Workforce development as a response to information asymmetry

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In an earlier post, I discussed the Indian approach to workforce development. A lot of Indian companies spend a lot of money on in-house training for their employees. Although I didn't mention it at the time, one of the things that puzzled me is why companies would invest so much money on in-house training; employees could simply leave after a short tenure, and the company would have lost money on the cost of the training. One explanation could be that the skills provided through this kind of training are highly firm-specific, but I find that proposition dubious. An article in the Financial Times today made me think of another possibility:

India's outsourcing industry is battling a rising number of "résumé cheats" - recruits who lie about their experience or qualifications - in a struggle that could be critical to the long-term prosperity of the business...

...The integrity of recruits in India's outsourcing industry, which employs about 2m people, is a concern because they are often entrusted with highly sensitive information and processes from multinational clients, including the world's leading financial groups.

The faking of curriculum vitae and work experience has long been a problem in the industry but it has become more critical in recent years, when the top outsourcing companies stepped up recruitment. A common deceptive tactic among those applying to Wipro or its rivals, Infosys and Tata Consultancy Services, is to claim to have worked for one of the other members of the big three since their fierce competition precludes much sharing of data.

Perhaps the in-house training is not so much a way to transfer skills to new recruits as it is a way to screen out underqualified candidates - those who have lied on their resumes. The cost of the training might then be justified as a screening device, especially if company-client trust is key to the success of these companies. 


Ryan Hahn

Operations Officer

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