How Indian Firms Beat the World for Talent

A near-decade of rapid economic growth has transformed India from a source of low-cost labor into a global business force. As Indian firms such as Tata Group and ArcelorMittal purchase their rivals worldwide, others such as Mahindra & Mahindra create low-cost, high-quality products that directly challenge their Western competitors.

The talent needs of these fast-growing firms are fed by well-educated, entrepreneurial MBAs from India’s institutes of management. In high demand, they average four job offers each at graduation, but many dream of starting the next great Indian company that furthers the country’s remarkable ascent.

Underlying these trends is a unique business and cultural commitment to great leadership that has created a meaningful competitive advantage. Top Indian talent leaders paint a picture of a country ready to use talent management as a blunt object against its competitors.

The Talent Challenges
India’s rapid growth occurred despite significant talent challenges. According to N.S. Rajan, an Ernst and Young partner and Europe, Middle East, India and Africa leader for people and organization, “Despite there being a labor surplus, there is a talent deficit. In response, the last decade has seen organizations in India embracing more formal talent management practices.”

“While Indians possess strong intellect, we haven’t historically focused on developing leadership skills as much as some Western countries,” said P.V. Ramana Murthy, senior vice president HR, India and Bangladesh for Hindustan Coca-Cola. “That’s now changing very quickly.”

Gender diversity also represents a talent barrier. Traditionally, the Indian woman’s role is as the primary caregiver, and there is some lingering discrimination limiting the number of women in the workforce. This has inspired creative new solutions to recruit and retain female managers. Google’s Indian offices keep a taxi on call to allow women to get home easily in case of family emergencies. Pharmaceutical company Boehringer Ingelheim allows young female employees to bring their mothers along on business trips to avoid the cultural disapproval young women sometimes face when traveling alone.

Fundamental talent management activities such as recruiting and retaining employees present another significant challenge given rapid company growth rates and rising compensation levels. IT consulting firms such as Tata Group and Infosys plan to add 50,000 and 40,000 employees respectively in 2011 in a country already short on talent. As if that wasn’t enough of a challenge, according to a March Aon/Hewitt study compensation increases will average 13 percent with an average 19 percent attrition rate in 2011.

In any other country these combined challenges easily could derail economic growth. But India isn’t any other country. Its unique culture, history and spirit provide it with the resources to not only weather these challenges but to thrive despite them.

Have Challenge, Find Solution
Indian firms are responding to talent challenges in ways that not only bring them even with, but also accelerate them past, their global competitors. Their starting point is often around achieving parity through best-practice approaches used by other multinationals.

According to Coca-Cola’s Murthy, Indian firms are focusing their attention on:
1. Better differentiation of performance and potential: Firms are establishing talent review and performance management processes that clearly differentiate levels of performance and potential to advance.
2. Sharper focus on A players in A positions: There is a concerted effort to ensure the most capable talent is aligned with the most critical positions — a strategy enabled by differentiation activity.
3. Improved diversity management: With a dearth of female leaders and Generation Y becoming a large percentage of the workforce, companies such as Google and Boehringer Ingelheim are engaging in creative tactics such as those cited earlier.

These efforts help Indian firms respond to rapid growth, but a fundamentally different set of factors is putting distance between them and their global peers. Their secret advantage comes from unique social and cultural factors that allow Indian companies to build better talent faster than their Western rivals. Of these six factors, five offer a tremendous advantage in building talent, while the sixth may create an insurmountable barrier. The five advantages include:

1. A legacy of HR influence: India’s socialist past created both large public-sector undertakings such as the Indian Oil Corporation and family-owned enterprises such as Tata Group, Reliance and Birla Group that invested heavily to develop human resources. According to Ernst & Young’s Rajan, “Indian firms have shown a higher propensity to invest at the high end of the HR value chain as compared to multinationals. For many years public sector undertakings have invested in leadership capability development and their head of HR has historically been a member of the board. Family-owned enterprises have made similar investments and recently transformed HR so it can more effectively support talent building.”

