Channel: Editor's View Point

  • Is your management BRIC ready?
    By Sanmit Ahuja On May 19, 2010
    In our inaugural feature we analysed why some of the British companies are not achieving much success in the Indian market.
In our inaugural feature we analysed why some of the British companies are not achieving much success in the Indian market. I alluded to the fact that for some companies to discover the joys of success in India or any other BRIC/high-growth economy, they will have to try out new and radical business models that they may not be well versed with.  But where and how will they find the talent that will give them the ideas to develop the new business models, remains quite a daunting challenge for thousands of organisations throughout the world. As the debate on BRIC nations and beyond intensifies, so does the mad scramble to find people who will help British companies champion these markets.
 
High growth emerging economies such as India or other BRIC nations are fairly complex eco-systems where the economic architecture is still evolving. The managers in the developed economies irrespective of whether they are running multi-billion pound corporations or SME outfits are used to mature and transactional eco-systems. But are they well equipped in their ability to manage a company’s growth in emerging markets?
 
In my hunt to find model frameworks, I set about to speak with a number of senior executives who are currently working for international organisations in India. My research largely centres around how these people were identified and selected to fill their current job roles. Although the contextual setting for the discussion is in India but there is a general consensus amongst the various actors that the findings would mostly also hold true for BRIC nations and other high growth markets.
 
I refrain from naming any organisation or individuals as it would clearly compromise either of them but I do provide some remarkable insights that I got in this process.
 
Who developed the emerging markets strategy in the first place?
It was rather saddening to find out that a large number of companies chose to bring in external consultants to help define their BRIC strategies. I don’t mean any offence to the consultant community, they are a vital cog in the industry wheel, but for once it would have been heartening to see companies make a real and solid attempt at getting to grips with BRICs.
 
Ready for entering the market – who will lead the country operations
Companies that already have or are in the process of entering the Indian market are either selecting their management teams from an internal talent pool or sourcing talent from external resources. This approach worked for some but also failed spectacularly for others.
 
The key reason why this is the case, according a number of executives, is that there is a lot of “copy-their-model strategy” that is at play. Companies are in such a rush to get any quality talent that they  are forgetting corporate and industry compatibility.
 
What kind of talent the company needs should be driven primarily by the kind of sector the company is operating within. For instance:
  • The IT and Technology sector predominantly requires Programme and HR management skills as India, for most “majors”, is either a massive research and innovation lab or a big software development factory . Yes, India is also a market for many but only a fraction of their on the ground manpower is involved in servicing the Indian market.
  • The financial and professional services sector requires great networking skills where developing relationship with senior management of corporates is extremely crucial. I have heard from more than one person that in the banking sector relationship-based-funding is more popular than balance-sheet-based-funding. Thus the company management must have great networking skills as well as a true understanding of the psyche of the Indian corporate.
  • The complexity increases in sectors that have a huge momentum but also stiff domestic opposition such as the Telecom sector. The amount of capital that this sector is pumping in is phenomenal. When competition heat is on full swing the incumbents can use various poker tactics that may well be very difficult for the new and foreign entrant to understand. It is imperative that the local management knows the competition landscape fairly well.
  • The real estate and infrastructure sectors pose a challenge of their own. Company management must be adept at managing issues related to land-purchasing, tackling corruption etc which by no means are a stroll in the park.
  • Just imagine the plight of corporate headquarters if Indian Government announces that it proposes to invest directly or co-invest USD 1.7 trillion in infrastructure sectors in the next decade. Their eyes will pop out by the sheer enormity of the opportunity but I wouldn’t be surprised if they are also pulling their hairs at the same time worrying who on earth is going to land them these opportunities.
  • One of the most difficult sectors to operate, in my mind, is the extractive industries sector such as mining, oil & gas that involves serious amount of Government lobbying, dealing with activists, NGOs and poor infrastructure.

Here the country manager will need to be the jack as well as the master of all trades.

I wanted to find out why are corporates forgetting basic tenets of sound HR management?
In order to reflect that properly it is necessary to go a bit back into history.

 

> The early days (2000-2005)
It was essentially in the post dot-com era that India truly emerged on the global economic landscape. In the early days it was the big IT majors and Technology companies that either set up shops or expanded their operations significantly.

