India’s Indian Institute of Technology (IIT) and Indian Institute of Management (IIM) campuses are on a warpath against companies who made offers to their students but backed out or postponed hirings at the last moment, leaving students in the lurch.
The institutes and the students are upset, as they should be. But in the outpourings that have graced the pages of several newspapers in subsequent weeks, I detect a strange sense of entitlement that runs contrary to the nature and behaviour of the real world outside. It suggests naivete at best and ignorance at worst about what a real, free market economy is about.
It makes me question whether students at institutes like the IIMs are taught about the basic principles of a free market economy and worry whether this is how they would run the companies they would eventually get hired in.
There are four different points that this issue throws up and let me go sequentially.
Many of the placement offers (not all) that were pulled or postponed came from companies whose business models are under severe pressure, in turn because their existence was supported by free-flowing capital and not revenues.
Actually, it’s more than just a revenue glitch. In many cases, I would question whether these businesses ought to exist at all. But that is my view and obviously someone sitting in the Valley sees (or saw) things differently. Good for them.
What I cannot fathom is how any student of management, particularly if you spend a few minutes on the internet every day—is not aware of these changing dynamics, including the fact that hordes of senior employees of these very companies are scrambling for the exit door.
Indeed, the smart students would see the current developments as a golden opportunity to not join these firms, which, by the way, may not even last till next year’s placement season.
India produces 1.5 million engineers every year. Barely 7% are employable as the India head of Dassault Systemes, Chandan Chaudhury, told me two months ago. That suggests the job market is severely skewed towards a few. Obviously, if you are from an IIT, your chances are deservedly better. But between the jobs you want and those that are on offer, there might a huge gap.
This is a larger challenge for the country, too, manifest in the rising number of youth agitations across the country, mostly targeting reservations and government jobs. But I do hope that an increasing number of young students focus on solutions and do not become part of the problem.
As a student, you may not concern yourself with the machinations of this strange animal called the Indian economy. But surely you should be aware, including from your own seniors and the like, that there is something fundamentally wrong. Yes, our GDP apparently grew at a staggering 7.9% in the last quarter of 2015-16, but most folks, including business leaders who take investment decisions, are just not feeling it.
The fact is that job creation is slowing down as I wrote in this report. And it looks less encouraging for manufacturing as I pointed out in this article. You might argue that the nature of jobs are shifting, which is true, but to believe that the nature of jobs are shifting to companies whose only reason for existence is a series of wild bets by VC firms is to ignore the very textbooks that are part of your course. Yes, innovation drives change, but not so fast.
In my last job, I was part of a larger media company that also made films. I recall a senior management meeting where there was a heated discussion about a well-known actor who tore up a three-film contract because the first film did resoundingly well at the box office.
The actor now wanted a higher revenue share from the next two films and the contract re-written. Amazingly, for all the legal resources that had been poured into this and other, similar, contracts, it turned out that there was little we could do.
It was an insight into doing business.
This was not the first one. Another well-known television anchor (who you surely know of) pulled out after signing a contract that had taken almost three months to prepare, mutually. All he did was to write a sorry letter. We were upset and thought we should enforce the contract legally. That feeling, thankfully, lasted only 15 minutes and we realised quickly that it was best to move on.
The bottomline is, stuff happens.
So even if the companies that yanked their offer letters are completely in the wrong, get used to it. This is just the beginning.
Remember, you will be doing the same thing in your company when you rise to a managerial position, as many of you already are. Particularly when business cycles go against you and you have shareholders to answer to.
For the record, I did speak to Larsen & Toubro and asked them for their official position on why L&T Infotech pulled its offer letters.
This is what the spokesperson told me:
“L&T is one of the largest recruiters of engineering students in India. While empathising with the students, we clarify that L&T Infotech had issued only Offers of Intent to prospective employees and not Letters of Appointment. This was explicitly stated in the terms of our offer. All stakeholders are clearly aware of the terms of the letter issued by us. All actions by the company were consistent with our Offers of Intent. The applicants who cleared an industry standard test duly received appointment letters to commence their training.”
And he rounded off by saying, “We continue to grow and remain committed to creating better job opportunities that build fulfilling careers and provide a platform for lifelong learning and growth.”
Do I think that this sounds like a dodge? Might be. But L&T is a blue-chip construction-to-finance major in existence from 1938, with revenues of around $15 billion as opposed to perceived market capitalisation. The company wants to be in business, arguably a little longer than the flip-as-you-go entrepreneur (no offense to them) with a one-billion-in-one-year-consumer-acquisition-via-newspaper-advertisements business plan.
On the flip side, perhaps everyone knows what the hard truth is but public posturing is called for, including by the placement officers at the many campuses. That is part of the game, too, and I fervently wish that were entirely true.
To me, the fear that we want to benefit from the upsides of a socialist economy while being protected from the downsides of a free market economy is frightening, to say the least.
Even more than the harm some crazy venture capitalists in the Valley can inflict upon our markets.