Stars of India

Financial Times Weekend Magazine
June 30, 2007
Around the world, more and more companies are recruiting people from the subcontinent for top management positions. Amy Yee finds out why.

For Pranesh Anthapur, a globe-trotting career has come full circle. More than a decade ago, Anthapur left his native India for a job in northern California with the software company Verifone. Last year, he moved out of his “rather lavish” five-bedroom creek-side house in Silicon Valley to return to India as chief operating officer of Yahoo‘s research and development centre in Bangalore. The R&D centre, with its warren of cubicles filled with balloons, bean bags and playful knick-knacks in Yahoo‘s signature purple, is the company’s largest outside California, with 1,000 employees.

Anthapur has accumulated a wealth of anecdotes during his global journey. A favourite is the Verifone human-resources assistant puzzling over the three Indian software engineers due to arrive in California who wanted to live together. “They’re all men!” the assistant said. Anthapur pointed out that they might have wanted to share a house for practical reasons. “Probably one of them knew how to drive,” he said.

An engineer by background, Anthapur’s first job in California was in that bewildered human-resources department. “I thought everyone was rude because they were speaking so loudly. I thought, ‘There’s no need to shout.'” He eventually adjusted to the volume. “It starts making sense after time. For the attitude to be open, to not make judgments right away, is so important.”

Many Indian managers have adjusted to western business – and several have risen even higher than Anthapur. Lakshmi Mittal’s Mittal Steel became the largest steel group in the world after last year’s Dollars 27bn acquisition of Arcelor.Vodafone chief executive, Arun Sarin, heads the world’s largest mobile-phone company and earlier this year led an Dollars 11bn bid for Hutch, India’s fourth-largest wireless operator. Indra Nooyi became chief executive of PepsiCo last year, becoming one of only 12 women to head a Fortune 500 company.

A report by Duke University and the University of California at Berkeley, released this January, showed that 26 per cent of US technology companies founded by immigrants during the past decade had an Indian founder – more than those from the UK, China, Taiwan and Japan combined. Between 1995 to 2005, Indians founded 15.5 per cent of all start-ups in Silicon Valley.

Vivek Wadhwa, author of the report and executive-in-residence at Duke University in North Carolina, says that Indian immigrants in the US often have very strong science and mathematics training and already speak English. Wadhwa is himself founder and former chief executive of Relativity Technologies, a software company in North Carolina.

International companies have recruited managers from their Indian subsidiaries to run their worldwide businesses. Unilever, the Anglo-Dutch consumer products giant, has filled some of its most senior positions with Indians who were groomed at Hindustan Lever, its Indian unit. They include Manvinder Singh Banga, Unilever‘s president of foods and one of the eight members of the Unilever executive group. Banga joined Hindustan Lever in 1977 and remains its non-executive chairman.

What lies behind Indian managers’ success? And can it be more widely replicated? These questions have taken on greater urgency as Indian companies extend their global ambitions and foreign companies expand in India. Indian groups are setting up international operations in countries as far apart as Chile, Hungary and China. And Mittal is not the only Indian business leader snapping up foreign companies. This year alone, Tata Steel bought Anglo-Dutch rival Corus for Dollars 11bn, United Breweries bought Scotch whisky distiller Whyte & Mackay for Dollars 1.2bn and Hindalco bought Canadian aluminum company Novelis for Dollars 6bn. In the first four months of 2007, there were 72 foreign takeovers by Indian companies, worth Dollars 24.4bn, according to Grant Thornton, the advisory firm. In the same period, there were 38 foreign deals for Indian companies, worth Dollars 17bn.

All this activity has led to a scramble by companies to recruit Indian executives who can operate at an international level. “Global managers are the need of the day,” said Arun Mahapatra, managing partner of executive search firm Heidrick & Struggles in India. There is a particular dearth of managers in sectors such as real estate, retail and infrastructure.

Even well-established companies can scarcely keep up with demand. Leading companies in India, whether multinationals or domestic, cite fierce competition for skilled workers as one of the biggest hurdles to growth. Attrition rates are as high as 40 per cent in industries such as call centres and outsourcing. Headhunters say even freshly recruited chief executives fail to turn up because they have accepted better offers.

In an effort to develop managers’ skills, Indian-based companies are spending heavily on training, management development centres, executive education and online courses. But much of the training aims at basic skills rather than leadership development. Training often focuses on “the nuts and bolts… how you teach people to organise things,” says Professor Shailendra Mehta, director of the partnership between Duke Corporate Education, the executive education arm of Duke University in the US, and the Indian Institute of Management in Ahmedabad (IIMA). Mehta believes that in spite of the success of the country’s corporate elite, much of Indian management has significant weaknesses. Referring to former US ambassador John Kenneth Galbraith’s description of India as a “functioning anarchy”, Mehta said, “India can be so unstructured that people don’t plan.”

Professor Bibek Banerjee, associate director of Duke CE’s programme at IIMA, says Indians are not necessarily good team players, as shown in the disappointing performance of India’s cricket team this year.

The squat brick buildings of the IIMA bake in the searing pre- monsoon sun. Inside the air-conditioned classrooms, senior Indian managers from one of India’s biggest state-owned companies (the FT was asked not to reveal its name) analyse the corporate strategy of a peer organisation. The students’ company takes the course so seriously that its chairman is due to visit the next day.

In a nearby classroom M.R. Dixit, a sprightly strategy professor, leads an animated Socratic dialogue with younger managers from a foreign electronics company that also asked to have its name withheld. The bespectacled, slightly balding Dixit paces the room as the group of 15 managers, dressed in casual slacks and button- down shirts, call out their ideas on a case study. Dixit notes them all on the blackboard.

