Amit Ranjan Rai & Shambhavi Chauhan
As the global financial crisis deepens, obituaries of free-market capitalism are flying thick and fast. James H Quigley, CEO, Deloitte Touche Tohmatsu, who was in India as co-chair of the World Economic Forum, India Economic Summit, 2008, is of the view that rather than decrying capitalism, what the global economy needs is a more effective regulatory framework. But not excessive regulation, he cautions. In such a scenario, he says, “There may be a tendency to overcorrect and swing the pendulum too far.” In a wide-ranging discussion with Amit Ranjan Rai and Shambhavi Chauhan, Quigley holds forth that India has an edge in the global marketplace when it comes to human capital. Equally, though, the country must develop this pool if it is to stay ahead of the competition. He goes on to enlist the strategies that Deloitte is adopting to nurture and retain its employee base. Edited excerpts:
Free market capitalism is under fire. What’s your take?
The declaration from the G-20 summit certainly suggests that we need to review the regulatory model. We are in a global economy which is very interdependent, and so, all the participants on the stage need to be responsible players. I am hoping that we can create a principles-based approach to a regulatory environment, and then have much greater cross-border coordination and cooperation. I believe in capitalism, free markets and barrier-free trade and investment flows, and free access to talent. This fundamental, at the principles level, is going to enable our working through this turbulence much more rapidly and lead to an expansionist environment quickly.
The idea of a principles-based approach to a global regulatory framework is a new one. It has never truly been on the stage before. The G-20 declaration, if they can get to specific implementable recommendations by March 31, has the potential of being very helpful.
There is a fine line that needs to be walked. There are many people who are concerned that if there is a breakdown that is viewed as a regulatory failure, there may be a tendency to overcorrect and swing the pendulum too far. And that, by excessive regulation, it will be more difficult for the economy to be moving again. I want to try to walk the fine line and acknowledge the need to review the regulatory framework that we have in place. But if we recognise that the first line of defence is, in fact, the national regulator, and its policies are aligned and coordinated with the other national regulators that are operating on the global stage, it will be a new environment.
The only meaningful example we have is the international accounting standard setter, which is a global body that has put forward some principles-based standards that are being implemented in all the countries. That’s the model that can be scaled, and we ought to be reviewing that model as we seek to achieve more transparency, coordination and cooperation on things like managing leverage and looking for evidence of systemic risk.
Where do emerging markets like India stand in the wake of the crisis?
They continue to be major players, set to grow bigger on the global stage because of the superior projected growth in their GDPs. But there is also the need for a regulatory environment that can help them attract capital. Emerging markets need to sustain their superior GDPs and economic performance. That is where the talent management agenda becomes so important. The ability to sustain superior economic performance will be driven by your ability to develop people’s potential, help them continue to be effectively employed, and for them to work as effective members of your teams.
Governments need to avoid the temptation, due to slowing growth, to engage in protectionist policies, making it difficult to attract FDI. As Walter B Wriston, former Citicorp chairman, said: “Capital goes where capital is welcome and capital stays where it is well-treated.” If you have a turbulent environment, an unstable tax or economic policy, or a complex regulatory scenario, then frankly you make it much easier for other markets to capture capital.
Business leaders looking to invest in emerging markets must take a long-term view of opportunities and come on stage as long-term investors. At Deloitte we are committed to this market. We have a strong presence in India — about 8,500 people — and in the next three to four years, we are hoping to increase our presence here by over 50 per cent.
How is the slowdown going to impact growth in India?
The earlier view that the Indian economy had uncoupled from the global economy, or the global economy had diversified to a point that it had uncoupled from the US economy, doesn’t hold ground. The reality is, this is a very interdependent world. And it’s good that the economies are interdependent because it gives all players access to the global marketplace.
At Deloitte, we certainly believe that India has enormous scope for future growth. If, in fact, one-third of the projected incremental GDP is going to come from Russia, India and China, I would tell business leaders to have a presence in these countries. One of the magic elements about India is its demographics — the fact that you have a large human capital base here.
The challenge is to develop a cost-effective and sustainable way to develop that talent. If you can, then the outlook has to be bright. If you look at the demographic trends in the mature economies of Japan, Western Europe and North America, they are going to have great difficulty in finding knowledge workers to sustain economic growth. India has the potential of becoming a source of knowledge workers for sustained growth and companies will want to have access to this talent base.
Having said that, it’s going to be a first-class challenge. Because even though there may be 1.3 billion people in India, how many of them will comprise the skilled workforce that you need to drive your businesses? At the same time, you will also be competing with players outside India to retain that talent.
What would be the best strategies for Indian companies to acquire, build and retain talent?
You will have to demonstrate a commitment to employees’ careers. The best people look for companies that are committed to their careers. Knowledge workers today are not necessarily committed to an individual employer, but to their long-term prospects. So, the development, training and building of their marketable skills is something that Indian companies need to be committed to.
How have you managed attrition at Deloitte?
Overall, we’ve encouraged flexibility in some concepts that I think are quite new. One is what we call Mass Career Customisation — you can have your computer customised, your pair of jeans customised, so why can’t you customise your career? The idea is to create an environment where “my work fits into my life, and my life fits into my work”. People want flexibility. Their needs change over the course of their careers, in terms of their willingness to relocate, the volume of work that they are willing to do, the nature of the assignments that they are willing to take on, and so on. So can we create an environment at Deloitte where it is possible for our people to customise their careers? I think that would give us an advantage as we compete for talent.
Any examples of the things you do at Deloitte?
Mass career customisation is something we are making available to all our people. If somebody wants a 75 per cent work-week because of personal or family needs, they can work three days a week, instead of five. Providing that flexibility demonstrates that we are strongly committed to our employees’ careers.
Then we spend quite substantially on developing and training our people — almost half a billion dollars on development and building capabilities. That demonstrates to them that we are committed to building their marketable skills — making them more valuable to Deloitte and making them valuable outside of Deloitte.
What are some of the challenges faced by professional services companies these days?
The challenges are the same as the economy’s — it’s about competing for talent, about being able to meet the needs and expectations of the new workforce we have today. I often tell my people that we compete in two markets — the market for professional services and the market for talent. So the challenge before professional services companies is to compete successfully for talent, and then retain and develop the best people.
As a professional service firm, how do you plan to differentiate in India? What does Deloitte offer that Ernst & Young and KPMG do not?
One key thing that really differentiates us is our culture, our people, the commitment that we have for each other, and our ability to deliver Brand Deloitte on a global scale. That is, to serve our clients with the best thinking of Deloitte and not the best thinking of an individual partner, an individual client team or just the knowledge that we have here in India. It is our ability to disseminate Deloitte’s knowledge globally that makes us different.
The second thing that’s different is our capability set. It’s much more balanced. We have a world-class consulting, tax, and audit and control capability. No one has the balance that we have, because when the other firms decided to sell their consulting businesses five years ago, we do not. That allows us to bring a more complete solution to our clients, and it also provides a richer career experience for our people, and that’s why we were the fastest growing of the Big Four this past year.
You are planning to increase your India workforce. Are these jobs not necessarily for back-office operations?
Over the next 3-4 years we are planning to increase our India workforce by 50 per cent. We are building a capability here to serve both the Indian and the global markets. The centre here is being developed to augment our delivery capabilities as well as work on changing the model for delivering our core tax and audit service.
We do have some back-office operations here, but the majority of what we are building is to assist the delivery of consulting projects, tax services and so on. We see a significant portion of our growth coming from advisory. So we will continue to build our advisory capabilities here. Deloitte is very much on the frontline here.