Indian industries feel the heat

with fierce competition, Indian companies in pursuit of skilled talent are
changing their recruitment practices. Paran Balakrishnan reports

was a peculiarly Indian corporate custom. In the old days, firms that were
owned by businessmen from the Marwari caste always made sure that their top
executives were trusted lieutenants from the same caste. Similarly, it always
helped to be a Parsi in a company owned by Parsi businessmen.

are still traces of caste-oriented nepotism in the Indian corporate world but
it is rapidly being swept aside by a gigantic tidal wave of competition.
Companies that would once have appointed a loyal clansman are now more likely
to call in a headhunter. "We hire people from companies where the service
orientation is high and who are used to an aggressive market environment,"
says Preetha Chatterjee, vice-president HR at Delhi-based mobile phone company
Bharti Cellular.

is fierce and it is changing the recruitment practices of Indian companies
faster than you can say "hire the best". Take Chennai-based Murugappa
Industries, an old-style conglomerate that makes everything from sweets to
industrial products. A few weeks ago Murugappa Industries was a hot topic. Its
chairman MV Subbiah, a member of the family that holds the controlling stake in
the group, stepped down in favour of a computer industry executive who was
brought in from outside. A year ago Murugappa brought in a team of management
teachers and respected professionals on to a newly formed executive board.
"They wanted to change the company’s culture from top to bottom,"
says a management consultant.

industry is feeling the heat from competition and that explains why it is
dropping old nepotistic practices faster than the proverbial hot brick. Today,
even the oldest business houses have called in consultants and started
restructuring their entire operations. New executives – frequently from
multinationals – have been brought in to turn family-run corporations into
leaner, meaner enterprises.

the sudden turnaround? Back in the 1980s the Indian government used its powers
to see that competition was kept to a minimum. It constructed a strict system
of licensing that ensured, for instance, that only three car manufacturers were
allowed to operate. Competition was deemed to be wasteful and a frittering away
of "national resources". Foreign companies were discouraged from
investing in India.

shackles were lifted in 1991 and Indian industry has altered beyond recognition
since then. For example, the world’s top car manufacturers including
Mercedes-Benz, Honda, Toyota and GM are falling over themselves to get a
foothold in the region. Some of the weaker players like Daewoo and Fiat are already
being pushed out. In short: competition is brutal and tough.

opening of the Indian economy has created businesses where none existed before
– and a huge demand for trained and talented executives. This year the
insurance market has been opened to foreign companies and a flood of new giants
like Prudential have entered the country for the first time. A few years ago
foreign liquor companies like United Distillers began selling their wares here.
Others, such as Bacardi, have entered the market more recently.

on the high-tech revolution. The advent of mobile telephony has created
fast-moving new players like Bharti Cellular, which are fighting a
multi-pronged battle against formidable rivals. And IT companies like
Bangalore-based Infosys are snaring the best talent with their bonanza offers
of share options.

competition has intensified during the 1990s, India has begun to look more like
the rest of the world. International headhunters like Egon Zehnder and
Korn/Ferry have established offices and are frequently called in by companies
that are about to make a foray into India. Some of these consultancies have
begun operations in neighbouring countries like Sri Lanka, which began opening
its economy in the early 1980s. However, it must be noted that because of its
earlier move to economic liberalisation, Sri Lanka hasn’t faced a sudden influx
of foreign companies as India did in the 1990s. Similarly, while Pakistan is
growing, it is doing so at a much slower pace than India.

do newcomers to India go about hiring the best executives for their operations?
The answer is that they call in consultants like McKinsey or headhunters like
Egon Zehnder, who are tasked with finding chief executives. Lower-level
executives are traced through a mixture of placement companies and newspaper

the example of Bharti Telecom, a relatively unknown telecoms company until a
few years ago. It had a tough time initially but hiring became easier after it
linked up with BT. More recently, Bharti has become an established brand in the
market place. Says Chatterjee: "I think the ability to attract talent is
correlated with success in the market place."

course, filling the executive ranks isn’t the whole story for new conglomerates
shifting to the subcontinent. India has a Byzantine maze of labour regulations
that makes it extremely difficult for firms to hire and fire workers. That
means that newly arrived companies must tread carefully when they take their
first steps in India. Again countries like Sri Lanka have a less-complex maze
of regulations.

changes that have taken place during the 1990s can be seen at the annual
recruitment jamboree at the Indian Institute of Management in Ahmedabad. Ten
years ago, consumer giants like Nestl‚ and Hindustan Lever (the Indian arm of
Unilever) called the shots and hired all the best talent from the Institute.
Now, they have been pushed to the sidelines.

new favourites at the Indian Institute are other international heavyweights
like McKinsey and Lehman Bros, and they are now scooping up the smartest
students from India’s top management school for their global operations. Or
there are the domestic superstars like Infosys Technologies and other high-tech
companies that are luring talent with the promise of a bumper bonanza of stock
options. This year Lehman Bros hired nine students from the Institute, and most
have already moved to the bank’s London office.

further changes are still to come in the recruitment game? One thing is for
certain – competition will ensure that companies turn towards the best.


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