The India Way Book Review

Corporate Restructuring: Human Dimension

11/19/2012 Indian Institute of Management Tiruchirappalli Harshad Deshpande - 1101011

The India Way Book Review

Contents
The India Way An Introduction ............................................................................................................ 2 Indian Business Rising ............................................................................................................................. 3 The Way to India Way ............................................................................................................................. 5 Managing People .................................................................................................................................... 7 Leading the Enterprise ............................................................................................................................ 9 Competitive Advantage ........................................................................................................................ 11 Company Governance........................................................................................................................... 13 Learning from the India Way ................................................................................................................ 15 Conclusion ............................................................................................................................................. 16

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The India Way Book Review

The India Way An Introduction

The India Way is written by Peter Cappelli, Harbir Singh, Jitendra Singh and MichealUseem. The book compares and contrasts the different ways of doing business in the United States and India. The take away from the books are the basic four principles on which Indian businesses function Holistic engagement with employees, improvisation and adaptability, creative value propositions and broad mission and purpose. While most books on management practices either deal with the western or the eastern philosophy of doing business, this book fills the void by covering the business practices of Indian organizations. The unique business practices that have led to the successes of most of Indian organizations are covered in this book. I believe with Rahul Bajaj when he says that, The India Way is of interest to us for understanding ourselves. Moreover, it re-emphasizes the fact that new Indian start-ups need not necessary follow the practices adopted by companies like Google or Facebook, but could create a unique organizational culture of their own which can later be emulated by companies in the West. While this book covers the positive aspects of the Indian Way of doing business, I feel that it gives a biased opinion leaning towards Indian business. It neglects the problems plaguing the companies in the present scenario. For example, Indian firms have not been particularly good at handling succession. Another issue surrounding Indian companies is the discrimination between the majority and the minority shareholders. Both the above issues arise from the fact that Indian companies are mostly promoter driven. Having said that, the good practices at Indian companies like valuing the stakeholders over primary focus on shareholders, engagement of employees, are widely covered in the book. The book is an outcome of through research conducted within Indian organizations, with over 130 interviews. This interviews and surveys cover a wide variety of companies and people, thus authenticating that the views in this book are not biased by a particular set of companies in one industry or by a particular set of leaders like promoters or professionals. To cover the entire book, I will review this book chapter wise, thus reviewing every aspect of authors view over how business in India is carried out.

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The India Way Book Review

Indian Business Rising

The Contemporary Indian Way of Conducting Business The theme of this chapter is laid by focusing on the national leadership role that Indian businessmen assume unlike their counterparts across the world. Examples drawn to support this philosophy include Anil Ambani staying back after 26/11 terrorist attacts and NandanNilekeni chairing the ADHAAR programme. HULs Project Shakti, ITCs e-chaupal, etc are a few examples of Indian businesses being involved in societal issues. The authors have correctly caught the essence of doing business in India. While one wants their company to grow, it wont be at the cost of social issues. The four attributes that form the principles for Indian companies holistic employee engagement, improvisation and adaptability of managers, creative value propositions and sense of broad mission and purpose have been discussed in this chapter. These principles, when bundled together form a distinctive Indian way of conducting business, which contrasts the one in other countries, especially United States. Social purpose is echoed through these four principles as well. Holistic employee engagement feeds creative value propositions and a sense of broad mission and purpose. Indian business house stress that it is not all about shareholders value, but the greater economic value delivered to the country. After liberalization, prior to which India maintained a Hindu growth rate, we saw GDP growing at 9 percent per year in most of the 2000s. Most of the well-known Indian companies have managed to surpass this growth rate of 9% and grown at almost double the economic growth rate through this period. The authors of this book initially believed that the answer to this phenomenon would be the victory of capitalism but were surprised to understand the innovative and exportable way of doing business in India. Though Indian business leaders were well aware of the Western methods, they believed in focusing on the mantra of not invented there. The authors have beautifully compared the Indian way of business with Toyotas lean manufacturing philosophy which was adopted by companies across the world. The authors rightly pointed out that both, India way and Toyota way were born out of necessity due to environmental conditions but the processes could be used elsewhere to bring in efficiency and improve quality. The authors point that the success of Indian organizations has been their deep rooted Indian ethos of conducting business. Indian ethos pointed towards Indian executives being more respectful towards seniority, government and tradition. Also, Indian businesses 3

