To understand the power rating of different appliances we need to understand the basic terminologies and concepts involved. The generic meaning of the word power means some kind of energy or strength to do a certain act. In the context of physics, power can be more narrowly or specifically defined as the measure of transformation of energy from say electrical form to mechanical form. An example can be of a fan which uses electrical energy (current) and converts it into mechanical energy (fast moving air). The power consumed by fans is generally in the range of 40W-60W.
Each appliance will require a specific amount of power to do the defined task. A monitor may consume 300W whereas a water heater may consume power as high as 2KW. This amount of needed energy is called the rating of the appliance. This power rating is decided by the manufacturer keeping in view the safety requirements as well. If the power supplied to the appliance exceeds the power rating of the appliance there is a possibility of the appliance getting damaged! In order to avoid this there is always a margin of safety maintained to protect the appliance from damage. That is, if the rating of the appliance is 75W it means the actual rating of the appliance may be in the range of 80W-85W. Else, if the power supplied exceeds the rating the appliance will be damaged. The economic implication of such damage can be huge especially in the case of electronic appliances.
Determining the power rating of appliances depends on different factors like Resistance, Load Connected and Type of Circuit. Resistance impedes the movement of electricity and hence consumes more power. This can be put in the form P=I^2 * R where I is the current, P is the power and R is the resistance. R is directly proportional to P and hence if R increases the power needed also increases. Power can vary, depending on load, especially in appliances like motors where the power consumption is higher when the motor starts. In parallel circuits, each branch consumes different amounts of power.
Monday, June 7, 2010
Non Conventional Energy
The present energy crisis in the world is because of negligence to tap non conventional resources in the past. Energy is the prime mover in the development process. Depleting fuel resources cannot increase the growth process. They need to be gradually replaced by non conventional resources. The sun is the source of all non conventional resources. India has one of the largest renewable energy projects in the world. In India, energy demand is increasing at the rate of 9% per annum and supply is not keeping pace. The increase in demand is primarily due to growth of industries and also due to increase in domestic load.
Non conventional resources comprise of Solar Energy, Tidal Power, Wind Energy, Ocean Energy, Hydro Power etc. Out of the many sources only Solar and Hydro Power have been making considerable progress-mainly through extensive support programs from the government and other environment bodies.
There are several strengths, weaknesses, opportunities and threats of the non conventional resources. Strengths include limitless supply, environmental safety and a naturally recyclable resource base. It offers excellent opportunities in terms of matching supply and demand and electrification of rural areas using off-grid systems. However there are looming threats as well because there has not been much research done on non conventional resources. Also the amount of money required in terms of initial investment could be an undermining factor.
Solutions to long term energy problems will come only through research and development in the non conventional energy areas. Instead of expecting immediate outcomes they should be set in the 10 year or 20 year plans. Biogas and solar energy offer the greatest scope for development of new energy resources. India is among one of the few countries which has embarked on an environmentally conscious path and has launched policy initiatives to accelerate renewable energy development and sustainability.
Non conventional resources comprise of Solar Energy, Tidal Power, Wind Energy, Ocean Energy, Hydro Power etc. Out of the many sources only Solar and Hydro Power have been making considerable progress-mainly through extensive support programs from the government and other environment bodies.
There are several strengths, weaknesses, opportunities and threats of the non conventional resources. Strengths include limitless supply, environmental safety and a naturally recyclable resource base. It offers excellent opportunities in terms of matching supply and demand and electrification of rural areas using off-grid systems. However there are looming threats as well because there has not been much research done on non conventional resources. Also the amount of money required in terms of initial investment could be an undermining factor.
Solutions to long term energy problems will come only through research and development in the non conventional energy areas. Instead of expecting immediate outcomes they should be set in the 10 year or 20 year plans. Biogas and solar energy offer the greatest scope for development of new energy resources. India is among one of the few countries which has embarked on an environmentally conscious path and has launched policy initiatives to accelerate renewable energy development and sustainability.
Friday, June 4, 2010
Impact of Technology on Newspapers
The advent of e-readers, smart phones and other technological devices has definitely brought in more challenges to printed newspapers. The current business model of magazines is broken and the direct evident cause is the reader. As more and more content moves online, the focus should be on increasing online advertising revenues and online subscriptions. This implies newspapers have to increase both traffic, i.e. the number of unique visits and page views.
This transition from offline to online has, however, increased the expectations of both the reader and the advertiser (who is the main source of funds for the print media). At the same time readers are unwilling to pay for news that is virtually free everywhere on the web. Advertisers, on the other hand, want to pay a fraction of what they paid earlier. The direct impact is generally seen with both revenues and readership numbers falling drastically.
However the business model is at threat and not the journalistic model. Essentially, newspapers have to look at new business models, including paid-for online access. The approach should be of innovation rather than defence. Of late, newspapers/magazines have begun to use more and more web tools, thus enhancing the experience they give to readers on the web. This has led to an overlap between printed and online versions of newspapers. Readers mainly access the web for latest news and weather reports. Thus, the Internet is not actually an immediate threat to printed newspapers. Modern marketers believe the Internet can present an opportunity for newspapers to go beyond their conventional product and offer faster news on varied areas using multi-media technologies.
We can conclude that getting readers online is not the actual problem today. Rather, the challenge lies in other, more specific areas:
• Increasing the amount of time readers spend on e-paper
• Ensuring regular visits
• Converting page views into revenue;
• Improving advertiser incentives for buying online advertisements
A paid model can be successful only if a magazine/paper has unique, rich and niche content. In such cases, newspapers/magazines might be able to attract readers to pay up. Newspapers needs to maintain its class and category leadership in offering news and analyses.
The following could help:
1. RSS Feeds:
An increasing number of people have begun to use web tools that enable them to read online content on their own terms. Newspapers that were reluctant to offer such features to their readers have avoided a loss in page views by only offering partial text feeds which enable readers to view headlines but not full articles.
2. Blogs
Blogs go beyond the conventional limits imposed on journalists. They involve readers and discuss topics not covered elsewhere, thus encouraging discussion of extraordinary issues, and in turn also increasing page views and site traffic.
3. Audio & Video
Audio and video are two features which go beyond the newspapers’ core platforms. This can be a superb medium which combines features of television with the power of the print.
4. Mobile
Delivering breaking news via mobile at regular frequencies could be another potential model to earn revenues. Of course this will be more of a volume game. Even advertisers can be roped in to pay for the news items. Sending mobile alerts to readers can be a good way to start. This will not only add value to the subscriptions but also increase page impressions. Local news can be a big hit if provided on time. This will also bring in good revenues from local advertisers who will be more than interested in promoting their services in the neighbourhood.
5. Interactivity
Options to connect with the journalists, other users and the site in general can make readers feel important and bring them back to the site.
Newspapers should be considering how to use social media and mobile technology to target both advertisements and content. In doing so, they’ll be able to open up their advertising space to both advertisers from around the world, and local neighbourhood businesses that could never before afford advertising in these newspapers.
Advantage of Localized Advertising Solutions
Newspapers can tap into its database of registered billing addresses and provide location specific online advertising solutions. This means they can offer special advertising rates which will display advertisements based on locations chosen for. This model is already being used in top job sites in India and elsewhere. Since Newspapers knows how many people in any given locality are subscribers and what content they like best, they can accordingly target the audience.
Social Networking
Newspapers need to be active on professional social networks such as LinkedIn increasing page views and tapping into user data. LinkedIn has a user base of mainly working professionals who will be the right target group.
This transition from offline to online has, however, increased the expectations of both the reader and the advertiser (who is the main source of funds for the print media). At the same time readers are unwilling to pay for news that is virtually free everywhere on the web. Advertisers, on the other hand, want to pay a fraction of what they paid earlier. The direct impact is generally seen with both revenues and readership numbers falling drastically.
However the business model is at threat and not the journalistic model. Essentially, newspapers have to look at new business models, including paid-for online access. The approach should be of innovation rather than defence. Of late, newspapers/magazines have begun to use more and more web tools, thus enhancing the experience they give to readers on the web. This has led to an overlap between printed and online versions of newspapers. Readers mainly access the web for latest news and weather reports. Thus, the Internet is not actually an immediate threat to printed newspapers. Modern marketers believe the Internet can present an opportunity for newspapers to go beyond their conventional product and offer faster news on varied areas using multi-media technologies.
