give the Indian workforce a way to benchmark against rest of the world. Understanding where you stand in a global workforce goes a long way in fostering realistic expectation from employees.