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The India Way Book Review have tried creating advantage where no one else was looking. While the automobile segment worldwide was moving towards SUVs, Ratan Tata and his team came up with an innovative breakthrough in the small car segment Tata Nano at a price which was less than half the price of the cheapest car in the market then. They found that a large market which was untapped, used innovative skills (or as the authors say: Gandhian engineering) to come up with a product for a large multitude of Indians who could not afford a conventional car. Though the authors have not explicitly pointed out, the social cause out of this exercise of developing a four wheeler for people who could not afford it normally is clearly evident. The authors point out at the end of the chapter that as the business leadership around the world is converging; it could be on Indian terms. They are completely right when they say that the models and principles of India Way are not so unique that they cannot be aped elsewhere. The India Way model has been developed over the past two decades and is out there for businesses across the world to use.

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The India Way Book Review

The Way to India Way

Economic Reforms Drive Development of New Capabilities The authors focus on the impact of liberalization of Indian economy in 1991 on the business in India in this chapter. The license raj imposed a lot of restrictions on carrying out business in India for four decades after independence. The economy was inspired by the Soviet Unions economic theory. There were heavy tariff barriers on import of machinery, restrictions on foreign investment in India and quota system on production of products. The business leaders interviewed have criticized the economic policies pre-liberalization but have ignored the fact that a closed economy was a need of the hour immediately after independence. A license raj was imminent for the development of supporting industries like steel, iron and other heavy industries. These industries provide input for almost all other industries. I agree that liberalization should ideally have happened in 1970s when the supporting infrastructure for all industries to grow and develop was firmly established in India. License raj and restriction on foreign capital movement meant very little capital for development of industries which was the need of the hour. The authors have correctly identified that liberalization was a necessity rather than choice given the foreign reserves India possessed in 1991. The liberalization meant lower tariffs, lower restrictions and a lot of financial sector reforms. The credit for the relatively resilient Indian economy in the face of 2008-09 crisis can be credited to the financial sector reforms which focused on transparency, liberalization in interest rates and reserve requirements. The cash reserve requirements, which are somewhat unique to the Indian banking sector were important factors which protected the Indian economy from being engulfed in the economic crisis worldwide. While the deregulation added a new sense of breathe to Indian business, the problems such as bureaucracy and palm greasing are still endemic to Indian business. Liberalization forced Indian companies to change for the best. Tata Steel was a company which was plagued with problems of inefficiency and lower bottom-line, but as economy was opened for everyone, the company was forced to mend its ways and focus on efficiency and improvement in quality. For some other companies like Infosys, it allowed them to be internationally competitive by reducing their dependence on approvals from governments. Liberalization also allowed companies to go public at significantly lower cost by allowing them to determine the price per share of their IPO, unlike pre 1991 period. Liberalization 5

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The India Way Book Review transformed India from a supply driven to a demand and market driven economy by removing the quota system on production of goods. The environmental factors such as availability of trained work force and the need of American companies to reduce their employee costs played in favor of companies in India, especially those in the information technology sector. As the authors have rightly quoted SanjeevSanyal saying, Instead of fearing multinationals, we are building our own. Liberalization meant that non performing companies wont be protected by the government but had to fend for themselves in a competitive market. This forced the companies to rethink their strategies and operate in the market. The business leaders, earlier seen upon as untrustworthy, suddenly became public figures due to the national pride that they instilled by showing a superior performance for their companies. The business leaders worked in partnership with the government post liberalization and didnt mind mincing words to showcase their opinion. Indian business leaders where consulted by the government not only on economic affairs but also on social causes. Even business leaders identified their role to rebuild the country over rebuilding only their company. Almost all companies in India stressed on social performance rather than economic performance. For example, generating employment was being regarded as an important factor over earnings per share. The authors have rightly said that not all companies were in favor of reforms and those who chose to oppose eventually perished. The success story of most organizations post liberalization has instilled a new found confidence and a sense of national purpose in the Indian business leadership. Indian leadership has correctly identified that economic and social growth could happen in parallel. The authors have beautifully given a picture of the Indian business landscape pre and post liberalization through this chapter. The environmental factors post liberalization have played an important role in the India Way of running business. One among them was employee engagement, which is discussed in the next section.

