International Executive search

The making of an Indian multinational - Challenges in setting up business entities in new markets - by K Sudarshan, Managing Partner, EMA Partners India.

As multinationals turn their attention to growth economies like India and China, in the face of increasing domestic competition the traditional homegrown Indian corporation has to look at expanding their footprint to sustain and grow amidst severe competitive pressures. What is their survival and growth strategy? Build and compete on a global scale, expand into new markets and gain a foothold in the underdeveloped or developing markets. In industries as diverse as automotive, banking or even in services, Indian companies are charting ambitious global growth strategies. As more and more Indian corporations are embarking on such initiatives there are several challenges they face especially when it comes to staffing their international operations.  

1. The profile of the workforce is changing for the Indian corporation. These corporations now wanting to operate in a global environment have to have the ability to attract the best talent in several markets to remain globally competitive. This means, our HR practices and systems have to be benchmarked with the best in the world or as CK Prahlad puts it, Indian companies should now aspire to be thought leaders in evolving Next practices as opposed to best practices.

2. Most Asian corporations and even American and European corporations have followed a model where Greenfield initiatives in International markets have always been led by their own people, as in people within their system seconded to new markets on expatriate status. This strategy will work as starting point as one needs to be in sync culturally with the senior management team in their Global offices. Similarly Indian companies will do good to depute one of their hi-potential managers to new markets. But often as we have seen the problem, in this case is to build a sound second line operating team comprising local nationals. One can take the learning and experience of several multinationals which have adopted such models in the Indian context. Some have got it right while many have floundered due to either overemphasis on expatriate talent or vice versa when it comes to leading key portfolios and hence have failed due to lack of appreciation of local pulse and the culture of the marketplace.

3. Different markets function differently and one needs to have a sound understanding of the local nuances in even the so-called simple things like an employment contract! For example, in developed markets like the USA, most senior candidates usually consult specialist lawyers to help draft employment contracts with clauses which are usually unacceptable in the Indian context. For example, in one such instance in Canada it took us almost a month to negotiate and seal such a contract and that too after hours and days of deliberations on several clauses! Whereas in certain markets like Russia candidates tend to change jobs too often and to our surprise, can come on board almost instantly, reflecting the churn in developing economies. The easier they come, the easier they go!

4. Indian ethnic population is widespread in several parts of the world and at times it makes good strategy to hire local Indians who are culturally in tune with either side. This approach can work well in places like UK, USA or Canada where there is a huge ethnic Indian community. But this being the stated strategy can run you in to trouble as these are societies which are essentially built on the tenet of equal opportunity and companies are often looking to maintain the ethnic balance. It is also important that you are not seen as a 'brown office' which will impair the ability to attract local talent in the larger context. Also several countries have specified a percentage cap on expatriate mangers and have a rigorous process in place for expatriate manager approvals.

5. As an unknown entity in an alien market the company needs professional support and advice in terms of local practices including various regulatory issues. The problem can be more acute in markets where English is not the main language of business especially in Latin America, parts of Europe or markets like Russia where the regulatory environment and bureaucracy can be stifling. Among other things at the start up stage it is critical that the Indian company has access to sound advice on formulating a hiring strategy for the market which will be a key factor in determining the success of the enterprise.

6. In the long term the Indian corporation has to create an employment brand if it has to attract serious talent in alien markets at reasonable market benchmarked compensation. Specifically, to get off the ground in terms of staffing, Executive search firms which have a sound understanding of the client from an India perspective and also with a local presence in key global markets can ensure appropriate positioning of the opportunity. It is also important for the executive search firm to transfer the touch and feel know-how (especially the cultural context) of the Indian corporation to its local partners in respective countries and work seamlessly with them.