Business schools such as the IIMA have long stood out in a country whose basic education is a shambles. Schools in India suffer from rampant teacher absenteeism and high drop-out rates. Oxfam estimated that 14 million Indian children were not going to school at all and the drop-out rate in primary education was 38 per cent in 2004. Only Nigeria and Pakistan had more out-of-school children than India, according to a report published by Unesco.

But the elite Indian Institutes of Technology (IIT) and the Indian Institutes of Management have maintained high standards since they were first set up by the government in the 1960s. In a corruption- ridden country, the admissions process for these institutions has remained clean. The IIMs have been “a beacon of meritocracy in an ocean of mediocrity”, said Tarun Khanna, professor at Harvard Business School.

The IIMA, founded in 1961, was modelled on Harvard Business School. HBS professors nurtured IIMA during its first five years of operation, set rigorous standards and introduced the case-study method. Another IIM, in Calcutta, was also founded in 1961 in collaboration with MIT’s Sloan School of Management. Four more IIMs have been built in India in the past three decades – in Bangalore, Lucknow, Indore and Kozhikode.

It is extraordinarily difficult to get into the IIMA, which admits 250 students out of 170,000 applications for its flagship two-year MBA programme. There is no let-up once admitted. “You can’t pass unless you are inherently hard-working,” says Professor Bakul Dholakia, IIMA’s director.

The competition to gain admission to these institutions helps explain the success of those Indian managers who do make it, says Deepak Gupta, managing director at the executive search firm Korn/Ferry, based in New Delhi. “It’s a competitive process all the way to the first job you get,” he says. The result is that when highly skilled Indians “go to a fair and open market like the US, they stand out”.

It is not just fierce competition for academic places that prepares Indian managers to succeed abroad – it is competition for everything. Satish Pradhan, head of human resources at Tata Industries, says India’s chaotic nature and lack of infrastructure places a “greater challenge on the individual to create a sense of order to pursue certain objectives”. The result, Pradhan says, is an ability to cope with the “simultaneous presence of opposites”.

In India they may be held back by bureaucracy, corruption and bad infrastructure. “But take entrepreneurs who are able to succeed with all the restraints that India imposes on them and transplant them to a fertile land and they flourish,” said Wadhwa.

Indians have long travelled overseas for education and work. There are at least 20 million Indians scattered around the globe. The highly mobile Indian diaspora translates into a wealth of overseas experience that can be tapped and honed in the workplace. Because of relatively fluid visa policies for educated elites, many regularly return to visit family and retain strong ties to India. That connection gives many Indian emigres an edge if they wish, like Yahoo‘s Anthapur, to return to India as the economy grows and jobs emerge.

Large families create a large network of uncles, aunts and cousins who can offer advice and mentorship and create connections. Strangers network zealously by exchanging cards and mobile numbers, whether at weddings or on a train ride. A strong culture of informal networking has translated to formal networks both in India and overseas in the form of robust Indian chambers of commerce and industry associations. The Indus Entrepreneurs (TiE), a global network of 10,000 Indian entrepreneurs and professionals, has chapters ranging from Minnesota to Mauritius.

In his Mumbai office overlooking the Arabian Sea, S. Padmanabhan recalls that when he joined Tata Consultancy Services (TCS) in 1982 it had 400 employees. Today it has nearly 90,000. Last year, TCS – India’s largest information-technology outsourcing group – hired 32,500 new employees. It expects to recruit a similar number this year. For those who have difficulty taking in such a large number, Padmanabhan points out that it equates to 125 new people joining every working day. For someone responsible for overseeing all this recruitment and training, he seems unnervingly calm.

How does TCS manage to absorb and train that number of people? While the need for a global workforce has become more urgent, training is nothing new at TCS, he says. “I’m a product of such processes,” he says. “The basic principles have been there for many years. What do we have besides people?”

TCS is quite used to training staff to take on new roles. Padmanabhan is an engineer by training. He has served as chief executive of a TCS software venture with Singapore Airlines and head of TCS’s aviation industry practice. His predecessor as head of human resources is now the company’s chief financial officer.

TCS prefers to take on fresh graduates it can train itself. It recruits from 300 Indian academic institutions, where students are invited to take online aptitude and analytical skills tests. Those who make the grade are interviewed by a three-person panel. New hires then spend 52 days at TCS’s training site in Kerala. That is not the end of it. After induction, employees devote 15 days each year to training. Giving more opportunities to learn creates incentives for employees to stay rather than joining another company, Padmanabhan says. Attrition at TCS is the lowest in the Indian IT industry at 11 per cent, compared with more than 20 per cent at peer companies.

It takes 45 minutes to reach Navi Mumbai (or New Mumbai) by road from central Mumbai. But that is only if you set out at 7.30am. When traffic is heavy, it can take two hours. New Mumbai is an industrial area with a slightly desolate feel, which makes the Aditya Birla Group‘s new corporate training centre all the more noticeable. The centre is called Gyanodaya, Hindi for “lamp of knowledge”.

On a recent morning one classroom at Gyanodaya is filled with about 20 middle managers attending an invitation-only three-day “learning event”. In a now-familiar scene, tall, silver-haired Professor Ranjan Das of IIM Calcutta takes a group of managers in their thirties and forties through a Harvard Business School case study on Dell, the US computer company.

But Birla, whose holdings include metals, textiles, insurance and chemicals, does something else too: it hosts virtual business games where teams of employees worldwide compete against each other by making business decisions for a fictitious company. Two years ago more than 700 people participated in the simulated business game, dubbed “Rananiti” (or “Art of War”). “The response was huge,” says Dr. Santrupt Misra, human-resources director.

Does this all make a difference to business performance? “Can you count it in terms of rupees?” Misra asks. “Not in the short term. But when people understand something, they can collaborate and empathise.”

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