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The India Way Book Review

Managing People
Holistic Engagement of Employees The book beautifully portrays the importance of employees for an organization and how Indian companies have identified it and used it for their benefit by engaging the employees much more as compared to the western counterparts. Perhaps, a comparison of employee engagement within organization in countries such as Japan, etc would have given a better picture as to where Indian companies stand. The authors have tried to identify the reasons for the source of distinctiveness of India Way. They have tried to find what motivates and employee in an Indian company to stay committed and try and hammer away problems by finding creative solutions to tough problems One of the factors, the authors identified is that the sense of mission and social goal for organization helps and employee see a purpose in their work that goes beyond immediate self-interest. The companies studied for writing this book didnt compete for hiring stars from labour market, but concentrated on improving the competencies of existing employees and developing them for careers inside the firm. Indian firms didnt concentrate only on soft practices but sophisticated human resources practices as well. Engaging employees at HCL took a new turn by the introduction of the slogan, Employees first, customers second by VineetNayar, the CEO. What Vineet tried to emphasize was that by engaging every employee for the betterment of the company, the customers were automatically satisfied by the sense of commitment shown by the employees to meet their unique demands. A lot of Human Resources practices like 360 degree feedback, webpages like U and I were introduced to align the company towards this new mantra. VineetNayar believed that the managers were accountable to their employees, thus instilling a sense of trust among the employees. The example of Human Resources practices isnt a stray example of Indian companies engaging employees. The quantitative results of the survey conducted for the book clearly show how Indian companies have beaten the Western companies in employee engagement. A majority of the respondents of the survey felt that managing and developing talent was the most important function. The India Way companies spent considerable time, effort and money on starting out with the right kind of talent. Once they found a gap between the skills required for the job and those learnt in colleges, they started training the new recruits to improve their skill

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The India Way Book Review set. The companies expect results for the efforts they put in to train the employees and demand performance too. The India Way focuses on performance management, but because of more investment in employees and a family oriented culture, they seem interested in developing future performance. Indian companies have a well-defined leadership program to identify and develop potential leaders. 90% respondents in India as against 71% in US felt that leadership training was used much more extensively in the organization. Apart from that, around 65% HR heads in Indian companies felt that their department was given more importance as against only 40% HR heads in US companies. In most of the Indian companies, the CEO felt that after strategy managing organizational culture was their highest priority job which was surprising for the authors. Indian CEOs identified role modeling for employees as an important function of their job. The book correctly identifies the problems India Way faces due to such high attachment to the employees. Emotionality is rated higher than rationality and sometimes proves to be a double edged sword for Indian companies. The authors also identify that Indian CEOs give so much importance to employee issues, not because they are generous, but because they have identified that employees drive the competitiveness of their business. I believe that the authors could have focused a little more on leadership development programs that companies in India run. Tata Group led TAS is a renowned leadership program which finds no mention in the book. HUL is a company which is known to groom leaders while Mahindra has started its own leadership program, Group Management Cadre. The authors could also have concentrated on some of the downsides that are experienced in Indian companies like long working hours, high attrition in Indian IT companies, etc. It would have given an holistic picture of managing people the India Way.

