Even five years ago, it was as if the good times would never end. India’s economy was in full blast and its appetite for workers, insatiable. Manish Sabharwal, who spotted the opportunity early on and co-founded TeamLease, a temp staffing company, was right on top of the wave.
During those times, TeamLease was hiring in thousands and still could not keep up with the demand. In early 2007, it had over 67,000 people on its rolls; it was breathing on the neck of Tata Consultancy Services and was all set to overtake the software major to become the country’s largest private employer. Only, Sabharwal’s ambitions were even bigger — nothing short of one million employees.
And then came the financial crisis. It hit TeamLease sooner than any other company, and in a way that devastated Sabharwal. “I don’t mind asking people to leave for performance issues, but I find it painful to let them go for no fault of theirs,” he says. He had to fire more than 25,000 people during the downturn. He had no choice. TeamLease’s business proposition was to be ‘a spring board during the boom, and to be a shock absorber during the downturn’. The only way it could absorb the shock was by letting people go.
The shock also jolted Sabharwal into seeing things that were hidden in plain sight during the boom — inefficiencies and even strategic flaws. The fact that he had to interview 100 people to hire five struck him as preposterous now. More than anything else, he felt bad about not getting into ‘a retail business’, i.e. having a backup revenue stream from sources other than corporates. For instance, student fees. All his revenues came from corporate customers, and when they went out in the cold, he caught the flu.
It was clear to him that if he wanted to take TeamLease to the next level, he had to think ahead. Thinking ahead was never a problem for Sabharwal, a Wharton MBA. At the b-school, while his classmates were thinking about job interviews, Sabharwal was busy writing business plans for India Life, a pension management firm he would start upon his return to India.
He came back, founded the company with two friends — Ashok Reddy, a classmate from Shri Ram College of Commerce, Delhi, and Mohit Gupta whom he knew from his school days — and started gunning for pension management deals. Over the next few years, India Life got into pay-roll and benefits administration, and evolved into a human resource (HR) outsourcing firm. In 2001, multinational company Hewitt acquired India Life. A year later, sensing a huge demand for temporary staff, the trio started TeamLease. Those who know the co-founders say they make a great team. Reddy, like Gupta, is an operations guy, good at keeping the ship running. Sabharwal, who likes to speak in metaphors and finds public policy more challenging than running a business, is the big picture guy, the one who guides the ship. When TeamLease faltered during the crisis, he had to quickly figure out where it should head to.
In a way, the answer suggested itself: Vocational training. Getting into training would solve two issues in one go. TeamLease would now be able to convert more applicants into employees, because it could train the candidates before it hired. It would also diversify into a sector that was close to an inflexion point. Gouri Gupta, who leads strategy at the National Skill Development Council, says India needs at least 526 million skilled labour by 2022. “At Rs. 2,000 per person, it is more than a Rs. 1 lakh crore opportunity,” she says.
Sabharwal was hardly the first one to spot the opportunity, but when he looked at the landscape, he found the players fighting an impossible trinity: Cost, scale and quality. Those who pursued scale and cost fell short of quality. Those who wanted to give quality at scale, found the cost too prohibitive.
“We had a lot of discussions on whether it should be Greenfield [a fresh initiative] or Brownfield [utilising an underused asset or opportunity]. Both have their advantages and disadvantages,” Reddy says. Most of the companies they saw were driven by marketing and sales, all aiming to fill in the classrooms. However, an acquisition would give TeamLease immediate scale. The trio could always set the other things right. They took help from Gaja Capital Partners, a private equity firm whose portfolio included Career Launcher and Educomp, to scout for a target. They zeroed in on Indian Institute of Job Training (IIJT).
Founded in 2006 by Devesh Srivastava, IIJT had scaled up fast to 260 centres and a capacity to train 100,000 students. In March 2010, TeamLease took 25 percent stake in the company, which has now been raised to 75 percent. Sabharwal called the firm IIJT 2.0.
Gopal Jain, managing partner, Gaja Capital, says that TeamLease’s staffing business is a huge advantage. “There is no other company which addresses both the issues [employment and employability] the way TeamLease does,” he says. While vocational training plus staffing makes business sense, it doesn’t complete the picture. In fact, there is a big white space in the education-employment ecosystem. In the US, half the enrolments at college-level happen at community colleges, and only 35 percent of the students there go on to complete their degrees. The rest join the job market. That is missing here.
(This article is excerpted from the latest Forbes India 11 March, 2011 issue which is now available at news stands and book stores. You can buy our tablet version from Magzter.com)