Are Indian Business Leaders Different?

Do Indian CEOs and business leaders operate in a way that is markedly different from those in other parts of the world? What is the source of their competitive advantage? Can other managers learn from their experiences?

Four Wharton professors – Peter Cappelli, Harbir Singh, Jitendra Singh (now dean of the Nanyang business school in Singapore) and Michael Useem – answer these questions in a new study titled, "The DNA of Indian Leadership: The Governance, Management and Leadership of Leading Indian Firms," co-sponsored by India's National HRD Network. Based on interviews with 100 CEOs of leading Indian companies, the researchers concluded that while top Indian leaders do share several attributes with their U.S. counterparts, they also have distinctive characteristics.

In contrast to U.S. business leaders, Indian CEOs tend to be more preoccupied with internal management, long-term strategic vision and organizational culture. Financial matters, on the other hand, are not at the top of their agendas. Indian leaders care a good deal more about motivating employees and setting an example than about currying favour with shareholders or the markets.

Advantage: Leadership? Is there an Indian Leadership Model?

In defining the scope of their research, the professors describe their objective as follows: "Our ultimate goal for the project is to see whether the practices and priorities of the [Indian] CEOs in our study suggest something like a different or distinctive model for leading and managing business enterprises. The rise of the Indian economy, and especially the international competitiveness of Indian businesses now, raises the question as to whether there is a distinctive Indian model and, if so, what that model might be."

The competencies most important to their success in the past five years, according to the Indian CEOs were shared values and vision, as well as building the top team.

For example, B. Muthuraman, MD of Tata Steel talked about a leader "being a visionary" as an important capacity, thus being able to make people envision their future as well as energize, enthuse and empower them." The respondents also noted that leading from the front and leading by example were important personal characteristics.

A number of the Indian business leaders also stressed that their vision for the company should be rooted in its underlying values, and that the vision in turn should energize and excite the company's employees.

When asked how Indian leaders might be different from their Western counterparts, the CEOs responded that Indian business executives were marked by flexibility, being in a family ownership structure and entrepreneurship/risk-taking. The leaders noted that the strict regulatory climate and challenging infrastructure environment in India necessitated a capacity to be resilient, adapt and move forward in the face of adversity.

Anu Aga, former chairperson of Thermax India, an energy and environment management firm, pointed to the many obstacles Indian companies have to deal with, such as "roads and ports in terrible conditions". Family ownership stakes sometimes helped leaders have a more long-term approach to strategy, reported the respondents. In addition, they noted that being entrepreneurial was important in order to get large companies to act nimbly and take advantage of the changing marketplace.

The CEOs believed that their firms' competitive advantage lay in their high-performance culture, customer focus, innovation and entrepreneurship, and low cost. Even when asked how their roles are changing, they overwhelmingly noted that they spend more time these days setting strategy and dealing with customers rather than worrying about shareholders.

Look Inside to Get Ahead?

Perhaps the most telling responses were the CEOs' ranking of their management priorities. They chose "Chief input for business strategy," "Keeper of organizational culture" and "Guide or teacher for employees" as the top three. "Unlike CEOs in America, Indian leaders tend to focus much more on internal issues -- on people management, motivating employees and so forth," says Cappelli. "U.S. CEOs spend a lot more of their time on shareholder issues."

Harbir Singh adds that, "in the U.S., CEOs often see shareholders or the board as their primary constituency. In India, CEOs need to focus on employees because of the safety net factor (which doesn’t exist in India). With the Indian economy booming, and a shortage of talent, investing in employees is the right thing to do.”

Cappelli notes that the best way to be successful as a manager is not to focus solely on short-term profits and to reward or punish leaders based on such performance: "If you're a manager, it's hard to motivate employees when the big goal is to increase quarterly profits by a half-percentage point. Not enough pay is at risk for that to be sufficient motivation.

What ails Indian Leaders?

Subodh Bhargava, CEO of telecommunications firm VSNL, told the researchers that, "In India we tend to be hierarchical, not just in administrative and management structure hierarchy but we are very conscious of personal hierarchy in our position. Second, in India we are over-emotional, and a lot of big decisions tend to be emotional. The attachment or other softer dimensions emerge, whether it's an acquisition or an investment or while evaluating people or opportunities. Finally, one of our biggest weaknesses is that we are unable to use scientific, reasonable assessment of white-collar productivity. We are poor judges of people, their capabilities and expectations."

Are Indian CEOs simply better at internalizing best practices that they have read in the management textbooks? "Of course, they have seen a lot of how U.S. CEOs operate," says Cappelli. "They know that U.S. leaders are more concerned with shareholders; they have been exposed to U.S. models and best practices. But then why did the Indian CEOs take it up, and not the American CEOs? I think it's more organic than that." Cappelli notes that many U.S. employers were exposed to Japanese models of management for some time. "But right when the Japanese model was hot -- that's when U.S. employers were abandoning it," he notes. "It's just not the way they saw themselves, and they didn't adopt it."

Time-Tested or Flash in the Pan?

It is tempting to think that Indian CEOs can afford to indulge in their inward preoccupation simply because the country's economy and markets haven't developed quite as much as they have in the U.S. Even though Indian companies are competing with U.S. and other Western firms, the CEOs don't report that they are subject to the same investor pressures

"While the Indian CEOs certainly engaged in some self-criticism -- they admitted that some aspects of management could be more professionalized, their staff could have more competences or deeper expertise -- they didn't feel that the financial aspects needed more attention," says Cappelli. "It was quite remarkable in that there was no significant dissent on this. When asked about their legacy, they talked about their firm's performance, about growth, influence and reputation -- not about share prices increasing."

Reference: http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4238#

Published: November 01, 2007 in India Knowledge@Wharton