We can conclude that getting readers online is not the actual problem today. Rather, the challenge lies in other, more specific areas:
• Increasing the amount of time readers spend on e-paper
• Ensuring regular visits
• Converting page views into revenue;
• Improving advertiser incentives for buying online advertisements
A paid model can be successful only if a magazine/paper has unique, rich and niche content. In such cases, newspapers/magazines might be able to attract readers to pay up. Newspapers needs to maintain its class and category leadership in offering news and analyses.
The following could help:
1. RSS Feeds:
An increasing number of people have begun to use web tools that enable them to read online content on their own terms. Newspapers that were reluctant to offer such features to their readers have avoided a loss in page views by only offering partial text feeds which enable readers to view headlines but not full articles.
2. Blogs
Blogs go beyond the conventional limits imposed on journalists. They involve readers and discuss topics not covered elsewhere, thus encouraging discussion of extraordinary issues, and in turn also increasing page views and site traffic.
3. Audio & Video
Audio and video are two features which go beyond the newspapers’ core platforms. This can be a superb medium which combines features of television with the power of the print.
4. Mobile
Delivering breaking news via mobile at regular frequencies could be another potential model to earn revenues. Of course this will be more of a volume game. Even advertisers can be roped in to pay for the news items. Sending mobile alerts to readers can be a good way to start. This will not only add value to the subscriptions but also increase page impressions. Local news can be a big hit if provided on time. This will also bring in good revenues from local advertisers who will be more than interested in promoting their services in the neighbourhood.
5. Interactivity
Options to connect with the journalists, other users and the site in general can make readers feel important and bring them back to the site.
Newspapers should be considering how to use social media and mobile technology to target both advertisements and content. In doing so, they’ll be able to open up their advertising space to both advertisers from around the world, and local neighbourhood businesses that could never before afford advertising in these newspapers.
Advantage of Localized Advertising Solutions
Newspapers can tap into its database of registered billing addresses and provide location specific online advertising solutions. This means they can offer special advertising rates which will display advertisements based on locations chosen for. This model is already being used in top job sites in India and elsewhere. Since Newspapers knows how many people in any given locality are subscribers and what content they like best, they can accordingly target the audience.
Social Networking
Newspapers need to be active on professional social networks such as LinkedIn increasing page views and tapping into user data. LinkedIn has a user base of mainly working professionals who will be the right target group.
Monday, April 5, 2010
Online Recruitment Sector
THE INDIAN ONLINE RECRUITMENT SECTOR
1. What is Recruitment?
Recruitment is the process of finding and attracting capable applicants for employment. The process begins when new recruits are sought and ends when their applications are submitted. The result is a pool of applications from which new employees are selected.
Figure: Recruitment Channels
2. E-Recruitment Revolution
The buzzword and the latest trends in recruitment is the “E-Recruitment”. Also known as “Online recruitment”, it is the use of technology or the web based tools to assist the recruitment process. Online recruitment and the use of new emerging technologies have many advantages for the modern recruiter. It makes the process of finding candidates and new business opportunities quicker, cheaper and more efficient. The one drawback, however, is that online recruitment can appear to be a daunting subject.
There is growing evidence that organisations are using Internet technology and the World Wide Web as a platform for recruiting and testing candidates. The IES survey of 50 organisations using e-recruitment reported that the primary drivers behind the decisions to pursue e-recruitment were to:
• improve corporate image and profile
• reduce recruitment costs
• reduce administrative burden
• employ better tools for the recruitment team.
Fifty-five per cent of respondents expected their organisation to reduce its use of other recruitment methods in the future. The key limiting factors to e-recruitment most frequently reported were:
• the cultural approach of the organisation towards recruitment
• the lack of knowledge of e-recruitment within the HR community
• Internet usage by target candidates
• Commitment of senior management.
Figure: The e-Recruitment Landscape (Source IES)
Issues raised as causing concern with e-recruitment included the quantity and quality of candidates applying using web-based tools (eg organisations being inundated with CVs attached by email, many of whom were not suitable for the post), the relevance of shortlisting criteria (eg the validity and legality of searching by keywords), confidentiality and data protection, and ensuring diversity of applicants.
The trends in e-recruitment use suggest a changing landscape whereby in future the candidate is connected to the central system and there is involvement of the line manager in the process (see figure). In addition to the reported benefits such as cost efficiencies, the role of HR in this model is viewed as more of a facilitative role, in theory allowing time for recruiters to become involved in the strategic issues within resourcing.
3. The E-Recruitment Sector
While the Indian recruitment industry is still reeling from the impacts of the US slowdown (in terms of cost cutting measures induced by the companies), one significant area which has actually witnessed a growth in such a conflicting situation is the e-recruitment market. Growing at a pace of about 100 to 150 per cent, this recruitment mode promises to increase its share from the present 2 per cent to 10 per cent in the next 3-4 years. The Internet, in fact, has completely revolutionized the role of the traditional recruiter. Gone are the days where cold calling and candidate networking were the only option available to identify new potential candidates. Now it's about searching through hundreds of thousands of CV's placed on personal web pages and browsing online corporate staff directories. In a candidate-starved (quality candidate) market, the Internet can prove a valuable resource for finding potential candidates who are not necessarily looking to change their current jobs but would be open to the 'right' opportunity. Meanwhile in a candidate rich marketplace, we can use the Internet to find relevant 'live' job vacancies where companies have advertised directly on the web. You can also use the Internet to find information on company's financial results, their budget information, who has been recently appointed, and business wins & losses. In fact, with the right search techniques, you can normally find exactly what you are looking for.
Presently, the total Indian recruitment market is approximately around Rs 500- 600Crores. The decade old online recruitment industry in India seems to be flooded with different jobsites, each of them promising a better job to candidates and better candidates to employers. The Indian market for e-recruitment is still at least five years behind the West”. This shows in the big numbers. According to industry estimates, the top four or five job portals account for only 1.5 to 2 per cent of total recruitments.
Internationally, online recruitment is almost neck-to-neck with other recruiting channels. In the US, for instance, the online recruitment market already accounts for 29 per cent of total recruitment related advertising.
4. Jobsites-The Concept
The online recruitment revolution started in India in 1997 with the launch of naukri.com which changed the entire platform for job seekers and employers. A typical job site offers a dynamic candidate database to employers apart from standard web-based advertising solutions (which include simple text based listings/classifieds to dynamic banners and animated pages). Online recruitment facilitates just-in-time hiring.
Figure: Resume Database Sizes of India’s Major Job Sites
When an organization needs a candidate it can access the database of job portals, screen resumes and send a mass mail. It can also shortlist people based on skills, location, salary and availability and move on to the interview stage. Some of the jobsites in India include naukri.com, monsterindia.com, timesjobs.com, clickjobs.com, shine.com, cybermediadice.com, jobstreet.com etc
5. Direct & Indirect Competition
Initially the most evident direct competition was only the job supplement of newspapers. Placement consultants although considered a threat by both newspapers and job portals were in fact consumers of both these solutions at some point or the other.
Direct Competitors Indirect Competitors
www.naukri.com
Times Ascent (Times Job Supplement)
www.timesjobs.com
DH Avenues (Deccan Herald)
www.monsterindia.com
Opportunities (The Hindu)
www.jobstreet.co.in
www.linkedin.com
www.clickjobs.com
SMS Advertising
www.shine.com
Newer methods of recruitment like mobile SMS advertising, Radio jingles and billboard advertising were some of the upcoming modes which were posing a threat to e-recruitment portals. An upcoming social networking site name LinkedIn was creating disruptive innovation by offering a combination of features offered by Facebook/Orkut and those offered by job portals. Moreover it is available free of cost to employers at the moment.
6. E-Recruitment-Objectives
The objective of a job portal is two pronged - First, to provide an avenue for a prospective job seeker with the most relevant and appropriate job opportunities. The more such opportunities that the job portal gives, the better it would be for the job seeker and the job portal themselves.
Second, to provide corporate employers with a large number of profiles in its database, which have good number of quality resumes in terms of work experience and skills sets as sought by the corporate.
And if these quality resumes are of actively job seeking individuals, that is when the employers, who actually make revenue for the job portals, will get benefited. If the job portals can increase an employer's or a head hunter's efficiencies in sourcing and selection of candidates for their current requirements, then one of the primary business objective is met.
