"VRS schemes realise only short term hits," he commented.According to Mr Shankar, a VRS scheme only jolts the system and generally, the most "employable of the employees" pick it up since they can find jobs outside with some other company. A VRS scheme finds the maximum takers amongst a company's middle management and it is precisely this rung that contributes the most to the company's operations. Thus, a company which resorts to VRS schemes loses to competition in the long run. The company suffers a setback with the outflow of middle management executives. American companies have been known to have had similar experiences.

Hewitt Associates' head of business development for India, Rahul Kohli said, "If you use VRS to shed fat, you end up shedding some muscle also with the fat."In the mid-eighties, when the US economy was on a downslide, many companies had resorted to retrenchments. But in the nineties, when the economy started doing well, it was these very companies who ended up doing badly." Mr Shankar points out:"An efficiently run company need not resort to VRS because non-performers are constantly being weeded out as part of the overall performance and accountability system which is understood to be fair and transparent. So a fair and transparent management and performance system and not VRS is the starting point.

The problems begin when the VRS becomes the starting point and the strategy." The question that should be asked is "why"? If companies offer VRS to reduce staff strength from say 10,000 to 8,000, then it is bound to backfire. But if it is being implemented as part of an overall strategy to exit some business and concentrate on core businesses or outsource some services, then VRS has a positive role. Tisco, for example, shed 24,000 people in the last six-seven years but used the same people to run call centres or outsource work.

The VRS was part of JJ Irani's vision to make Tisco the cheapest producer of steel in the world. Hewitt Associates is a global management consultancy firm which specialises in people consulting and has revenues of nearly $1.3 billion. The company has pioneered the B2E concept (business to employee), the new business space in the Internet world. In India, it is growing at over 40 per cent and has over 250 clients.