Core strategy for value creation and employee retention: Study

Zinnov, a leading globalisation and market expansion advisory firm, released its latest study - Compensation & Benefits Survey 2012 – as part of the annual series on MNC R&D landscape in India. The study provides detailed analysis of the the year gone by and predicts the way ahead for R&D centres of leading global MNCs in India, with direct impact on compensation and benefits of employees at these centres.

According to the study, 2011 witnessed the strong revival of R&D investments worldwide. The significant growth in R&D activities across the globe signals the optimism in world economy which had earlier reported a drop in R&D investments in 2010. Reflecting the steady growth globally, the R&D landscape in India too has posted rapid growth in the year gone by with an established base of over 870 MNC R&D centres. India currently boasts of an installed R&D talent pool base of over 200,000 engineers growing at an average of 9 per cent a year for the last five years.

The study observed that while salary hike in 2011 was around 13 per cent, many companies shifted their focus towards designing a centre level core strategy, people centricity approach and process efficiency at their India facility. Furthermore, after a steep increase in 2010, R&D centres have managed to control attrition levels at 17.4 per cent as a result of the focused approach on career enhancement by ensuring increased ownership, better work profile, and competitive pay to retain talent. Best-in-class companies have been able to keep their attrition rate well below the industry average.

Another notable trend that Zinnov noticed last year at MNC R&D centres in India was the way in which companies focused on investing in new products, improvement of existing processes to focus on technical career path, faster time to market and quality enhancements. Says Praveen Bhadada, Director-Market Expansion, Zinnov, “The Indian R&D centres today have come a long way and are maturing in to centres focusing on multi-city strategy, sustained career growth for employees and improved hiring strategy for balancing the pyramid.”

“The industry expects the salary increments this year to be very similar to 2011. MNC R&D centres in India are expected to continue to focus on various other key enablers as well for higher value generation. China continues to give us tough competition, but we are confident that the innovative business approach and renewed focus of these R&D centres will hold us in good stead going forward”, he added.

Today, there is a rapid evolution of a multi-city R&D ecosystem in the country which was earlier concentrated in few Tier I cities. 

The latter half of last decade witnessed the entry of Tier II cities into India’s R&D map as MNCs started expanding their network by taking advantage of the higher catchment area, lower attrition, and cost arbitrage benefits offered by these locations. Over 35 per cent of the fresh R&D talent pool is now spread across non-conventional R&D locations (Tier II cities) and they account for just below 5 per cent of operational R&D workforce. This indicates a good potential for Tier II & Tier III locations, according to the Zinnov Compensation & Benefits 2012 study.

The study also says that while Bangalore is maturing in terms of experienced talent pool availability, other cities like Pune, Hyderabad, Chennai and the NCR region too are fast picking up. India has a rich talent pool of scientists and engineers thus, adding to the talent pool year-on-year. Over 45,000 engineers suitable for MNC R&D centres graduate every year and there has been increased trend towards encouraging employees to opt for technical courses. Few organisations consider PhD as one of the parameters during performance evaluation and a few also have ties with universities to encourage the same.

Striking a cautious note, Zinnov says that though nearly half of the world’s largest R&D spenders have their centres in India, China is giving tough competition and emerging as a R&D hotspot in specific areas/verticals. 

At the same time, an interesting and encouraging sign for India is that many non-US companies have started looking at the country as a viable R&D investment option and planning to set up R&D centres in this lucrative market. At present, about 28 per cent companies with HQ in Japan, EU and APAC have their centres in India and this is likely to increase going forward, which is a very healthy indicator for India as it continues its ‘battle of dominance’ with China.