So there are two questions that a job portal needs to answer. First question that needs to be answered is - do the job portals really add value to the job seeker? And the second question is - do the job portals increase the hiring efficiency and effectiveness of an employer.
But how many jobsites will actually survive? What is it that makes a job portal stand apart? Newspapers also provide job supplements. And there are plenty of such job supplements thriving and getting good revenues for the newspapers. Will this principle hold good even for jobsites?
7. Newspapers’ Success
Different newspapers lead various markets across India. For example, if The Times of India leads in Bangalore then The Hindu perhaps sells better in Chennai. Moreover, there are many regional newspapers which have better market penetration in the interiors of the country. This is primarily because of better local news coverage.
Hence, any vacancy advertisement has to be advertised in multiple newspapers for wider reach. Advertising in different newspapers across regions gives employers unique responses. Also, in India, advertising in newspapers is still considered to be a better brand-building exercise.
8. Factors affecting the Online Market
a) Cost of advertising in newspapers: Many employers have switched to online recruitment as it is cheaper and cost-effective. If the cost of advertising in newspapers reduces, it will hit the online recruitment business
b) Hiring plans of employers: If there is a reduction in hiring budgets, it will hurt the online recruitment business more, as compared to newspapers, as these portals are vertical (focused only on recruitment)
c) Placement Consultants: Although, majority of the consultants use job sites as one of the media for sourcing profiles, mid/senior level candidates are better sourced through networking, paper advertisements and referrals. This is exactly what the top-notch consultants do. Since the online candidate database is available to anyone who subscribes to it, mid/senior level candidates are skeptical to register on job-sites.
d) Vernacular Languages: Companies looking out for candidates from Tier II/III cities and interior belts advertise in the regional newspapers in the local language. Advertisements in local language can generate much better responses in these places. However, the job sites accept advertisements/resumes in English language only.
e) Client Satisfaction: Reduction in time and cost of recruiting
f) Growth of Internet: Increase in market penetration will definitely increase the number of visitors on jobsites thus leading to growth of the e-recruitment market.
g) R & D: Increased technological advancements combined with newer features being offered by jobsites could give e-recruitment a better edge over other modes.
9. Jobsite-Differentiating Factors
A job site is accessible on the web from across the globe. This makes advertising on multiple websites redundant. Since registration on a job site is free, job-seekers may register on all sites. They may also respond to advertisements on all sites. But the job-seekers may be the same. So it does not make business sense for employers to advertise on multiple sites to get the same response.
So, how are the job sites surviving? Not all job sites are doing well. But the top sites are uniquely positioned and offer unique advantages to employers. Hence, employers are willing to spend on multiple sites. For example, timesjobs.com is the undisputed leader in conducting job fairs across the length and breadth of the country. Participants include leading IT/ITES companies looking out for entry/junior/mid level candidates. Of late, companies from other sectors are also keenly looking at job fair as an option for recruitment. Clearly, timesjobs.com has an edge over others as it draws support from its in-house partners like print (Times of India/Economic Times/Bangalore Mirror etc), radio (Radio Mirchi), Televison (Zoom, Times NOW) and the horizontal portal Indiatimes.com In addition, the resumes sourced through the job fairs may also be available to online subscribers thus giving access to unique profiles.
Monster.com is a multinational company operating in multiple countries across the globe. Employers hiring candidates from abroad typically look at monster as it offers various combined packages giving access to candidates from multiple countries. For example: If an IT company in India wants to hire a specialist available only in Europe, it makes sense to sign up with Monster rather than Naukri as Naukri is not well-known in Europe.
Naukri.com, being the first-mover in the Indian online recruitment space, has been a dominant player in the core online services.
Industry experts feel the reason for the growing popularity is change in perception of the recruitment site from just being a job board to a resume manager to a market analyst. A market study of past six months show that not only has there been an increase in terms of specialized solutions and services, but also a lot of stress is now being given on R&D and providing of customized and personalized services, which gives them a fast mover advantage.
There has been a paradigm shift in the hiring process through online recruitment. In particular, accessing profiles from any corner of the globe, real-time communication and online automated assessment. Online corporate recruitment features include video profiles, virtual office tours, online presentations and interactive tests. These value-additions enable a firm to make a benchmarked peer comparison on a one-on-one basis and understand a prospective candidate’s suitability for a job. It has also increased the visibility for candidates on the options available in the market and reduced the recruitment cost drastically while improving the turnaround time.
Advantages
• Much faster than traditional modes of recruitment
• Access an dynamic pool of resumes
• Automated short-listing process cuts down hiring time by over 65%
• E-recruitment is experiencing phenomenal growth, according to the Recruitment Confidence Index (RCI) e-recruitment special. Almost 50% of employers now go on-line to fill their vacancies – nearly three times the number who used the internet three years ago.
• Newspaper advertisements may have worked to find top talent in the past but Internet recruitment sites are where the skilled individuals of the present and future are looking for jobs.
• Gaining occasional candidates for free by ensuring the e-recruitment website is easily found from the front page of the corporate website
• E-recruitment can produce cashable savings.
• Retaining speculative and star candidates for the future, and then contacting them when an appropriate vacancy is advertised effectively generating applicants for free.
• Reduced Administration
• Allows line managers to view applications online and seamless transfer of candidate information to employee records.
• Time becomes an issue and you need to minimize time-to-hire or else face the risk of losing good candidates to competitors.
• Reach a wide/niche pool of applicants
• Offer access to vacancies 24 hours a day, 7 days a week reaching a global audience
• Help handle high volume job applications in a consistent way
• Provide more tailored information to the post and organization.
Some Facts
• 96% of all companies will use the Internet for their recruitment needs.
• In the U.S., some companies claim 30% of new hires are from the Internet and 77% of Internet users who are seeking a change, use the Net to do so.
• A recent survey conducted by Employment Management Association, U.S.A, the cost -per-hire of print Ads was estimated at $3295 and Online Ads, a mere $ 377
10. Type of Market
The Indian e-recruitment sector took birth with the advent of Naukri.com-India’s first online job site. This was sometime in 1997. Naukri had the first mover advantage until Jobsahead entered the scene sometime later. Before the entry of Jobashead, Naukri was virtually a monopoly. Of course since the concept was new the cost of introduction was higher. Once the product gained acceptance with both the corporate as well as job seekers Naukri started commanding a premium for its e-recruitment solutions. Sales representatives would charge a price higher than that listed. Naukri even resorted to exorbitant price increases almost every six months to literally “milk the cash cow”.
Jobashead did bring in some amount of competition, threat and challenge to Naukri but later on an informal cartel structure developed with neither player willing to cut prices. Further, innovation in technology was easily imitated by the other since there was minimal capital expenditure required. Monster, a multinational player in the e-recruitment sector entered the Indian market quite some time later. Monster acquired Jobsahead and posed a big challenge to Naukri using the “power of 2” advertising. This was the beginning of the consolidation stage in the Indian e-recruitment sector and of course it took place too early as the market was very nascent at that point in time.
Figure: E-recruitment Market Structure at Different Stages of Evolution
With the thumping success of Naukri many small and big players entered the market assuming there is space for each player. Players like Timesjobs.com (Times of India Group), Shine.com (Hindustan Times Group), Jobstreet.com, ClickJobs.com (Bharat Matrimony Group), Cybermediadice.com (Joint Venture between Cybermedia Publications, India and Dice, USA) and Itpeople.com made hurried entry into the sector. Cybermediadice.com and Itpeople.com tried focusing on only IT related jobs. However, most of the players used similar kinds of technologies and databases. So what mattered more in this sector was brand recall and advertising strategies. Naukri is the Hindi word for job and hence had the Indian touch. Monster fared well because of its multinational image whereas Timesjobs dominated several niches. Itpeople.com went out of business whereas Jobstreet.com turned to selling recruitment software. Cybermediadice.com was later acquired by Timesjobs.com.
MONOPOLY DUOPOLY PERFECT COMPETITION OLIGOPOLY
Naukri Naukri/
JobsAhead Naukri/Monster/JobStreet
/CybermediaDice/Clickjobs
/Itpeople/Timesjobs Naukri/Monster/Timejobs
Figure: Players in Different Stages of Market Evolution
Overall, the recruitment market is showing tendencies of oligopolistic competition. The competition is mostly on non-price. But, within the industry, timesjobs.com has created a niche for itself in the job fair segment and is a clear monopoly. Naukri and Monster continue to dominate the online recruitment segment with Monster having a better footing over Multinational Companies based out of western/European countries. Entry and exit from the market is easy. There are hundreds of other smaller players who keep entering and leaving the market.