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The India Way Book Review

Leading the Enterprise

Improvisation and Adaptability The authors have focused on the functioning of Indian business leaders within the organization. They have brought out stark contrast between leaders in US and India through their survey on allocation of time over past three years. The authors approach the chapter by discussing why Indian leaders are not seen at the global platform. They attribute it to the fact that Indian business leaders have not been represented in business literature worldwide barring a few exceptions. While US CEOs generally wrote about their experience at the top of the organization, it wasnt the case in case of Indian CEOs and hence, the lack of representation. The contrast between Indian business leaders and the American counterpart is again due to the environment of business operations. Indian leaders took to improvisation and adaptability as the unique business climate left them little choice otherwise. India Way clings itself to the trial and error way of growth as companies in India hardly had any models to emulate. The survey on time allocation revealed that while Indian CEOs focused more time on setting strategy, the US counterparts spent more time on regulatory and compliance issues. Indian CEOs are more flexible and resilient mainly due to the economic factors in which they have grown as opposed to American CEOs. Indian companies, affected by poor infrastructure and challenges from regulatory side and labour relations need the qualities mentioned above to succeed. The above issues which affect Indian companies has given rise to a colloquial term jugaad. Jugaad means to adjust with limited resources and get the desired output. Indian CEOs are more adept at adapting easily from speaking in a language that an employee like a truck driver will understand to speak in one which a minister would understand. Indian CEOs additionally have a sense of broad mission and purpose. While an Indian CEO would generally talk about attracting new customers, engaging more employees, an US CEO will generally contain himself to the goal of a double digit growth figure. Indian leaders generally had a clear vision for their organizations and believed that expansive thinking was important for the future of the organization. Indian CEOs try and look and both the micro and macro picture of how a strategy would affect the companys operations and easily juggle between the two. In addition, the leaders believe in communicating their vision and values clearly to the

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The India Way Book Review employees. Even in public sector companies, the executives at the top of leadership structure took time to talk to employees and communicate their vision. This, I believe is an addition to employee engagement and instills a sense of trust within the employee which motivates him to work for the organization. In addition, Indian leaders were generally found to be more transformational and believed in inspiring and influencing the employees. The authors put forward the example of ICICI bank on how it transformed from a project financing bank to an all our commercial bank. K. V. Kamath closely worked with NaranyanVaghul, both having a vision of transforming ICICI from a development bank to a corporate and retail bank. Direct involvement, which is one aspect of Indian leadership role is clearly seen by ChandaKochhars example while heading corporate banking. She didnt fear taking ICICI into the unknown and succeeding by trial and error in retail banking. She had an expansive thinking which is evident that ICICI decided to open 3000 ATMs in 2 years when the entire country had only 300 ATMs. Additionally, Kamath himself chose a new CEO rather than leaving the decision to the board, which traditionally happens in an US company. In this chapter again, the difference in leadership roles assumed is mainly because of the distinct circumstances that company leaders have had to confront. In spite of the success enjoyed, the authors point at the end that Indian executives are ready to learn and are looking for the best of West may have to offer. According to me, the leadership roles discussed in this chapter gives a slightly favored opinion towards Indian leaders. The problems faced by American CEOs are of different nature as compared to Indian CEOs, and hence the leadership styles differ. The India Way model for leadership role might not turn out to be successful in an American company. The India Way model for leadership has vast scope for improvement and a further blend from the West might help to improve this aspect of India Way.

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The India Way Book Review

Competitive Advantage
Delivering the Creative Value Proposition The chapter focuses on how organizations have been able to deliver creative value propositions by leveraging on competitive advantage the India Way.Indian companies base their strategy on competencies developed within the firm by engaging energy and commitment of employees. Indian CEOs ranked chief input to business strategy as their priorities. Also, what differed from American CEOs is that maximizing shareholder wealth was ranked the highest by American CEOs as priority. Indian CEOs generally ranked it lowest in the priorities mainly due to the fact that these executives were major holders of the company shares. Most of the CEOs believed that a committed top management was important for the organization achieving its goals. The leadership team had to have loyalty towards company goals and visions. As discussed in the previous section, trial and error was an accepted principle of strategy the India Way. Most of the executives are encouraged to take decisions without the fear of losing their job if a decision is proved wrong. They are just advised not the repeat the same mistake. The decentralization of decision making by most Indian companies points towards the acceptance of trial and error philosophy of India Way. In addition to the above philosophy, Indian companies include having a sense of Indianness in everything that they do. Unlike the western counterparts, Indian business leaders focused on customers but with a national twist. The examples of Pantaloons and Tata Nano point in that direction. Also, moving sideways to grab new opportunities is an additional strategic outlook of Indian companies. The uncertainty in environment leads to this being an important strategy to gain competitive advantage. If a company focuses on only one customer segment with only one product, there is a high probability of their strategy going wrong. For example, give 20 potential initiatives, Mr. Mor of ICICI will try all rather than bet on two or three. This forms the essence of diversification and the acceptance of trial and error approach for growth. Apart from all this, Indian companies focus on innovative structure and strategies to fuel growth. The authors have focused on three pioneering approaches of BhartiAirtel, Cognizant and HUL to explain how innovative structures and strategies were used by Indian companies. While BhartiAirtel went for reverse outsourcing to be able to grow at a pace it was growing. Bhartis story illustrates improvisation and

