'(By selling India Life) we made enough to start TeamLease'
Soon after the 2008 financial market collapse that led to the end of Lehman Brothers that September and the subsequent rationalisation of employees by a large number of Indian companies, staffing giant TeamLease too had to cut down on its employee strength of 82,000.
Over the next two years as the global economies stabilised, TeamLease became a 58,000-employee company. Had it not been for the economic slowdown, that had repercussions in India too, the company would have by now easily beat Tata Consultancy Services as India's biggest private sector employer.
While the decision to rationalise so many employees was not an easy one, the 39-year-old managing director and one of the three co-founders of TeamLease, Ashok Reddy, is pretty confident they will emerge as India's biggest private sector employer by 2011.
TeamLease, though, isn't Ashok's first entrepreneurial stint. Earlier in 1997, after he quit a career in investment banking, Ashok, along with his Shri Ram College of Commerce mate Manish Sabharwal and Mohit Gupta had started India Life (currently Hewitt Outsourcing Asia), a pension and payroll administration company, which was sold to Hewitt Associates five years later for an undisclosed amount.
"We made enough from the deal to start TeamLease," Ashok answers cryptically when asked about the profits they made from their first enterprise.
Today TeamLease, India's leading staffing company offers provides staffing solutions to ICICI Lombard, Bharati AXA, Kotak Bank, ICICI Bank, IDBI Bank, Samsung, Videocon, Coke, Pepsi, Toyota, Bharati Airtel and Reliance Communications.
Ashok, who did his schooling from the popular Rishi Valley School (in Andhra Pradesh) and earned an MBA from IIM-Bangalore, spoke to Prasanna D Zore about the challenges that a staffing company like TeamLease faces in India where there are more than 25,000 labour laws and almost 97 per cent of it workforce is employed in the unorganised sector. He also talked about the emotional turbulence that his company went through and interesting trends emerging in India's job sector after sentiments improved in 2010.
Why did you sell your first venture?
I think we were able to scale up India Life (his first company) in size and reach across the country. We were the largest player in the space; we had strong systems and platforms in place. I think the opportunity of taking it to the next level and across national borders was immense which we were not interested in.
From the destiny of the company we believed it would be better driven if we got a strategic partner who had a global footprint to help leverage our business. It also would give our team greater opportunities in terms of growth.
How much money did you make out of your first venture?
That is still under our non-disclosure clause. But we made enough to start TeamLease. But at TeamLease we did not have an investor for the first eight years of our life.
What inspired you to start TeamLease?
When we were doing India Life we realised we were playing a concept arbitrage game in India. The reality of payroll and pension administration exists globally. But in the Indian context there wasn't a single large player offering a comprehensive service solution on this front.
And that's where we believed we could really add value. While we were working on India Life we had corporate client base of 400 companies. We realised that a lot of them were seeking partners who could provide them with temping opportunities where they wanted to hire people but didn't want them on their rolls.
They wanted a partner who would comprehensively drive statutory legal compliances, who would drive HR and backend support services to these employees and also support them on the hiring front.
When we started our research on the temping industry we realised globally it was a $ US 120 billion industry. But in the Indian context there was not a single dedicated, organised player in this field.
That's when we said why don't we repeat what we did with India Life for creating an outsourcing company on the employee temping front.
Image: Ashok Reddy, MD and co-founder, TeamLease
'(We rationalised) so that 58,000 employees who had to stay on with us had a long-term future'
What is TeamLease's employee strength as well as revenues?
In revenue terms, for 2009-10 financial year we closed at 650 crore. Our employee base now stands at 58,000. We started with about 10 employees.
At the peak of the market before September 2008 slowdown hit us we were actually at 82,000 employees.
Did you downsize after the market slumped in 2008-09?
What happens on the temping front is we are the springboards in good times and shock absorbers in bad times. So the element of rationalisation that companies get into either in terms of their headcount where they don't want to hire new people or the element of not replacing attrition happens on the temping side.
How big an emotional decision was it to downsize or rationalise 24,000 people from TeamLease?
Look, out of 24,000 employees 23,800 were located at client locations. Out of these we did provide alternate employment to some of them depending on the market demand and where we could create opportunities.
But of these 24,000 people 50 per cent of them were natural attritions where they had other opportunities and they moved out. When the market downsized it impacted the entire industry. We reached out to our employee base, we communicated to them, we told them about the ground realities and today as the market is picking up they are the ones who are joining us again.
Are you going back to the peak employee figure of 82,000?
I think by the end of this year we would definitely achieve it.
What kind of emotional turbulence did Teal Lease go through while rationalising so many people?
It was something we needed to do in the short run in order to survive for the long run. I think it was a decision that was not easy to go back home and speak on but it was a decision that had to be taken in order to ensure that the 58,000 employees who had to stay on with us had a long-term future.
I think to that extent it was critical on our part on how we communicated the decision internally and to the external world the rationale, the belief, the element of it being unbiased. It wasn't a call based on likes and dislikes.
We went about it in a very structured manner of finding out performers and non-performers, client feedback to the same and then take a decision thereon.
It was an extremely painful decision. As you are higher up in the hierarchy it pains you even more because you go back with the element of having to live with that decision where, to some extent, I think, it's not completely employee-driven to be laid off but there are macro factors also for the decision which you have taken.
What challenges did TeamLease face as a start-up company?
