Replacement Hiring in Indian IT Sector: Speed, Scale and Sustained Attrition

Replacement hiring or replacement planning focuses on finding suitable replacements for top executives in a firm. Replacement hiring assumes that the organization’s structure will not change. For any top executive role, two or three replacements are identified in the organizational chart. Each of these replacements are then evaluated with their ability to replace an existing leader. 

Current Scenario

IT companies are expected to witness the maximum impact of hiring corrections with expected attrition rates of more than 15%. Replacement hiring plays a prominent role to counter employment turnover. Employers aim for specific levels of employment and maintain them with the help of replacement hiring. The reason why employers commit to certain staffing levels is that when people leave, their positions remain vacant. The tasks for which these people were responsible will then have to be reassigned to other people. This can be an expensive affair that requires training and disrupts the workflow. So, most organizations end up hiring about 5% of the workforce every quarter to replace people who have quit. 

Some people confuse succession planning with replacement planning, however, the two are very different. Replacement planning is done when a position becomes vacant because either the person is retiring or is leaving. The company can hire a replacement or fill the position by getting a subordinate to fill the role. There will however be a long learning curve for the replacement to settle in.

How does replacement hiring work?

Replacement hiring is focused on immediately replacing the vacant role. Most companies try to fill the role with someone who is similar to the leader who has departed. Since these hires are done in a hurry, there is no room for planning and training the new person. Succession planning on the other hand works with a large talent pool before there is a need and develops candidates in advance.

Replacement hiring does not lend itself to careful planning and thoughtful decision making and therefore runs the risk that the incoming candidate may be unable to fill the role effectively. It does not therefore lend itself to a predictable career path where promotions can be predicted and it may therefore be a less attractive option for candidates who are looking to advance in their career. Since replacement hiring does not have the scope for developing skills or enhancing abilities, it may result in potential costs for the organization as the new leader learns the ropes of the new role.

Scale of hiring

India’s IT companies are using replacement hiring to combat sustained attrition. It is estimated that over 3.8 lakh replacement hirings were done by the Top 7 Indian IT companies during FY ’23. This translates into a whopping 1040 hires per calendar day! Most companies are hiring replacements to sustain capacity and capability.

The recent upswing in CXO hiring in India is attributed to replacement hiring since organizations are impatient with non-performers and cultural misfits in the company. Earlier, such people would be counselled, put on a performance improvement plan, and provided with a support system. Today, replacements are the name of the game with IT, pharma and FMCG sectors seeing considerable replacement hiring.

Sustained attrition

Attrition rates in IT companies are high and companies are looking to replace them with billable workforce. The high churn in senior roles has necessitated replacements at a higher cost. IT companies are looking to reduce and retain talent which means high compensation costs. Spike in the wage bill is a result of high replacement volumes at a heightened cost and sustaining the attrition rates. 

When you hear of companies paying high compensations to recruit people and paradoxically hear that others are not getting jobs, it is normal to imagine that HR recruiters who say that the market is doing well are lying. The reality is that talent is always looking for greener pastures and therefore job tenures are getting shorter, specifically in the IT sector. 

Speed of hiring

Another factor is that the skills required for a role are changing fast and employers are letting go of employees and replacing them with those that have the required skills. In such a replacement scenario, the job market is booming. 

Looking at the top 10 IT companies in India, one understands that they have recruited close to 4,00,000 employees in the last few quarters. Most of these hires were replacement hires. The only way to combat this will be to upskill the current workforce and indulge in a continuous learning mode. When employees stay relevant, they give themselves a chance to be in high-skilled, high-paid jobs.

Conclusion

Replacement hiring has a big learning curve and there are a host of issues that it brings with it. Sustained attrition brings with it loss of good talent, which leads the recruiters to search and fill up the vacant positions at high speed and larger scale. 

People Also Ask

1.  What is replacement planning in HR?

HR replacement planning is an imperative strategic undertaking utilized by corporations to proactively tackle employee attrition, retirement, or talent voids. The core revolves around recognizing and fostering promising internal candidates, honing them for pivotal roles. In this manner, enterprises build a resilient pool of competent individuals, ensuring smooth transitions and unbroken business continuity.

2. How do you replace an employee?

In the event of employee replacement, companies typically undertake a meticulously planned procedure. Initially, they scout for apt contenders within the organization through promotions or external quests. Upon discovering the perfect match, they engage in onboarding and impart training for a seamless handover.

3. What are the advantages of a replacement chart?

The replacement chart provides a lucid perspective on potential heirs for pivotal positions, facilitating succession planning and mitigating disturbances during employee transitions.