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The India Way Book Review adaptability. When the world mocked Sunil Mittal for his strategy to outsource the core competence of any telephone company, he stuck to his innovative approach. He took the step of outsourcing knowing fully well that to manage the growth, outsourcing will play an very important part. At the growth Airtel was experiencing, he could not have built additional infrastructure or hired additional employees at the same pace. In sense, he innovated the value chain and managed growth. Cognizants demonstrated importance of creative value proposition. Cognizant altered the working of an Indian IT company. The first step towards it was seen after they stopped targeting new customers and rather focused only on the existing customers. They also inverted the model by basing their head office in United States and the back office in India thus managing onshore service at offshore costs. In addition, they experimented by shared responsibility between offshore and onshore manager thus offsetting the challenge of time difference between US and India. Also, the board focused on customer satisfaction before focusing on revenue growth and profit margins during business meetings. HULs story of Project Shakti shows the role of mission and purpose within the organization. By including village self-help groups to sell their products they not only overcame the challenge of reaching out to villages, they also brought in a sense of broader social purpose and business growth. By 2010, HUL had reached 500 thousand villages touching lives of more than 500 million people. By citing the above examples the authors have justified their focus on the four principles on which Indian companies run. All the four principles form an important input towards company strategy which leads to competitive advantage. The chapter echoes all the values that we have discussed till now having abroad social purpose over focus on investors, foregoing short term growths for long term growth of company and nation and a broad sense of national pride. I believe that in this chapter again, the authors have failed to compare the organizational setting against companies of other countries. The strategies might not be specific for Indian companies but might be used in other developing countries around the world. The uniqueness of India Way strategies as discussed by the authors can be questioned, not from the US context but from the emerging economies context.

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The India Way Book Review

Company Governance
Fulfilling Broad Mission and Purpose The authors have discussed the governance standards at Indian companies and compared the rule based approach used by US companies to the value based approach which is prevalent in Indian companies. The American Board of Directors have a clear mandate to oversee managers on behalf of owners and not get engaged with the operations and strategies of the company. The American model is to keep a check on the executives working in the company. As a counterpart to USs SEC, India has established the Securities and Exchange Board of India (SEBI). SEBI has laid down rules prescribed governance structure that closely mimics the US standards of rule based approach. SEBI, through its Clause 49 mandates that independent non-executive directors should compromise at least half the board. In contrast to SEC, SEBI has an additional mandate of protecting the interests of minority shareholders, a unique feature of Indian business scenario emerging out of the promoter run-company structure. The governance structure at Indian companies is starkly different from the US counterparts is because of the ownership structure. More than 60% of Indian companies fall under business-group companies while only 20% are stand-alone companies like ICICI, which are the type of companies seen in US. Also, as companies in India are mainly family owned, the role of formally appointed boards is diminished considerably. B. Muthuraman, MD of Tata Steel said that Tatas always believed that rules cannot be framed for corporate governance. Instead, corporate governance existed in spirit and the value systems. The non-executive board members take a strategic partnership role within Indian companies. Like the CEOs and the employees, even the board members try to balance the interests of the diverse stakeholders, not just the shareholders. Social engagement was an important feature of governance of Indian companies. Most Indian companies operating in the heavy industry sector have established townships for their employees consisting of schools, hospitals, roads a necessity which would have been shot down by boards in the United States which have a primary objective of reducing costs for benefit of shareholders. Indian boards, in principal will agree for marginal decrease in shareholder value if the majority interests of the stakeholders are being met. The liberalization of Indian economy and presence worldwide has meant that Indian companies have paid a price by having to confirm to global norms. Indian companies though 13