One was obviously the element of concept acceptance and the time we spent in convincing people that the concept could be a win-win for all the stakeholders. But the advantage we started off with was that we had a pedigree behind us in terms of having started, run and managed India Life that had worked with corporates and they in turn had a positive experience working with us.
The second challenge was in battling the unorganised sector. 97 per cent of the country's employed work in the unorganised sector. According to some government estimate about 80 million people work in the unorganised sector. That means they don't get tax benefits statutory benefits, they don't have right to permanent employment, they work through unorganised contractors where the cost to company is equal to net take home.
To make migration of employees from such unorganised sector away from these contractors was a big challenge.
Also, temping as an industry is not an acknowledged industry space in itself in India. We have 25,000 labour laws in the country and depending on the industry we are catering to we have to adhere to the labour laws of that industry.
So understanding the labour laws, ensuring that we keep ourselves updated on a continuous basis, ensuring that we are compliant so that tomorrow nobody points a finger at us became a key variable.
Today we have offices in 14 cities our associates are based out of 800 locations in India. Our ability to recruit people out of all these locations, ability to service them, handle their salary disbursals, look after their statutory benefits became a key variable.
The need to build corporate systems and organisational structures at our end became essential. Because one thing we realised that we were pioneers in this industry. We didn't have somebody else we could emulate or copy. We had to lay the path on which future organisations would tread.
'We are sure we will become India's largest private sector employer by 2011'
How does it feel to be the second biggest recruiter in India after TCS?
We aspire to be the largest private sector employer in India. I think we were at a shouting distance of that mark in 2008. Obviously, we lagged, as growth in TCS was much faster over the last 18 months. But we are sure we will become India's largest private sector employer by 2011.
Have you noticed any interesting trend in the job sector in India post 2008?
Obviously the Lehman effect had its knee jerk reaction on the hiring plans that Indian corporates had. Pre-September 2008 hiring plans were just exuberant. Though they were justified to some extent employees were not monitored for their productivity. Employers were looking just at increasing headcount in their organisation.
But I think the rationalisation that happened thereafter (post Lehman Brothers' collapse that spun into a full blown recession in Western economies and had a spill over effect on the Indian job market) was in a way good for the industry.
Employers became more productivity-driven, focused on metrics, rewarding performers, and punishing non-performers. I think that aspect of hiring has now started coming into all industry segments now.
Pre-September 2008 we used to have 10,000 open positions on an average with us at any given point in time. Post Lehman and the economic slowdown thereon we came down to as low as 500 open positions being open per day.
Today, we are back to about 3,200 open positions at any given point in time in a day. A positive sentiment is creeping back, people are being more cautious, focused on productivity. There is a clear realisation that one can't equate performers and non-performers and you would need to look at a variable compensation structure in order to reward performers as well as improve productivity and profitability.
What are TeamLease's success mantras?
The key aspect of our success is we have a great team. We strongly believe that success of any organisation rests on teamwork.
We don't have a single, brilliant star in our organisation. We have multiple people with different competencies and capabilities who complement each other well, and working for the common objective set out by the organisation has helped us succeed.
We believe in synthesis versus analysis. We believe we should have all data points, all information, but we should err on the side of action rather than on data perfection.
We make mistakes with the belief that we can course-correct when we realise what we are doing. As against being confused about what needs to be done. We are very action-oriented.
Our business wasn't about discovering something new. It always existed in a very informal, unorganised manner. We did it differently to create an industry based around temping.
There was always an element of trial and error in what we did. If it worked expand on it, if it fails do something else. I think these attributes have held us in good stead.
Within the organisation our belief is that sunshine is the best disinfectant. Every issue, every point is on the table. Internally, we argue a lot; we fight a lot. But that is to bring the issues on to the table and not let them fester within the minds of people.
Once, as a team we make a decision, we have a single focus attention to implementing it and seeing the outcome.
What does it take for an entrepreneur to build a strong team?
There is no perfect person to start with. To that extent there was an element of people we brought into the organisation, have worked with, have evolved with and some of our senior team members have been with us from our India Life days.
I think it takes lot of complementing and supporting in order to get the right mixture of people to build a successful team. It also takes element of trustworthiness and role-responsibility, accountability delegation in order to build a people's team. We are a very young team. Organisationally our average age is 28 and senior management's average age would be about 35. Of these senior managers we have been working together with each other for 10 to 12 years.
Dos and don'ts for young entrepreneurs...
First and foremost young entrepreneurs must dream big. The end result of jumping from the 10th floor or the 50th floor is going to be the same. But you might as well jump from the 50th floor so that you at least get to enjoy the view longer.
You are able to dream big when you are able to motivate people or find the resources to achieve your objective. Passion moves people and it definitely becomes a very key variable. Passion attracts money.
You have to bet on people, inspire people, and build great teams in order to achieve the larger objective.
Young entrepreneurs should always have the desire to look at the dessert at the last.
Don't look at monetary rewards upfront. Maybe you will have to sacrifice certain things to have the dessert in the end. Starting with saying I am giving up on something and so I need to compensate that something doesn't work in an entrepreneurial environment.
Don't wait for the light to turn green to step out to do what you want to do. The ability to change 'I wish I had that' sentiment lies in the hand of entrepreneurs.
Image: TeamLease employees at a cultural event at their Bengaluru office