INTERNATIONAL BUSINESS: The ties that bind – Indian business: Indian style

New Zealand business folk puzzling over the Chinese market on the map may want to turn their heads slightly to the left. For India offers opportunities on scale more than juicy enough for any Kiwi corporation. Confronted with linguistic smorgasbord of over 400 local languages, India long ago plumped for English as its lexicon of business. More to the point, unlike China, India’s commercial, justice and education systems all draw breath from the same British foundations that form the bedrock of business behaviour in New Zealand.
Interestingly, British author Will Hutton in his latest book The writing on the wall may be focusing on China but he cannot resist segueing into praise for India’s heritage. It’s heritage which bears fruit today in tightly-woven pattern of cultural mores, familial ties and clanship, deep analysis, hard bargaining, rapid debate and some blunt questioning.
India’s argumentative tradition, as Hutton points out, can be traced back to the Rig Veda, the country’s oldest sacred text, which questions the very existence of divine entity.
“This tradition combines with the British-style legal system to give India strong justification and accountability processes,” says Hutton. As result, he notes, India’s corporate governance is among the best in Asia. In survey by the Far Eastern Economic Review, India had more companies ranked for their leadership than any other Asian country.
Now, 70 years after independence and 16 years after economic liberalisation, the country is muscling up its connections with international markets.
It’s not doing too badly. The latest World Competitiveness Scoreboard from Swiss think-tank IMD, shows India resting comfortably half way up its list of 55 countries. Nestled between Chile and France, at 27th place India looks whole lot more secure than it did just four years ago when it chugged in at number 42. (For more IMD analysis of India’s performance see the box stories “How’s it going?” and “Warts ’n’ all”.)
While India is carving out an international style of business, management and governance it is also keen to identify and preserve its own cultural flavour.
In management circles, the process of crafting this Indian style has been championed for some time now by professor Arindam Chaudhuri, dean of the Centre of Economic Research & Advanced Studies at the prestigious India Institute of Planning & Management in New Delhi. Chaudhuri’s “theory ‘i’ management” argues for India-centric management ideas with global applicability.
“India needs,” he says, “to remove the dichotomy where on the one hand we keep harping about our culture and its strengths and on the other hand we overlook this aspect completely when it comes to managing our people.”
Chaudhuri believes the American, contractual, hire-and-fire style of business chimes poorly with Indians who value bonds, emotions and long-term relationships.
“An Indian grows up in system where family ties and sense of belonging get an absolute top priority,” he says. “Coming from this environment he gets shock when he sees the job environment practising American philosophies. He is not able to adjust productively to this cultural mismatch and very often fails to be as productive as his Japanese or American counterpart.”
In Chaudhuri’s mind, Indian managers would be wise to strengthen the softer, humanistic side of their interactions with staff, demonstrating company concern through regular training programmes, family welfare schemes and consultative decision-making processes.
“The sad part is that successful Indian managers who have developed indigenous styles of management don’t end up theoretising their styles and propagating them through books or articles,” says Chaudhuri.
“In the US, almost every semi-successful manager ends up writing book and thus today one knows how IBM is managed but one doesn’t know how an Indian corporation such as the Reliance Group is managed. So when it comes to learning management the only option is to refer to foreign books and learn foreign management styles.”
Such so-called foreign management styles may well linger little longer in some sectors of the Indian economy. Prashanta Mukherjee, director of Wellington-based consultancy India Horizonz, points out that Indian businesses can be clumped into four distinct units whose management styles, drivers and philosophies vary markedly.
Balanced at the top of the food chain are India’s gargantuan state owned enterprises which straddle the oil, petroleum and thermal power sectors, swallow up some 20 banks including the State Bank of India and the Punjab National Bank, and include business giants such as Integral Coach Factory (ICF) which makes cool half of India’s railway coaches.
Employee numbers at these SOEs can run into the hundreds of thousands – and, for some, as many as tens of hundreds of thousands. Despite more than decade of reforms, says Mukherjee, many of these SOEs remain bureaucratic in style and cling to decision-by-committee processes.
These SOEs are the last bastion of the military command and control leadership style left over from the days of the British civil service in India.
Paradoxically, notes Mukherjee, the high level of job security in India’s SOEs means managers are more likely to take business risks if, where and when they can. Employees are also treated to lavish welfare schemes that mean it is not unusual for even an ordinary employee to be sent overseas for medical treatment.
Then there are the large publicly listed companies such as the 28 enterprises from the mind-bogglingly huge 96-company Tata Group which collectively employs some 2.46 million people. Or biotech company Biocon which is run by one of India’s leading business women Kiran Mazundar-Shaw who built the company from scratch.
Or the UB Group, run by Vijay Mallya, who has been described as India’s answer to Richard Branson and who happily balances airline and beer businesses.
These listed companies endeavour to follow international best practice management and western style corporate governance.
So it is the third and fourth of Mukherjee’s business categories where Indian management styles come to the fore. These are the large clump of privately held – often family owned – big businesses and the huge number of SMEs which dot India’s corporate landscape.
Here, paternalistic rather than participatory management runs the show. “Even when family owners have appointed professional managers, the CEO is in an interesting position,” says Mukherjee. “They have to really read where the owner’s mind is.”
Family loyalty may override merit. Even when senior managers are actively involved in decision-making there is much less emphasis on employee development.
Indian-born marketing executive Barin Das has slightly different take on how to slice the Indian corporate landscape. Before moving to New Zealand four years ago, Das – who now handles special projects for New Zealand’s Steel & Tube Holdings – had already carved out career in India’s steel business on the back of an MBA from one of India’s elite business schools, the Indian Institute of Management in Calcutta.
According to Das, the nation’s true characteristics shine through in its listed companies. India’s owner-driven businesses and the multinationals operating within the country’s boundaries reveal little that delineates national traits.
However the demarcation lines are drawn, it is true to say that criss-crossing the business landscape is network of social threads as old as India itself and, for foreigners at least, just as mesmerising. Take the notion of clanship, for example, which Mukherjee says underpins business interactions and drives relationships. Rooted in the cultural mores of an individual’s home state, clanship tempers and permeates business behaviour. It fleshes out predominant values so that group of Bengalis, whose values centre around peacemaking and the concept of “bhaddorlok” or being well-mannered