Substitutes
1. Print Advertisements
2. Targeted Mailers
3. Targeted SMS Advertising
Complements
1. Job Fairs: Periodic job fairs held by Job Fair “Specialists” Timesjobs.com has seen a spurt in the number of new resume registrations on their website. This shows that the resume database offered by Timesjobs.com and their Job Fairs are complementary goods.
Figure: Timesjobs.com Job Fair Advertisement
2. Job Listings: These are simple job advertisements posted on the job sites as and when vacancies arise within an organization. These listing direct viewers to a registration form which captures the resume details before the applicant can send his profile to the prospective employer.
Figure: Naukri.com Job Listings Screen Shot
The list of substitutes and complements has been periodically changing depending on innovations brought in by existing players or new entrants. For example, a decade ago the only indirect competition to e-recruitment was the print media. But with newer technologies becoming popular print media is not expected to be a big threat in future. Some of the listed substitutes were actually developed as complements. For example SMS facility was initially used by Naukri to send out job alerts to relevant job seekers. But now employers are finding it more economical to directly send out SMS alerts by tying up with a mobile service provider. Same is the case with email. This also exposes the job opening to a wider passive job seeking audience as compared to the active job seeker base registered on the job sites.
But over a period of time this fine distinction is slowly vanishing with some of these options working as a substitute and much better as part of an integrated recruitment package. For example a Job Fair requires online and offline advertising supported by Radio Announcements, SMS Alerts, Print Communication etc. Selecting only a few of these may bring down the footfalls at the fair.
11. Entry & Exit
It is impossible for any new entrant to grab a market share as the success of any job portal depends upon both employers and job seekers. While the former are customers the latter is the
reason for existence of customers. It illustrated in the figure above. More jobseekers viewing a site lead to an increase in traffic which in turn encourages employers to spend on advertising on that site. When there are more job advertisements on the site it leads to an increase in the number of job seekers viewing the site.
Hence a new firm may find it difficult to enter the circle. The group (employers or job seekers) to be approached first becomes a difficult question to answer. If employers are approached first, the number of candidates’ resumes available for display in the database would be meager as compared to existing players. On the other hand, if advertisements are not available on site, job seekers will not be motivated to register. Naukri started off with listing free advertisements initially. This led to an increase in traffic which in turn generated revenues. But Naukri had the first-mover advantage. Employers were willing to try a new concept to fill in their ever growing human resource requirements. Jobseekers were also regularly visiting the site to check out new advertisements. A strong web-based product combined with an aggressive sales team & advertisements gave Naukri the much needed edge. But with the entry of so many job portals, can advertising and sales techniques give the same results. Far from it.
Figure: Percentage of Global Visitors (Source: Alexa.com)
So what is the solution? Innovation. Innovation is the name of the game. Times jobs not only conceptualized job fairs but also started off the print-online combination advertisements thus driving newspaper readers (read :traffic) to the online site. This helped them in building a sizeable database within a short span. They introduced the concept of both ground (offline-conducted on a particular day at a specified venue: employers meet prospective candidates [jobseekers] and conduct on-the-spot interviews) as well as Virtual (online) job fairs. The concept of a virtual job fair was very interesting. Paper advertisements were released notifying the openings. This would attract job-seekers who do not visit any/the jobsite often. In order to apply the job seeker is required to logon to the site. This would increase the traffic as well as add resumes to the database. Further, a new visitor might get interested and start browsing regularly.
Other new start-up ventures did try out a few new concepts but all did not pick up because of various reasons-right from budgetary constraints to inappropriate strategies. For example, a common complaint from employers was that there were too many junk or non-updated resumes available on any portal. So an innovation came through with a job site doing a check on the validity of the contact details of the job seeker on a regular basis. Others tried the idea of having jobseekers send copies of their academic and professional credentials so as give greater credibility to the resume. Yet another possible innovation doing rounds is the pay-per-click concept for job listings rather than a fixed cost per advertisement or package.
Such similar innovations are great differentiators and stand a chance of not only diverting traffic from other sites but also creating new online visitors. There is no shortage of job-seekers. One should use the right techniques to attract the right people on site. Moreover attracting visitors cannot be a onetime affair. So it is also high time new entrants realized that the online recruitment business is not about trying to build a huge database of resumes. It is a volume game no doubt but the methodology of creating the volume is what makes the difference. Also, it is necessary that registered users come back regularly to update their details else the resumes are nothing better than dead fish.
Entry Cost
Entry costs can be classified into direct and indirect costs. Direct costs are the costs that are directly related to setting up the infrastructure for running a job portal business. This business primarily being operated online does not cost as much as conventional businesses. Some of the direct costs are only related to hardware and web development. Majority of the expenses are directed towards promoting the website and employing sales and back end staff.
Naukri being the first mover received substantial funding from venture capitalists. Entering an established market requires financial muscle which was proved by Times of India Group. Although, ClickJobs also received huge funding from Yahoo! it was unable to make a mark because of lack of innovation. Several hundred players enter this market considering only the direct perceivable costs. It is only later that they realize that a site with a back-end IT team will not be sufficient to manage the show.
Exit Cost
Exit costs are virtually absent except perhaps the statutory obligations towards employees. The site is allowed to die its natural death. Some players like Cybermedia Dice were acquired for their database which contained huge number of IT-related profiles.
12. Economic Implications of Exit
The economic implications of exit for an unsuccessful job site are enormous. The expenditure made on employees and depreciating assets are not recoverable. This means the salvage value will be less than the capital pumped in. If the business was started on credit then it is difficult to settle the outstanding payments. For a moderately successful venture the database can be a savior which may be acquired by a competitor for a sizeable amount.
1. What is Recruitment?
Recruitment is the process of finding and attracting capable applicants for employment. The process begins when new recruits are sought and ends when their applications are submitted. The result is a pool of applications from which new employees are selected.
Figure: Recruitment Channels
2. E-Recruitment Revolution
The buzzword and the latest trends in recruitment is the “E-Recruitment”. Also known as “Online recruitment”, it is the use of technology or the web based tools to assist the recruitment process. Online recruitment and the use of new emerging technologies have many advantages for the modern recruiter. It makes the process of finding candidates and new business opportunities quicker, cheaper and more efficient. The one drawback, however, is that online recruitment can appear to be a daunting subject.
There is growing evidence that organisations are using Internet technology and the World Wide Web as a platform for recruiting and testing candidates. The IES survey of 50 organisations using e-recruitment reported that the primary drivers behind the decisions to pursue e-recruitment were to:
• improve corporate image and profile
• reduce recruitment costs
• reduce administrative burden
• employ better tools for the recruitment team.
Fifty-five per cent of respondents expected their organisation to reduce its use of other recruitment methods in the future. The key limiting factors to e-recruitment most frequently reported were:
• the cultural approach of the organisation towards recruitment
• the lack of knowledge of e-recruitment within the HR community
• Internet usage by target candidates
• Commitment of senior management.
Figure: The e-Recruitment Landscape (Source IES)
Issues raised as causing concern with e-recruitment included the quantity and quality of candidates applying using web-based tools (eg organisations being inundated with CVs attached by email, many of whom were not suitable for the post), the relevance of shortlisting criteria (eg the validity and legality of searching by keywords), confidentiality and data protection, and ensuring diversity of applicants.
The trends in e-recruitment use suggest a changing landscape whereby in future the candidate is connected to the central system and there is involvement of the line manager in the process (see figure). In addition to the reported benefits such as cost efficiencies, the role of HR in this model is viewed as more of a facilitative role, in theory allowing time for recruiters to become involved in the strategic issues within resourcing.
3. The E-Recruitment Sector
While the Indian recruitment industry is still reeling from the impacts of the US slowdown (in terms of cost cutting measures induced by the companies), one significant area which has actually witnessed a growth in such a conflicting situation is the e-recruitment market. Growing at a pace of about 100 to 150 per cent, this recruitment mode promises to increase its share from the present 2 per cent to 10 per cent in the next 3-4 years. The Internet, in fact, has completely revolutionized the role of the traditional recruiter. Gone are the days where cold calling and candidate networking were the only option available to identify new potential candidates. Now it's about searching through hundreds of thousands of CV's placed on personal web pages and browsing online corporate staff directories. In a candidate-starved (quality candidate) market, the Internet can prove a valuable resource for finding potential candidates who are not necessarily looking to change their current jobs but would be open to the 'right' opportunity. Meanwhile in a candidate rich marketplace, we can use the Internet to find relevant 'live' job vacancies where companies have advertised directly on the web. You can also use the Internet to find information on company's financial results, their budget information, who has been recently appointed, and business wins & losses. In fact, with the right search techniques, you can normally find exactly what you are looking for.
