As the Indian economy posts robust growth of about eight per cent year after year, finding and retaining people is becoming an increasingly difficult challenge.

The biggest challenge is to find leaders for key positions. Consultants agree. "If you consider India's demographics, there is a shortage of leaders," says Murray Dalziel, group managing director of the management consultancy, Hay Group.

Iain Herbertson, managing director of Manpower Asia Pacific, adds: "Indian companies will have to seriously address the challenge of finding people and leaders. India will not be restrained by capital or by manufacturing capabilities, but by a lack of the right people."

Moreover, attrition rates have only been increasing. Most companies today experience attrition rates of about 14-18 per cent each year -- as high 26 and 40 per cent in sectors like business process outsourcing and retail. But not all companies are worried, as they believe that they already have their strategies in place.

Says Sumit Mitra, V-P, HR, Godrej Consumer Products [Get Quote], "We already have a structured initiative to develop a leadership pipeline. We have identified 25 critical positions and we always plan successors for these positions. The only significant change in this is that earlier we planned only for retirements, today we also factor in possible resignations."

Satish Pradhan, executive VP, group HR, Tata Sons, is not ruffled by the rapid churn  either. Says he, "I am optimistic, as in the current scenario young and fresh talent will get more opportunities. Across the group we are trying to give our employees more choice, flexibility and autonomy."

For companies looking to develop a continuous flow of leaders, the first step begins with appraisals. They look at the performance of an employee and decide if he or she has the potential to be a leader.

But companies look at more than just performance. Godrej Consumer Products, for instance, rates its employees on 10 parameters -- vision and direction, managerial skills, team functionality, decision making skills and so on.

The immediate superior rates them and employees are then divided into two categories -- experts and leaders. Mahindra & Mahindra takes this initiative further by using a 360-degree appraisal technique.

Before appraising an employee, the firm takes the views of his immediate superior, peers and those who report to him.

Says Rajeev Dubey, executive V-P, HR sand corporate services, M&M: "In some cases we even collect information from sources outside the company, like industry peers and clients."

The Tata Group for its part has put in place talent review programmes in all its companies, aimed at helping to accelerate the growth of its employees.

The programme identifies people who are performing well in their roles and at the same time displaying eagerness for more responsibility.

Once leaders have been identified, the focus shifts to grooming those chosen. Companies are leaving no stones unturned here.

While the common practice is to send employees to management schools abroad or provide them cross-functional exposure, companies are clearly doing more than that.

M&M  uses a 'shadow board' technique where the selected candidates are assigned different roles on the mock board and asked to find solutions to  challenges faced by the company.

Godrej ensures that its current set of leaders coach the selected candidates and prepares them for their future roles. Companies also put the selected employees in higher compensation bands.

The Tata group has a three-tier leadership programme where more than 300 employees have been trained in the last five years. It also uses methods like cross-functional teams and overseas stints.

It is also important for companies to indicate the career paths to the selected employees. To do this, companies engage them in meetings with top bosses, have them make presentations to the board and even stints in overseas locations.

Says Dubey: "We can't put it up directly on the notice board. But we do send signals to our employees who are being considered for bigger roles in future."