Managing across cultures

TRENDS: As they venture abroad, Indian companies are discovering and meeting challenges relating to key managerial appointments.

In the first six months of 2006, India Inc has seen nearly 170 acquisitions, estimated to be worth $8.2 billion. The figure has been steadily rising"" from $12.3 billion in 2004 to $ 18.2 billion in 2005. However, the overseas acquisitions made by Indian firms have nmore than doubled.

From $1.7 billion in 2004 the figure rose to $4.5 billion in 2006. Home-grown companies like the Tatas and Mahindras have taken the Indian footprint to various countries across the globe. The Tata Group's business in the US is worth $1.5 billion and it has 18 companies in the UK.

But as Indian companies go global, HR managers face a host of issues"" different cultures, languages, values, practices and styles of leadership. Of the various challenges faced, finding and retaining talent seems to be among the biggest.

Says Pawan Goenka, President (automotive sector) at Mahindra & Mahindra: "When a US company goes to Europe or UK, the culture is not very different. But when an Indian company goes abroad, the cultural differences are vast." It is this difference in culture that poses a major barrier.

"The biggest challenge," he adds, "is to find a person who provides business leadership to the overseas venture and at the same time fits into the local culture scenario."

To counter this, companies have tried to strike a balance between local and foreign executives. For instance, Mahindra has ensured that it maintains a mix of senior-level executives from both countries in its Chinese operations. The Tata Group is another example. It employs a 23,000-strong overseas workforce, of which 8,100 are non-Indian (2004-05).

But this solution only addresses part of the problem. To hire or retain top talent overseas, companies first need to create goodwill for themselves. Says Goenka: "Barring a few countries, Indian companies are unknown brands in most countries that they enter." This means that most people in these countries know little about India, its culture and the intentions of the new company.

And all these three factors are extremely crucial for employee retention. Says R Gopalkrishnan, Executive Director, Tata Sons: "Losing your top people is one of the major worries in any overseas acquisition, so it is important to build credibility."

He explains with an example. When Tata Motors went to Korea, it had to compete with bidders from various countries. The company sensed that the Koreans preferred the Europeans. Realising that this could affect things drastically, the group quickly swung into action. In collaboration with the Indian embassy in Seoul, it organised an Indian evening.

Employees were treated to some Indian cuisine, traditions and a presentation on the Tata Group"" its industries, its presence in 25 locations worldwide and so on. The trick worked and the group has used a similar strategy in all new countries it enters. For instance, when Tata Chemicals entered Kenya, it ensured that the employees of the new company got a preview of the group, its culture and its plans in that country.

While this may be the answer to some of the challenges faced by Indian companies going global, Raymond Saner, registered lead auditor for the ISO 10015 quality standard for corporate training, believes that only bigger challenges await Indian companies.

Says Saner: "Indian companies have mostly followed the expat or the colonial model, wherein a German company always has a German national at the helm of affairs, no matter which country it enters."

He points out that this model leads to a number of problems, as the leader isn't very familiar with local conditions. Goenka agrees, adding that it also poses other problems. For instance, bringing back employees from foreign postings is a major problem. So how can Indian companies battle this? Saner has a solution-- companies must function without looking at nationalities.

He explains with an example: "Look at Nestle. The previous CEO was German, the current CEO is an Austrian and the company's working language is English, although it is headquartered in Switzerland." It has to be the best man for the job, irrespective of both the company's and the employee's nationality.