Presently, the total Indian recruitment market is approximately around Rs 500- 600Crores. The decade old online recruitment industry in India seems to be flooded with different jobsites, each of them promising a better job to candidates and better candidates to employers. The Indian market for e-recruitment is still at least five years behind the West”. This shows in the big numbers. According to industry estimates, the top four or five job portals account for only 1.5 to 2 per cent of total recruitments.
Internationally, online recruitment is almost neck-to-neck with other recruiting channels. In the US, for instance, the online recruitment market already accounts for 29 per cent of total recruitment related advertising.
4. Jobsites-The Concept
The online recruitment revolution started in India in 1997 with the launch of naukri.com which changed the entire platform for job seekers and employers. A typical job site offers a dynamic candidate database to employers apart from standard web-based advertising solutions (which include simple text based listings/classifieds to dynamic banners and animated pages). Online recruitment facilitates just-in-time hiring.
Figure: Resume Database Sizes of India’s Major Job Sites
When an organization needs a candidate it can access the database of job portals, screen resumes and send a mass mail. It can also shortlist people based on skills, location, salary and availability and move on to the interview stage. Some of the jobsites in India include naukri.com, monsterindia.com, timesjobs.com, clickjobs.com, shine.com, cybermediadice.com, jobstreet.com etc
5. Direct & Indirect Competition
Initially the most evident direct competition was only the job supplement of newspapers. Placement consultants although considered a threat by both newspapers and job portals were in fact consumers of both these solutions at some point or the other.
Direct Competitors Indirect Competitors
www.naukri.com
Times Ascent (Times Job Supplement)
www.timesjobs.com
DH Avenues (Deccan Herald)
www.monsterindia.com
Opportunities (The Hindu)
www.jobstreet.co.in
www.linkedin.com
www.clickjobs.com
SMS Advertising
www.shine.com
Newer methods of recruitment like mobile SMS advertising, Radio jingles and billboard advertising were some of the upcoming modes which were posing a threat to e-recruitment portals. An upcoming social networking site name LinkedIn was creating disruptive innovation by offering a combination of features offered by Facebook/Orkut and those offered by job portals. Moreover it is available free of cost to employers at the moment.
6. E-Recruitment-Objectives
The objective of a job portal is two pronged - First, to provide an avenue for a prospective job seeker with the most relevant and appropriate job opportunities. The more such opportunities that the job portal gives, the better it would be for the job seeker and the job portal themselves.
Second, to provide corporate employers with a large number of profiles in its database, which have good number of quality resumes in terms of work experience and skills sets as sought by the corporate.
And if these quality resumes are of actively job seeking individuals, that is when the employers, who actually make revenue for the job portals, will get benefited. If the job portals can increase an employer's or a head hunter's efficiencies in sourcing and selection of candidates for their current requirements, then one of the primary business objective is met.
So there are two questions that a job portal needs to answer. First question that needs to be answered is - do the job portals really add value to the job seeker? And the second question is - do the job portals increase the hiring efficiency and effectiveness of an employer.
But how many jobsites will actually survive? What is it that makes a job portal stand apart? Newspapers also provide job supplements. And there are plenty of such job supplements thriving and getting good revenues for the newspapers. Will this principle hold good even for jobsites?
7. Newspapers’ Success
Different newspapers lead various markets across India. For example, if The Times of India leads in Bangalore then The Hindu perhaps sells better in Chennai. Moreover, there are many regional newspapers which have better market penetration in the interiors of the country. This is primarily because of better local news coverage.
Hence, any vacancy advertisement has to be advertised in multiple newspapers for wider reach. Advertising in different newspapers across regions gives employers unique responses. Also, in India, advertising in newspapers is still considered to be a better brand-building exercise.
8. Factors affecting the Online Market
a) Cost of advertising in newspapers: Many employers have switched to online recruitment as it is cheaper and cost-effective. If the cost of advertising in newspapers reduces, it will hit the online recruitment business
b) Hiring plans of employers: If there is a reduction in hiring budgets, it will hurt the online recruitment business more, as compared to newspapers, as these portals are vertical (focused only on recruitment)
c) Placement Consultants: Although, majority of the consultants use job sites as one of the media for sourcing profiles, mid/senior level candidates are better sourced through networking, paper advertisements and referrals. This is exactly what the top-notch consultants do. Since the online candidate database is available to anyone who subscribes to it, mid/senior level candidates are skeptical to register on job-sites.
d) Vernacular Languages: Companies looking out for candidates from Tier II/III cities and interior belts advertise in the regional newspapers in the local language. Advertisements in local language can generate much better responses in these places. However, the job sites accept advertisements/resumes in English language only.
e) Client Satisfaction: Reduction in time and cost of recruiting
f) Growth of Internet: Increase in market penetration will definitely increase the number of visitors on jobsites thus leading to growth of the e-recruitment market.
g) R & D: Increased technological advancements combined with newer features being offered by jobsites could give e-recruitment a better edge over other modes.
9. Jobsite-Differentiating Factors
A job site is accessible on the web from across the globe. This makes advertising on multiple websites redundant. Since registration on a job site is free, job-seekers may register on all sites. They may also respond to advertisements on all sites. But the job-seekers may be the same. So it does not make business sense for employers to advertise on multiple sites to get the same response.
So, how are the job sites surviving? Not all job sites are doing well. But the top sites are uniquely positioned and offer unique advantages to employers. Hence, employers are willing to spend on multiple sites. For example, timesjobs.com is the undisputed leader in conducting job fairs across the length and breadth of the country. Participants include leading IT/ITES companies looking out for entry/junior/mid level candidates. Of late, companies from other sectors are also keenly looking at job fair as an option for recruitment. Clearly, timesjobs.com has an edge over others as it draws support from its in-house partners like print (Times of India/Economic Times/Bangalore Mirror etc), radio (Radio Mirchi), Televison (Zoom, Times NOW) and the horizontal portal Indiatimes.com In addition, the resumes sourced through the job fairs may also be available to online subscribers thus giving access to unique profiles.
Monster.com is a multinational company operating in multiple countries across the globe. Employers hiring candidates from abroad typically look at monster as it offers various combined packages giving access to candidates from multiple countries. For example: If an IT company in India wants to hire a specialist available only in Europe, it makes sense to sign up with Monster rather than Naukri as Naukri is not well-known in Europe.
Naukri.com, being the first-mover in the Indian online recruitment space, has been a dominant player in the core online services.
Industry experts feel the reason for the growing popularity is change in perception of the recruitment site from just being a job board to a resume manager to a market analyst. A market study of past six months show that not only has there been an increase in terms of specialized solutions and services, but also a lot of stress is now being given on R&D and providing of customized and personalized services, which gives them a fast mover advantage.
There has been a paradigm shift in the hiring process through online recruitment. In particular, accessing profiles from any corner of the globe, real-time communication and online automated assessment. Online corporate recruitment features include video profiles, virtual office tours, online presentations and interactive tests. These value-additions enable a firm to make a benchmarked peer comparison on a one-on-one basis and understand a prospective candidate’s suitability for a job. It has also increased the visibility for candidates on the options available in the market and reduced the recruitment cost drastically while improving the turnaround time.
Advantages
• Much faster than traditional modes of recruitment
• Access an dynamic pool of resumes
• Automated short-listing process cuts down hiring time by over 65%
• E-recruitment is experiencing phenomenal growth, according to the Recruitment Confidence Index (RCI) e-recruitment special. Almost 50% of employers now go on-line to fill their vacancies – nearly three times the number who used the internet three years ago.
• Newspaper advertisements may have worked to find top talent in the past but Internet recruitment sites are where the skilled individuals of the present and future are looking for jobs.
• Gaining occasional candidates for free by ensuring the e-recruitment website is easily found from the front page of the corporate website
• E-recruitment can produce cashable savings.
• Retaining speculative and star candidates for the future, and then contacting them when an appropriate vacancy is advertised effectively generating applicants for free.
