September 23, 2007

To regain the lost glory of our governmental organisations, the policies on compensation and manpower planning have to be completely revamped...

Since the time of economic liberalisation, the Indian policy makers have been suffering a strange dilemma. As we all know, economic liberalisation was never a choice – so, if on one hand, policy makers have been unwillingly advocating the principles of free market, on the other, wherever they could, they willingly stuck to their age old legacy of control. Ergo, if the private sector enjoyed semi-liberal economic policies, public enterprises got completely stifled. In fact, the biggest loser of this policy hypocrisy has been none other than government run institutions and enterprises. They have suffered relentlessly on all fronts, but suffered the most on account of neglect of the most critical resource of any successful enterprise i.e. the human resource.

My argument stems from the fact that in today’s world, the success and failure of any enterprise (particularly a business one) is in its people. And the manner in which this all-important resource has been treated in any governmental enterprise, has been most unfortunate. In this competitive market where private enterprises are crazily scouting for talent and going all out evolving new pay structures and innovative compensation policies, policy makers have illogically made government institutions stick to their age-old policies of manpower planning and compensation management. On account of compensation, a recent survey by the salary tracking firm PayScale revealed that the median salary in India for the private sector is Rs.5,65,214, while that for government owned entities is Rs.2,45,745. With that kind of a differential, it is extremely challenging for government enterprises to attract and retain talent. And that is the very reason that hordes of talented people have been leaving government enterprises and moving towards greener pastures, making the enterprises unproductive, uncompetitive and redundant, in most cases. In fact, it is incredible that the Managing Directors and Chairmen of Public Sector Banks draw salaries that are less than what many of the entry-level managers get in private sector banks. Worse is the case with scientific institutions, which are of strategic importance – like ISRO and DRDO – where research scientists are leaving and joining competing firms across the globe, not only making Indian organisations totally inefficient, but also posing a threat to the internal security of the nation. It is indeed shocking to learn that these scientists earn less than what an entry-level call centre employee earns nowadays. Similarly, the huge deficit of Commissioned Officers in the Indian Army is because the salary a Commissioned Officer gets is no match to what his compatriots get in the private sector.

The same holds true for manpower planning. I’m sure that most of us would still remember the ‘iconic’ Voluntary Retirement Scheme (VRS) of the State Bank of India. The scheme was so successful (!) that many of their top management and most competent people took the opportunity of a golden handshake – and then joined the private sector – while unskilled people stayed back. The same story has been oft repeated for most PSUs that undertook VRS.

The fact is that there was a time during the early post-Independence era when young Indians joined the public sector in hordes with a dream to build a new India; sadly, things have drastically changed since then. Today, in the given scenario, there are three kinds of people who keep themselves employed with government enterprises – first are those who still feel that their work is a service to the nation (e.g/ Army personnel, policemen, senior doctors at institutions like AIIMS, eminent faculty members at IITs etc); second are those who have decided not to work throughout their lives and enjoy a ‘lifetime of guaranteed employment’; and the third are those people who are so incompetent that even if they want to switch over, they find no takers. And unfortunately, in most of the government enterprises, the first variety is only a handful, and almost all government setups are loaded with the second and third variety of employees. As a net result of all this, government enterprises have been perennially sinking.

If the functioning and productivity of government organizations have to be improved, then mere big talks of ‘service to the nation’ alone would not suffice. The near-death policies on compensation and manpower planning have to be completely revamped. Policy makers have to realise that if human capital is not respected, the day is not far that government enterprise would become a thing of the past. The least that they should do is to make sure that there is some reasonable parity in compensation between the government and the private sector, so that the former can also attract and retain talent and get a level playing field to compete, not only against the private sector but also globally, as the Indian private sector is doing today.

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