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The India Way Book Review reluctantly, have embraced the global norms and adopted the rules based approach to corporate governance. Many Indian companies have even adapted to stringent rules laid down under the Sarbanes-Oxley Act as it meant ease of raising capital that was necessary for the company. Though many Indian companies have embraced global norms on corporate governance, Indian executives have accepted that corporate governance rules in India are in the transition phase and a lot needs to be done to improve the condition. Indian companies, which have independent and non-executive directors on boards, widely use them to show a strategic direction for the organization. Mahindra and Mahindra is a classic example where not only 8 of the 12 are independent directors, but they are also from distinctive fields like consulting, banking, etc. Anand Mahindra pointed out that Mahindras would be stupid not to use the skills of such directors for the betterment of the company. The non-executive directors were seen as a discussing partners rather than adjudicating monitors for key decisions of the company. Indian boards also looked at long term prospects over key short term bottom-line figures, which would be the case in American boards. Given the easy flow of capital across the world, the authors predict that there will be convergence on issues related to corporate governance across the world. The authors further predict that the corporate governance in India was likely to adapt to the rule based model followed by the United States, but the value based model will always overlay the rule based model in India. My views on corporate governance in India echo the authors view but with a slight difference in the fact that the major issue faced by the Indian capital market is the oppression of the minority shareholder by the majority. Another factor ignored by the authors is the fact that in most of Indian companies the post of the Chairman of the Board and the CEO is held by the same person, which goes against the fundamental principle of corporate governance. This may prove to be one factor which may stop success story of India Way abruptly as world over, corporate governance is gaining importance. Another issue that has not been discussed in this chapter deals with the succession process. While in most American companies, the board appoints the CEO, in India generally, it is taken over by a family member or the business is split amongst heirs though this may not be in the best interests of the companys stakeholders or the shareholders. I believe, Indian boards need to have a significant control over appointment of CEO or the MD of the company.

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The India Way Book Review

Learning from the India Way

Redefining Business Leadership The chapter focuses on the relevance of India Way to businesses across the world. The authors also focus on the sustainability of Indian Way to the Indian business context. India Way model is in stark contrast to the US based model. While India has adapted to the theory of capitalism, it has laid its own models to make business structures relevant in India, which eventually helps them to derive value by operating here. The authors argue that the US model of financialization has been the reason for the series of frauds, scams and scandals that the business world has faced there. India Way avoids the rapaciousness and excesses of the American model. The authors have never argued that self-interest isnt a motivation for Indian companies, but the self-interest coupled with social mission makes India Way an interesting phenomenon. The stakeholder-centric model assumed by Indian companies has insulated it from the wrongdoings that are highly prevalent in the US context. Though, there have been stray cases like Satyam, corporate frauds havent really caught the headlines regularly in India. The two factors that distinguish India Way from the US model, which align with the stakeholder model are the employee engagement philosophy and the customer centric approach focusing on social cause. As authors have emphasized many times through the course of the book, India Way is an outcome of the environmental necessities faced by Indian companies. India Way can be easily applied to organizations in countries which are facing similar issues. Individual leaders across the world can use India Way as a guide to conduct themselves within an organization. They can focus on the following four aspects, not necessarily on all four to improve the performance of the organization: Establish the sense of mission Engage employees Manage the culture Focus on alignment (of the above three aspects)

The authors believe that India Way demonstrates the power of collective calling over private purpose, which is the base of American Way of doing business.

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The India Way Book Review

Conclusion

The book throws brilliant comparisons between the business models, cultures and structures adopted by the West and India. The book is an outcome of a series of surveys and interviews conducted within Indian and US organizations involving executives at the top of the organization. I believe that a little more comprehensive comparison involving the medium enterprises would have given a deeper insight to the way in which business is conducted in India. Though certain aspects like corporate governance, etc would have been irrelevant for such organizations, it would have been a good learning exercise to understand India Way. Also, a comparison of business practices in countries like Japan would have supported the cause of India Way. This comparison could have shown if India Way is aligned more to the East or the West or is completely distinctive. The findings of this book find prominence due to the quantitative nature of surveys conducted by the authors. Also, the authors have accepted that India Way is an outcome of necessity, rather than design. Critics would have asked regarding the sustainability of India Way, but the authors have already answered it towards the end of the book. The India Way is a much needed addition to the business literature across the world. Having distinctive practices, as compared to peers in other parts of the world, The India Way throws light to models which can be adopted by organizations across the world. The India Way might be instrumental in providing inputs to the evolving business models which are converging across the world.

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