Nothing temporary about it

Before 2002, until TeamLease started up, people in India worked either in the organised sector or the unorganised sector. For a large percentage of the population, the organised sector was tough to break into. The unorganised sector lacked the benefits (like minimum wage, compliance with labour laws) offered by organised companies. “There was nothing in-between where one could have a temporary job with several benefits that were present in the organised sector. Globally, temping was a U.S. $140 billion market and we believed there was huge potential to recreate the temporary (temp) staffing model for India,” explains Ashok Reddy, managing director and co-founder of TeamLease. In its early years, TeamLease was convinced that the temporary model of hiring employees into its roles and having them work at client locations would be a sound value addition for its clients.

In fiscal 2002-2003, TeamLease had 800 temporary staffers in their roles and touched Rs. 2.97 crore in revenues in only its first year of operations. Over the years, it has grown at a rapid pace, temporary staffing over 75,000 people and touching revenues of Rs. 704.22 crore in fiscal 2008-2009.

Expertise in sourcing people

An interesting aspect of the TeamLease story has been its ability to pursue aggressive growth year-on-year. Emphasis on client delivery with strong skills developed around sourcing people has been its forte. We also heard an interesting piece of statistical information. Since inception, it has hired atleast one person every five minutes, nights and weekends included. In addition to its temporary staffing business, TeamLease also has a thriving permanent staffing business to cash in on its expertise in sourcing people.

“Employment and employability requires a concerted joint effort and that has and will be the mantra at TeamLease in the years to come”

Right from day one, TeamLease wanted to be a 360-degree provider across industries, functions and cities in India. The temporary staffing industry over the years followed a pyramid-like structure. Large volume hiring came from lower salary level jobs spread across functions including sales, marketing, point of sale service executives, administration, customer support, accounts and human resources. It also catered to blue-collar workers in manufacturing companies and information technology hardware support professionals. In 2002-2003, TeamLease’s early clients were global companies, which tapped into the temporary staffing model in other countries. Once it could convince early clients in a sector, it was not very tough to attract more clients from the same industry.

Going after the employability problem

Sometime in early 2008, the senior team at TeamLease realised that its whole business model revolved around the corporate client. Reddy says, “When the economy was growing, hiring was robust and we faired very well. But, when hiring dried up, our growth came down tremendously.” While during the boom cycle TeamLease worked on over 10,000 positions every month, the demand slumped by over 90 per cent in late 2008. “That is when we realised, while on one side we were tackling the employment problem for companies, there was tremendous potential to tackle the employability problem for individuals through vocational training,” explains Reddy.

These two fairly large, complicated problems – employment and employability – required a joint effort in some sense. The company had two options – create the training system, vocational education centres and build the business from scratch or buy out a vocational education company that could leverage on TeamLease’s scale.

Reddy says, “Building the academic system, the technology and establishing centres requires upfront investments.” Around this time, IIJT had been making good progress in the vocational space. With 250 centres across India and over 50,000 alumni – it had proved vocational education played a crucial role in helping people find jobs. TeamLease went the brown-field acquisition route and bought a substantial equity stake in IIJT. IIJT has both short and long-term courses in finance, retail, information technology and sales and marketing. TeamLease planned to invest over Rs. 75 crore over a two-year time frame and funded the acquisition through internal accruals and a private equity investment from Gaja Capital.

The integration effort

With the IIJT acquisition, TeamLease has a renewed mission statement – “Putting India to work” with the 3E (education, employability and employment) framework. Since the acquisition in March 2010, IIJT has launched a satellite-based vocational training programme and has started offering employment services in its 250 centres. The TeamLease-IIJT combine also added a new strategic business unit to take the job-training model to the government and institutions. It recently tied up with the Gujarat and Haryana governments to offer training programmes.

Reddy is convinced that the long-term success of IIJT and TeamLease as a whole will thrive on its ability to connect these training programmes with the job market. Today, IIJT’s (the subsidiary’s) revenue stands at Rs. 30 crore (typically, with a 20-25 per cent profit margin). This compared with TeamLease’s revenue of Rs. 700 crore (with a profit margin of 1.5-2 per cent) might seem small in size, but, Reddy is convinced it is the way to grow further. In the words of Reddy, employment and employability requires a concerted joint effort and that has and will be the mantra at TeamLease in the years to come.