• Reduced Administration
• Allows line managers to view applications online and seamless transfer of candidate information to employee records.
• Time becomes an issue and you need to minimize time-to-hire or else face the risk of losing good candidates to competitors.
• Reach a wide/niche pool of applicants
• Offer access to vacancies 24 hours a day, 7 days a week reaching a global audience
• Help handle high volume job applications in a consistent way
• Provide more tailored information to the post and organization.
Some Facts
• 96% of all companies will use the Internet for their recruitment needs.
• In the U.S., some companies claim 30% of new hires are from the Internet and 77% of Internet users who are seeking a change, use the Net to do so.
• A recent survey conducted by Employment Management Association, U.S.A, the cost -per-hire of print Ads was estimated at $3295 and Online Ads, a mere $ 377
10. Type of Market
The Indian e-recruitment sector took birth with the advent of Naukri.com-India’s first online job site. This was sometime in 1997. Naukri had the first mover advantage until Jobsahead entered the scene sometime later. Before the entry of Jobashead, Naukri was virtually a monopoly. Of course since the concept was new the cost of introduction was higher. Once the product gained acceptance with both the corporate as well as job seekers Naukri started commanding a premium for its e-recruitment solutions. Sales representatives would charge a price higher than that listed. Naukri even resorted to exorbitant price increases almost every six months to literally “milk the cash cow”.
Jobashead did bring in some amount of competition, threat and challenge to Naukri but later on an informal cartel structure developed with neither player willing to cut prices. Further, innovation in technology was easily imitated by the other since there was minimal capital expenditure required. Monster, a multinational player in the e-recruitment sector entered the Indian market quite some time later. Monster acquired Jobsahead and posed a big challenge to Naukri using the “power of 2” advertising. This was the beginning of the consolidation stage in the Indian e-recruitment sector and of course it took place too early as the market was very nascent at that point in time.
Figure: E-recruitment Market Structure at Different Stages of Evolution
With the thumping success of Naukri many small and big players entered the market assuming there is space for each player. Players like Timesjobs.com (Times of India Group), Shine.com (Hindustan Times Group), Jobstreet.com, ClickJobs.com (Bharat Matrimony Group), Cybermediadice.com (Joint Venture between Cybermedia Publications, India and Dice, USA) and Itpeople.com made hurried entry into the sector. Cybermediadice.com and Itpeople.com tried focusing on only IT related jobs. However, most of the players used similar kinds of technologies and databases. So what mattered more in this sector was brand recall and advertising strategies. Naukri is the Hindi word for job and hence had the Indian touch. Monster fared well because of its multinational image whereas Timesjobs dominated several niches. Itpeople.com went out of business whereas Jobstreet.com turned to selling recruitment software. Cybermediadice.com was later acquired by Timesjobs.com.
MONOPOLY DUOPOLY PERFECT COMPETITION OLIGOPOLY
Naukri Naukri/
JobsAhead Naukri/Monster/JobStreet
/CybermediaDice/Clickjobs
/Itpeople/Timesjobs Naukri/Monster/Timejobs
Figure: Players in Different Stages of Market Evolution
Overall, the recruitment market is showing tendencies of oligopolistic competition. The competition is mostly on non-price. But, within the industry, timesjobs.com has created a niche for itself in the job fair segment and is a clear monopoly. Naukri and Monster continue to dominate the online recruitment segment with Monster having a better footing over Multinational Companies based out of western/European countries. Entry and exit from the market is easy. There are hundreds of other smaller players who keep entering and leaving the market.
Substitutes
1. Print Advertisements
2. Targeted Mailers
3. Targeted SMS Advertising
Complements
1. Job Fairs: Periodic job fairs held by Job Fair “Specialists” Timesjobs.com has seen a spurt in the number of new resume registrations on their website. This shows that the resume database offered by Timesjobs.com and their Job Fairs are complementary goods.
Figure: Timesjobs.com Job Fair Advertisement
2. Job Listings: These are simple job advertisements posted on the job sites as and when vacancies arise within an organization. These listing direct viewers to a registration form which captures the resume details before the applicant can send his profile to the prospective employer.
Figure: Naukri.com Job Listings Screen Shot
The list of substitutes and complements has been periodically changing depending on innovations brought in by existing players or new entrants. For example, a decade ago the only indirect competition to e-recruitment was the print media. But with newer technologies becoming popular print media is not expected to be a big threat in future. Some of the listed substitutes were actually developed as complements. For example SMS facility was initially used by Naukri to send out job alerts to relevant job seekers. But now employers are finding it more economical to directly send out SMS alerts by tying up with a mobile service provider. Same is the case with email. This also exposes the job opening to a wider passive job seeking audience as compared to the active job seeker base registered on the job sites.
But over a period of time this fine distinction is slowly vanishing with some of these options working as a substitute and much better as part of an integrated recruitment package. For example a Job Fair requires online and offline advertising supported by Radio Announcements, SMS Alerts, Print Communication etc. Selecting only a few of these may bring down the footfalls at the fair.
11. Entry & Exit
It is impossible for any new entrant to grab a market share as the success of any job portal depends upon both employers and job seekers. While the former are customers the latter is the
reason for existence of customers. It illustrated in the figure above. More jobseekers viewing a site lead to an increase in traffic which in turn encourages employers to spend on advertising on that site. When there are more job advertisements on the site it leads to an increase in the number of job seekers viewing the site.
Hence a new firm may find it difficult to enter the circle. The group (employers or job seekers) to be approached first becomes a difficult question to answer. If employers are approached first, the number of candidates’ resumes available for display in the database would be meager as compared to existing players. On the other hand, if advertisements are not available on site, job seekers will not be motivated to register. Naukri started off with listing free advertisements initially. This led to an increase in traffic which in turn generated revenues. But Naukri had the first-mover advantage. Employers were willing to try a new concept to fill in their ever growing human resource requirements. Jobseekers were also regularly visiting the site to check out new advertisements. A strong web-based product combined with an aggressive sales team & advertisements gave Naukri the much needed edge. But with the entry of so many job portals, can advertising and sales techniques give the same results. Far from it.
Figure: Percentage of Global Visitors (Source: Alexa.com)
So what is the solution? Innovation. Innovation is the name of the game. Times jobs not only conceptualized job fairs but also started off the print-online combination advertisements thus driving newspaper readers (read :traffic) to the online site. This helped them in building a sizeable database within a short span. They introduced the concept of both ground (offline-conducted on a particular day at a specified venue: employers meet prospective candidates [jobseekers] and conduct on-the-spot interviews) as well as Virtual (online) job fairs. The concept of a virtual job fair was very interesting. Paper advertisements were released notifying the openings. This would attract job-seekers who do not visit any/the jobsite often. In order to apply the job seeker is required to logon to the site. This would increase the traffic as well as add resumes to the database. Further, a new visitor might get interested and start browsing regularly.
Other new start-up ventures did try out a few new concepts but all did not pick up because of various reasons-right from budgetary constraints to inappropriate strategies. For example, a common complaint from employers was that there were too many junk or non-updated resumes available on any portal. So an innovation came through with a job site doing a check on the validity of the contact details of the job seeker on a regular basis. Others tried the idea of having jobseekers send copies of their academic and professional credentials so as give greater credibility to the resume. Yet another possible innovation doing rounds is the pay-per-click concept for job listings rather than a fixed cost per advertisement or package.
Such similar innovations are great differentiators and stand a chance of not only diverting traffic from other sites but also creating new online visitors. There is no shortage of job-seekers. One should use the right techniques to attract the right people on site. Moreover attracting visitors cannot be a onetime affair. So it is also high time new entrants realized that the online recruitment business is not about trying to build a huge database of resumes. It is a volume game no doubt but the methodology of creating the volume is what makes the difference. Also, it is necessary that registered users come back regularly to update their details else the resumes are nothing better than dead fish.
Entry Cost
Entry costs can be classified into direct and indirect costs. Direct costs are the costs that are directly related to setting up the infrastructure for running a job portal business. This business primarily being operated online does not cost as much as conventional businesses. Some of the direct costs are only related to hardware and web development. Majority of the expenses are directed towards promoting the website and employing sales and back end staff.