During this period the company headquarters was paranoid about control and was generally suspicious about letting Indian managers run the show. They would typically parachute people in from the West to India. A number of Indian origin people were made responsible for the India operations. A number of executives agreed that the waters did get muddy a bit with a number of trailblazers also entering the market who failed in their attempt to westernise Indian operations.

 

> The economic boom (2005-2008)
This period is defined much more by exuberance than any other word. With the global economy firing all cylinders, a large number of international companies and a number of private equity funds entered the Indian market during this period. The companies were generally comfortable in hiring Indian managers to run country operations. However they also had no other option given that the incumbent managers were also more interested in running the ever expanding home country operations.

The failures in this period were where the country heads knew very little about the corporate headquarters and the company’s DNA as such.

 

> The economic crises and times after that (2008 – present)
The last 18 months have been unprecedented in every aspect for the global economy. There was very little international expansion for most part in this period but since the Indian economy has shown phenomenal resilience, the spotlight is back on the country. A number of international companies now have a firm belief in the market despite its vagaries. The churn is increasing, the salary inflation is back at 15%, headhunters are getting busier again, according to a CEO of a major international executive research firm.

  • But will this phase witness new strategies coming to the fore? Are there any nuggets in the events of the past years that companies can pick up and learn from? Would company headquarters do things differently when selecting the candidate to run the country operations?

“Yes”, said almost every single person I interviewed. Corporate headquarters cannot pay a lip-service to a market like India. If they are serious about the region then they have to cultivate talent for the longer run. Poaching talent from similar natured industries, parachuting people in to steady the boat, hiring top people in India even though they have not spent any time with the company; these are all short term fixes that will come back to haunt the company in the longer run.

 

The characteristics of a person who is an ideal country manager for an international corporation is someone who understands the local economy, its ways, its culture, the socio-economic environment, the industry traits but also should have spent considerable time with the company at its headquarters or other major offices so that they are able to understand both sides of the coin.

 

They are able to communicate effectively to the senior management at corporate headquarters to manage expectations, are able to find innovative solutions to problems that almost all foreign companies face in India, should be entrepreneurial and grow the business by using new business models and last but not the least should also be able to take products and services either in part or as whole out of India to new markets.

 

The most important consideration is that the universe of such people who can adapt to both working environments is fairly small. If a company decides to select someone today it will take them a few years just to identify and train them.

 

So what can companies do to make themselves BRICs-ready?

Once they have decided to foray into India or any other high growth market they will need to decide which of the following two principal modes they are going to use. Acquisition is not being considered as an option here since it doesn’t require a company to start operations from scratch.

 

  • Intra-Corporate

The management recognizes fairly early on in the decision lifecycle that India is an important market for them. They go about searching for internal talent that will lead their operations into the Indian market and manage to identify one or more individuals who score high on the matching criteria.

But what happens if this person decides to leave the organisation? The smarter organisations are already recognizing this as a key-person danger and are preparing not one but a few people who one day may take over the country’s operations. This is of the utmost importance since there is a considerable lag between the time corporate need arises and their ability to find and train these people up so that they are able to take control. 

 

  • Extra-Corporate

When there are no suitable existing matches available within the organisation and they also do not have the time to train someone up for a couple of years then they should pretty much look outside the organisation. This is a fairly recent strategy that some organisations have started to utilise. They end up backing a management team within India that run as a separate legal entity. The company backs the management team with working capital requirement and has an outright option to acquire them in a few years should the team do credibly well. There is an absolute alignment of interests of both the company as well as the external management. The reputational and branding risks to the company are also ring-fenced.

 

Finding these people should not be a challenge, according to one senior executive whom I interviewed. “I was selected like that”. These people are there right in front of you…They may not be part of your organisation but you are dealing with them all the time. They could be part of your supply chain or associated networks. You are working with them, reading about them in media, hearing them at conferences and meeting them at networking with them at various events. An Indian professional has a highly entrepreneurial mindset and is always looking out to set up his or her own operations.

 

Smarter companies are also increasing the levels of debates, discussions and dissemination of quality reports on BRICs within their companies. They are increasingly organising their board meetings in these markets so that the top management get a first-hand account of the attractiveness (and challenges) of high growth markets.

 

For comments and feedback to this article please write to me on:   tic.editorial@etidynamics.com

 

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