At one time, the West’s multinationals ruled supreme. But the financial Armageddon has left some like General Motors and Ford reeling. The India Way explores how top Indian companies have achieved double-digit growth in the midst of a downturn while governing for the long-term, investing in employees, improving quality and making social issues a business priority.
“The experience of Indian business — and the roaring success of the Indian economy — points the world towards a different enterprise model that the West should study,” says Wharton Business School professor Michael Useem, who has authored The India Way with Peter Cappelli, Harbir Singh, and Jitendra Singh.
Useem has written several books on leadership including The Inner Circle, Investor Capitalism and The Leadership Moment. He talked to DNA in New York about how the top Indian CEOs have created unique business practices that the West should emulate.
How have Indian companies fared in running acquired companies in the super-competitive Western market?
Indian companies are nimble international acquirers, able to compete with the best well beyond the boundaries of India. When Indian companies take over publicly traded foreign companies, research confirms that the acquired firms often increase both their efficiency and profitability. However, you have to be cautious in inferring too much since acquired companies are often underperforming and ready for a management makeover. Overall, Indian companies have developed enormous confidence and an Indian CEO is not shy about saying, “The world’s my oyster.”
We believe the Indian model can not only compete with the US model in terms of financial performance, but might even beat it.
Indians flock to American B-schools but when they
return to India do they blindly replicate Western management practices?
India business leaders are keen to learn the best practices from the West, and the US experience has served as a major source of ideas. If you look at the number of Indian students in American business schools, including our own, there has been a huge surge in applications and enrolment from India... (But) while Indian executives are ready to learn from the West, they don’t blindly apply what they acquire, and instead evolve distinct combinations of Western principles and Indian methods.
For instance… Indian executives have been watching how company governance operates in the US and are mindful of the strengthened shareholder oversight requirements of the Sarbanes-Oxley Act of 2002. But drawing on the broader mission and purpose that defines the India Way, Indian directors have at the same time become more deeply engaged in guiding company directions with less of an eye or an ear on the shareholders and more of a concern for the community and the country… the Godrej group, for instance, has constructed schools, medical clinics and living facilities for employees on a massive scale unknown among American companies.
So Indian managers aren’t reinventing the wheel but making the best business ideas their own?
The experience of Indian business and the roaring success of the Indian economypoints the world towards a different enterprise model that the West should study. Rather than wholeheartedly embracing American-style “unbridled capitalism”, the India Way has settled voluntarily on a more bridled version. India’s top business figures, we found, were pursuing strategies not strictly tethered to the pursuit of private profits.
What do Indian managers do differently to get the most out of workers?
The India Way revolves around holistic engagement with employees and is readily seen in the culture of the Tata companies. The employment relationship is widely understood to be for the long term while still tied to performance. The Indian business ethos views companies as “one big family.”
Is this the “soft” side of company management?
It would be a mistake to assume Indian companies have relied solely on “soft” practices. We found more sophisticated HR practices, systems of workforce planning and performance management than are common in the US. American employers have largely abandoned investments of all kinds in employees, especially managerial development, for fear that that such investments will be lost if employees leave. But Indian companies opt for the longer-term strategy of investing in employees.
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