Naukri being the first mover received substantial funding from venture capitalists. Entering an established market requires financial muscle which was proved by Times of India Group. Although, ClickJobs also received huge funding from Yahoo! it was unable to make a mark because of lack of innovation. Several hundred players enter this market considering only the direct perceivable costs. It is only later that they realize that a site with a back-end IT team will not be sufficient to manage the show.
Exit Cost
Exit costs are virtually absent except perhaps the statutory obligations towards employees. The site is allowed to die its natural death. Some players like Cybermedia Dice were acquired for their database which contained huge number of IT-related profiles.
12. Economic Implications of Exit
The economic implications of exit for an unsuccessful job site are enormous. The expenditure made on employees and depreciating assets are not recoverable. This means the salvage value will be less than the capital pumped in. If the business was started on credit then it is difficult to settle the outstanding payments. For a moderately successful venture the database can be a savior which may be acquired by a competitor for a sizeable amount.
Tuesday, March 9, 2010
ETHICS IN FINANCIAL SALES
ETHICS IN FINANCIAL SALES
Financial Products
The market is flooded with a host of financial products ranging from simple fixed deposits in banks/post-offices to complex derivatives, unit linked insurance plans and mutual funds. Whereas traditional investment options like fixed deposits are primarily pull-products insurance plans and mutual funds are push-products.
Financial Products Vs Other Products
The financial jungle is such a complex area that even the best of the people make wrong investment decisions. Moreover the intricacies of finance make people gullible and sales reps, taking advantage of this, try to make a fast buck. Financial products are difficult to understand, for the layman, as compared to other goods.
Insurance & ULIP Demystified
Insurance and Unit Linked Insurance Plans (ULIPs) are now the most commonly mis-sold products. Mis-selling obviously takes place where big money is at stake. Selling ULIPs fetch big commissions for agents.
Particulars | Year1 | Year 2 | Year 3 | Year 4 |
First Premium (FP) | 5,00,000 | 5,00,000 | 5,00,000 | 5,00,000 |
Renewal Premium (RP) | 0 | 5,00,000 | 10,00,000 | 15,00,000 |
Commission on FP@12% | 60,000 | 60,000 | 60,000 | 60,000 |
Commission on RP@5% | 0 | 25,000 | 50,000 | 75,000 |
Total Earnings | 60,000 | 85,000 | 1,10,000 | 1,35,000 |
Table 1: Insurance Agents’ Commission Structure (Source: Insurance World, November 2008)
Mis-selling takes place in several forms. A significant portion (IRDA, the insurance watchdog is working on reducing the charges) of the first year premium is deducted on account of fund management, administrative and other charges. This is rarely told to the prospective customer. In fact IRDA had mandated that an electronic benefit illustration be signed by the customer. However sales reps tend to find a loop-hole in each rule. Some employees of a private life insurer kept page 2 of the electronic benefit illustration alongwith the application (called proposal) form. The unsuspecting customer usually signs all the pages while the sales rep keeps a conversation going.
Common Cheating Styles
- Pressuring the customer to sign a blank form so that inconvenient details are not disclosed on form
- Taking too many counter-signatures in the margins of a blank form
- Selling insurance plans as mutual funds or fixed deposits with guaranteed returns
- Accepting application (proposal form) even in case of non-availability of required supporting documents. Sales reps are known to manipulate documents to achieve their sales targets
Insurance plans are also promoted through banks, a channel known as bancassurance in insurance parlance. The bancassurance channel has an added advantage given the access to contact details of High Net Worth customers of the bank. One such customer at a leading private sector bank was made to believe that the ULIP application form was actually a form for fixed deposit. The man, although literate, was not qualified enough to understand the differences. He signed wherever his “Relationship Manager” asked him to do so and invested a whopping Rs.10 lakhs on an unwanted policy!!
One may argue that IRDA offers a 15-day free look period during which the customer may return the policy and get a refund. One, all customers, even though literate, cannot understand the matter in the policy kit. Two, full refund is still not given. Administrative charges are deducted even if there is no fault on the customer’s side. In case of literate or educated customers it becomes extremely difficult to prove that the company had cheated them.
One might wonder what insurance companies do with all the front-loaded charges deducted from the premiums. Apart from commissions for agents, employees ranging from lower level team managers to the Vice President draw huge incentives. Besides, there are periodic contests, parties and exotic foreign trips-all for fooling innocent and gullible people. A top insurance giant had the “culture” of organizing annual “meetings” or “get-togethers” where Bollywood stars are invited to perform for a huge fee. The entire national sales team flies to Mumbai or elsewhere to stay in 5-star super-deluxe hotels and enjoy the bollywood dances. So who sponsors this lavish lifestyle? Who else but the customer who puts in his hard-earned money hoping to earn the falsely assured exotic 50% returns in 3 years! Moreover, many people do not realize that the expected returns are on funds available post-deduction of specified charges. The table below will clarify the same:
Amount | Deduction | Amount for Investment | Rate of Interest | Expected Amount in 1 Year |
10,000 (ex: ULIP) | 25% | 7500 | 25% | 9375 |
10,000 (ex: FD) | - | 10,000 | 8% | 10,800 |
Table 2: Return on Investments
It is evident that even a 25% rate of interest on a ULIP does not make sense if it is heavily front-loaded. The idea is not to degrade ULIP as an investment option but to highlight the negative aspects as well. With IRDA putting an axe on reducing front-loading drastically ULIPs may definitely become more attractive. In any case the “3 year invest and withdraw option” is not viable for all ULIP plans and a long term investment horizon is advised.
Loans-Rate of Interest
This is another financial product which is a banker’s (especially private banker’s) favorite. Even finance companies are glad to extend a variety of loans like personal loans, car loans, auto loans etc. In 2008, a young executive approached a finance company as well as a bank for a car loan. The bank offered loan at the rate of 12% per annum. The finance company appeared too generous when it offered a loan at the rate of 9% per annum. The executive jumped on to the offer in excitement and availed the loan. This is what many banks/finance companies hide from loan seekers. There is a difference between reducing balance method and the flat rate of interest method. In the former the interest is calculated on the reduced principal on each payment. Hence the interest burden is greatly reduced in the reducing balance method.
Credit Cards
The piece of plastic is already known world over to pull people into the vicious debt cycle. But telemarketing departments of banks have found newer ways to worsen people’s plight. Free upgrade option is the latest trap. One is made to believe that the upgraded card is more prestigious and moreover comes for free** (conditions apply)!! But it never comes free. They talk of some free gift vouchers which are worth the amount paid towards card’s joining fees. Thus they claim the card is free. Of course their speech generally picks speed while talking about this and many poor souls think they are getting a free card as well as free gift vouchers.
This is an era of agency business and we have at least one agent representing some financial product in our neighborhood. It may be the over-friendly neighbor, the distant aunt (who suddenly starts visiting us frequently) or even the “friendly” bank clerk (who was rude till a couple of months ago until an incentive scheme was launched for promoting investment plans!). It is essential that the layman no longer remains a layman and updates himself at least on the basics of finance. This will reduce the number of people falling prey to the sales-hungry agents!
***
Placement Consultants-Tarnished Image
PLACEMENT CONSULTING: TARNISHED IMAGE
Placement consulting forms a sizeable part of the ever-burgeoning recruitment sector, the other components being e-recruitment, print advertisements, employee referrals and job fairs. The Indian recruitment sector is estimated to be around Rs.1000 crores and growing at 10% year on year. One can then imagine the importance of the role that placement consultants play in this sector.
Types
Classification can be based on client (both employer and job seeker) type, functional areas, industry, level or a combination of one or more of these factors. So we have consultants for IT/ITES, Manufacturing, Services, Entry Level, Senior Level, Sales & Marketing etc.
Source of Revenues
Majority of placement agencies charge their corporate clients and the rest charge the jobseekers. Only agencies catering to lower level placements generally fall into the latter type. Organizations pay, anywhere between 8% and 25% of the annual gross package, depending on the position and skill sets. Those charging candidates take around Rs.50-Rs.500 depending on the city and the availability of jobs in that area.
The Role
Although the exact role depends on the understanding between the consultant and his corporate clients the positioning is more like an intermediary who connects an appropriate job seeker to a relevant employer.
Business Process
A brief generic process is as follows. Corporate Clients give out candidate requirements to associated placement agencies. These agencies work on the requirements and source relevant candidate profiles. After discussing the profile with the candidates, the consultant sends the profiles to the corporate client for feedback. On receiving positive feedback interviews are scheduled. The consultant is eligible for payment only if the selected candidate joins the organization.
