)
Asignificant number of Indian companies experienced impressive growth during the past two decades. But today, many face a daunting side effect: a nationwide crisis in leadership. In some ways, Indian companies are victims of their own success. As one senior HR manager at a large private-sector conglomerate explained, "People have been so focused on growth that they have not invested in developing the next generation of executives. There is a strong circle of top leadership in our businesses, but no tag team."
Recent data supports this claim. In a 2010 study by Harvard Business Publishing, an overwhelming 88 per cent of top Indian companies cited "gaps in [their] leadership practice" as their top challenge in coming years. The global Manpower Talent Shortage Survey 2012 reported that 48 per cent of the respondents based in India had difficulty finding candidates for their senior managerial positions. And a recent analysis by Booz & Company forecasts that by 2017, 15 to 18 per cent of the leadership positions in India's top 500 companies will remain unfilled (or filled incompetently). This implies that companies will be missing almost one in every five leaders they need - putting both potential growth opportunities and the continuity of existing business operations at risk. .(Estimated demand-supply gap for management in India)
Several causes have contributed to this breakdown in India's corporate leadership pipeline. Understanding these factors can reveal the opportunities to set things right.
Shifting realities
About 65 per cent of India's 1.2 billion people are between 15 and 64 years old, and 30 per cent is younger than 15. This "demographic dividend" should have given Indian companies a significant advantage in the form of a sizable pool of qualified applicants. But the country's youth-dominated population has thus far fallen short of its promise. As Nandan Nilekani points out in his book Imagining India: The Idea of a Renewed Nation, India lacks the educational institutions it needs, from the earliest years to the post-college level. Thus, the thousands of Indian graduates who enter the workforce every year are often not "industry-ready" or equipped with the skills demanded by global business. This has contributed to a dearth of top-notch candidates and a growing talent war for those few with desirable skill sets.
Young talent needs development and supervision. As Indian companies expand domestically and abroad, the lack of managers capable of providing this guidance has become all the more acute. The founding executives who built the businesses, and who made the far-reaching strategic decisions in the past, are approaching retirement. This dynamic is all the more daunting because operating models at many Indian companies have shifted.
Traditionally, Indian companies operated in a top-down manner - the person with the corner office made the final decisions, and senior managers oversaw their specific silos. It was efficient but it stifled creativity and discouraged autonomous decision-making. It is now giving way to a more participative approach, more resonant with the younger generation and more resilient and effective for companies that are too big to micro-manage. This new model can be effective only if there are skilled managers to fill the ranks.
Looking for leaders
India's underprepared population, its economic growth, and its changing business models are the more visible contributors to its leadership deficit. But there is another more subtle but equally powerful underlying cause: historically, Indian business leaders have focused on developing technology rather than people.
-
Perhaps the most obvious example that can be found - or found missing - in the C-Suite: Fewer companies have provided HR a seat in executive management committees. The HR department often has a limited role in strategic planning, leading to a lack of focus on people matters. Similar to the early years of the Silicon Valley boom, Indian companies have prioritised achieving technical excellence, hiring engineers who've been trained to pursue innovation - but not to manage people and lead organisations.
-
Insufficient training for new recruits: Many companies struggle with new hire onboarding programmes. Often, the incoming class of MBA recruits is not integrated well enough into the broader workforce, and companies put too much hope too early on these new hires' shoulders. Meanwhile, rotation programmes meant to train the new recruits are often ill-conceived and seen as an intrusion into daily work by line managers.
-
Limited variety of experience at the top: Without a strong leadership pipeline in place, star functional specialists are typically promoted to top roles. These individuals may have a background focused within one domain but may not have had the opportunity to develop a broader perspective or set of skills. Many global companies compensate for this with targeted on-the-job experiences and in-depth training, where they bring senior executives together to help develop one another's skills. But Indian companies have invested little in this type of executive development.
- Lack of succession planning: Rapidly growing new-economy industries often rely on relatively young and inexperienced managers to take on senior positions. These individuals have not yet developed a leader's perspective. For example, the telecom boom has seen a flurry of mobile phone brands flourish in India. But each of these firms has had to draw on its existing executive pool to build their senior team. The growth of that talent pool has not kept pace with those of the brands. As one regional sales head for a mobile handset company put it: "Eight to 10 years ago, there were only three to four handset brands in the country. Today, there are over 60. Relatively younger managers have had to step up to take on top roles in these companies." This is the result of lack of qualified successors. Senior leaders are not retiring when they should. Instead of a clear succession plan, executives are extending their tenure, lacking confidence that the next level of management is up to the task of leading.
Many executives recognise the challenges but are often unsure about the steps that should to be taken to overcome them. First and foremost, they need to take a holistic look at leadership development practices. Their goal should be to develop a sustainable leadership pipeline across the organisational pyramid: a well-rounded leadership team to complement the required skills at the top, a team of successors behind them, a strong bench of high-potential individuals identified and developed in the middle, and a cadre of young, industry-ready talent. It should also include advancement opportunities for technical specialists.
This is no small task. It will require executives and managers to embrace the idea that training young recruits is an essential part of their routine, and will provide the incentives for them to contribute to the organisation. Companies will need to invest in specific interventions that have been successful at global companies instead of generic initiatives. This means making talent management a key component of HR strategy, and making HR a key participant in the firm's decision making processes.
This article has been adapted from the viewpoint titled "Taking the Leadership Leap: Developing an Effective Executive Pipeline for India's Future" authored by Viren Doshi, Jai Sinha, Gaurav Moda and Anshu Nahar of Booz & Company