2. A well-trained and closely-knit talent fraternity: India’s graduate education system produces top HR leaders from its institutes of management. The XLRI School of Business and Human Resources, established in the 1950s, is a top 5 Indian business school whose graduates include HR leaders for Procter & Gamble India, Hindustan Lever, Hindustan Coca-Cola, Bharti Airtel and Wipro.

These top Indian talent leaders often form strong interpersonal networks with talent peers outside their companies. Compared to talent leaders in the U.S., Indian senior talent leaders seem to have deeper relationships with, and are in more regular contact with, their external talent peers. This increased interaction enables them to more easily share best practices and India-specific market information.

3. Strong individual commitment to talent development: It’s not unusual for Indian corporations to hold internal leadership development courses on Saturdays. These meetings aren’t held on the weekend to accommodate the schedule of the CEO or a visiting professor. The companies simply have a five and a half or six-day work week. Ask the typical American or European executive to give up a Saturday for a leadership development course and eyes likely will roll. Indian leaders, on the other hand, are less likely to complain about being away from home or not having work/life balance.

4. A unique understanding of India: Indian firms have the obvious advantage of understanding how to manage talent in an Indian context. Coca-Cola’s Murthy offered a simple but telling example. “Indian firms are very adept at managing the slightly more emotional nature of Indian leaders. While Indian firms have flexibility to support employees’ feelings and emotions, multinationals are often bound by rules and regulations that prevent the type of empathy and coaching that can support success.”

5. The ability to develop and pay: Two key factors to engage and retain great talent — professional development and compensation — are easier to come by at many Indian firms. “Because of their success, Indian companies can offer large wealth creation opportunities through stock options or shares. Western firms aren’t listed on the Sensex (the Indian stock exchange) so can’t offer similar benefits,” Murthy said.

Growing firms also provide significantly more development opportunities, especially prized international postings. “Indian leaders are highly mobile and want to travel the world,” Murthy said.

These five factors create a high but not impossible barrier for non-Indian companies looking to compete. The true challenge is created by the sixth factor — Indian leaders’ nationalist passion for success.

A Passion to Succeed
In 1991, India eliminated the license raj — the bureaucratic licensing of industry that restricted Indian firms’ ability to compete on the international business stage. The ensuing 20 years have seen firms such as Wipro, Infosys and Reliance become strong global competitors or become leaders in their industry like Arcelor Mittal, Taj Hotels and Larsen & Toubro.

Indians take pride in this ascendance and see sustained corporate leadership as inextricably linked with sustained national success. This belief is reflected in communications from Indian executives. For example, in 2002, Dhirubhai Ambani, founder of the Indian conglomerate Reliance, is quoted in the Times of India saying, “Our dreams have to be bigger. Our ambitions higher. Our commitment deeper. And, our efforts greater. This is my dream for Reliance and for India.”

The sentiment doesn’t appear to have changed significantly since that time. It’s challenging enough to compete against commercially motivated competitors. How can the rest of the world compete against firms that see their success as a patriotic imperative?

The consequences of this nationalism are also visible in the number of nonresident Indians leaving the U.S. to return and work for Indian companies. Already these numbers are a steady flow of 10,000 to 20,000 professionals each year, and projections suggest 100,000 or more will return over the next five years.

Results from a January Aon/Hewitt survey of 14,000-plus job seekers across Asia also reflect this nationalistic pride. In the survey, Indian workers expressed a preference to work for an Indian company while other Asian workers preferred primarily American and British companies.

In just 20 years Indian firms have leveled the playing field with their Western competitors. What Indian firms are doing in talent management should raise a few eyebrows. How they’re doing it could shift the world’s economic balance even further in their direction.

Marc Effron is president of The Talent Strategy Group. He can be reached at editor@talentmgt.com.