Payment terms differ from organization to organization and the service level agreement. Some organizations pay only if the candidate works with them for 2-3 months, while others ask for replacement in case of attrition within 2-3 months.
Following are some of the possible services that consultants extend to their corporate clients:
(i)
Advertising & Short Listing: The consultant announces the positions through suitable media, collects
responses and shortlists relevant profiles. The evaluation process is done by the corporate client. The short listing part is not as simple as it sounds. Adherence to client’s requirements is a pre-requisite. An auto giant may require an MTech with 10-12 years experience in R & D. If the responses received do not match these criteria the consultant needs to start all over again.
(ii) Advertising, Short Listing & Initial Evaluation:
This process takes care of the most difficult part of the recruitment process namely the sourcing, short-listing and meeting all short-listed candidates. What remains is the most relevant bunch of candidates who are then sent for final evaluation to the client. This saves lot of corporate time.
(iii) Short Listing & Initial Evaluation:
The advertising & response collection part is taken care of by the employer. The consultant is roped in only to sort out the responses and do an initial basic screening.
(iv) Staffing:
Of late there has been a trend towards a concept called staffing or staff outsourcing in India. Organizations hire employees but place them on payrolls of staffing agents or consultants. Some of the prominent staffing agencies in India are Teamlease, Mafoi, Kelly Services etc. This model offers tremendous flexibility to employers. This model is employed for new pilot projects or for positions where pay structure is considerably lower as compared to on-roll employees.
As and when the project ends the staff is withdrawn by the agency. This saves the organization from legal hassles and enables staff replacement as and when required. However these positions are currently restricted to blue-collared or lower/entry level positions only.
Dual Frontline & Profile Sourcing
Placement consulting business is unique in the sense that it has two frontlines to manage. On one front the business development team is accountable for fostering relationships with prospective clients and obtaining their hiring plans. On the other front we have the recruitment vertical which has to interact with prospective job seekers and co-ordinate their recruitment process. The challenge in getting the right person for the right job itself is daunting but worse still is the candidate walking out after receiving the offer.
Newspapers advertisements, job portals, head hunting, networking are some of the common methods of candidate sourcing used by consultants.
The Disconnect
The theoretical idea of placement consulting business looks very exciting. The number of consultants in Bangalore city itself is close to 1000. But many of these form what is called a “floating population” as consultants keep coming in and going out of business. Entry and exit from this business is easy and free from restrictions or legal barriers/requirements. Majority people assume minimum infrastructure is needed to start off this business. A detailed study is rarely undertaken.
There are so many retired employees or even corporate HR executives jumping on to this business without any proper foresight. Those with financial muscles try and survive, some others adopt unethical means to survive and the rest bite the dust!
Common Misconceptions
- Computer with Internet Connection is the only infrastructure required
- Companies approach consultants when they need people
- Candidates can be found easily using job portals
- Consultants’ role is only to line-up candidates for interviews
The Mediocre Consultant Vs The Top Notch Consultant
Top-notch consultants probe the candidates at length to ensure they are suitable for the role. They ensure that only closely matching profiles reach the corporate client for approval and further discussions. Mediocre consultants do exactly the opposite. This is what they do:
The Mediocre Consultant | The Top Notch Consultant |
Uses only public databases to source candidates | Innovative. Works on referrals, head hunting and social networks as well |
Sources candidates who broadly match requirements | Sources candidates who closely match requirements |
Speaks to candidate only about job profile and salary expectations | In-depth probing to ascertain interest and suitability |
Directly lines up candidates without sending profiles in advance | Sends profiles to client for short listing |
Does not fix appointments for candidate’s interview | Fixes interview timings well in advance |
Consultants do not realize that candidates from all levels cannot be treated equally. There was a consultant who was lining up candidates, for the position of Area Manager, for a multinational insurance company. The consultant simply asked candidates to walk-in to the client’s office with a resume (with the consultant’s name on it so that he can claim his commission later on!!!). This position, carrying a CTC of around INR 8 to 10 lakhs, reported to the Zonal Manager. Asking prospective candidates to “walk-in” like freshers was grossly inappropriate.
Fair Play
As is the case with other walks of life, we have cases of dishonesty and corruption in the recruitment sector as well. We will take up dishonesty first.
(A) Dishonesty
Recruiters of BPOs are always reeling under pressure to hire because of high attrition levels. The selection process at BPOs/call centres comprises of a test of language comprehension followed by several rounds of interviews. The test and initial round of interview is generally conducted by a lower level HR executive followed by interviews with functional heads/senior HR Managers. Considering the volume of recruitment, it is not always possible to source candidates with perfect language skills.
Entry level HR executives are hands-in-glove with consultants in clearing the tests. They provide answers to test questions before hand so that candidates are well prepared. In some cases answers are directly given to candidates at the venue. This happens primarily due to the mounting pressure to recruit and also the lucrative incentives provided to HR recruiters.
The race among placement agencies is to send relevant profiles to the client before their competitors do. In this mad race some consultants do not even check with the candidates regarding their interest in the open position. Instead they send the profiles to the client first. The candidates are contacted only if the profile gets shortlisted.
(B) Corruption
There are hundreds of consultants mushrooming in every nook and corner of the country. There is very little differentiation in the services provided by consultants. So how do these consultants bag those assignments from corporates? Sending out sales reps is not a sure shot success formula-at least for start-ups. This business differs from other services as business depends upon multiple factors like ability to get assignments from corporates, source relevant candidates, client’s decision and candidate’s willingness to take up the offer. In this sense it is a very complicated sales process.
This complex but lucrative process drives many to adopt corrupt practices. An informal understanding with the HR department can do the trick. Picture this: A company has 3 vendors who source candidates. Assuming that vendor1 sends in a candidate first and the candidate, on selection, joins the company. The HR Manager can easily manipulate the source of the profile to divert commission funds to the desired vendor. Worse still, in many instances the source is even shown as employee referral to share the booty internally!!!!
Competition & Work Pressure
Placement consulting has become highly competitive in the last few years. Today, it is not important which consultant sources the right candidate. Who sources the right candidate first is more important now. This is more so for majority of placement consultants who use commonly available recruitment resources/tools like job boards, databases and job fairs.
This rat race has diluted the quality of recruitment consulting. Placement agencies now employ “telecallers” rather than recruiters to “convince” candidates especially for lower level positions in high-attrition sectors like Insurance and BPO. These telecallers are under-qualified and untrained to talk to job seekers. As a result, they start “offering” the job to anyone and everyone.
A fine example to support this: Sales departments employ “Account Managers” to manage corporate clients. Each client/prospect is termed an account and a sales representative assigned to handle such “accounts” is called an “account manager”. Unfortunately, the so-called recruiters (read: telecallers) are largely unaware of this fact. So there was a GM (Finance and Accounts) who was called by such a “smart” telecaller for fixing an interview for the position of “Account Manager”.
I had recently applied for the position of faculty at a leading coaching institute (for their centre in my locality) in Bangalore. I took their entrance test (the first step in their recruitment process), performed reasonably well and was shortlisted for further evaluation processes. After completing the hiring process I was told that no vacancy was available in my locality. I was being “convinced to accept” an “alternative locality” till a vacancy arose in my area. This was deliberately kept under wraps by the consultant and even the HR department.
Recruiters working in placement consulting agencies are always reeling under pressure (just like their counterparts in sales departments) to source profiles since each position is tagged “urgent” considering the intense competition. Besides, they also have “targets” and “performance-linked incentives” which makes them all the more desperate to place candidates. This mad rush of lining up candidates is sometimes a waste of time particularly for job-seekers.
Placement consultants want their names to be fresh in the HR Managers’ minds. So sometimes they keep sending irrelevant candidates to either frequently remind the client regarding their existence or simply try their luck. Either way the candidate becomes the scapegoat. Picture this: Although experience can be an advantage, it is not sufficient.
This kind of irresponsible management has spoilt the image of the recruitment sector. Placement consultants are today seen more as a pack of hungry wolves waiting to make a fast buck by somehow getting candidates placed. Professionalism has taken a back-seat. The sector has definitely seen tremendous growth in terms of revenue and volume but it is not yet “developed” in the true sense of the word!! But it is not only the consultant who is to be blamed. Indian corporate executives have encouraged this culture of disrespect for others’ time, reputation and experience.
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