Archive for October 2009


A Tale of Two Indias

October 21st, 2009 — 2:03pm

Earlier this month, I finished a fifteen day trip to India. I formally met executives at two of the country’s largest business groups, and several others in social settings. A journalist posed a question that set me thinking about how business had changed since I lived and worked there.

In 1984, I returned to India after finishing my MBA and spending 13 months in the US as a management trainee at American Express Bank. In other posts, I’ve mentioned my experiences as a trainee creating policy papers for the AEB Board. My return quickly cut me down to size.

My 13 months in New York hadn’t taught me the basics of banking. For example, the lesson I was taught about “Letters of Credit,” the grease of the wheels of international trade, was: reject any “Bill of Lading” that differed from its LC, no matter how small the discrepancy. This categorical rule was meant to protect the Bank if contract disputes emerged between the buyer and seller of the goods covered by the LC and BL. But in India, 100% of the BLs had multiple differences from their LCs. Rejecting them all would shut down the Bank. My India-trained colleagues handled these decisions effortlessly, whereas I, supposedly a “high potential” junior manager, couldn’t without help. (Incidentally, the (rare) managers from the Sub-Continent who got posted abroad, often received multiple, quick promotions to the levels they would have normally achieved had their careers unfolded in the West.)

I also learnt there were many things we could not do, even if they made good business sense. Often, my colleagues (and even my boss) signed off on some transactions with indecipherable squiggles. Moreover, when they had to approve certain types of transactions (e.g., giving a valued client a better deal on its foreign exchange transaction than was allowed by India’s central bank), they almost always had to make client calls; in those cases I signed for them. Ultimately, I realized that these transactions violated arcane Indian laws; when these were minor, the officers squiggled; when they were non-trivial, I became a convenient fall guy.

Today, the situation is very different. Many arcane rules have been repealed; one does not need to break the law every day in order to do one’s job. A palpable degree of confidence radiates from business executives about the prospects of their own firms in particular, and the economy in general. In the 1980s, virtually nothing I had studied in my MBA was applicable in India. Today, many companies are brilliantly run – and could teach a lot to the rest of the world.

The country’s liberalization and rapid growth has, however, produced one downside: A top executive I met bemoaned the fact that the country was teeming with MBAs who wanted to be Managing Directors immediately, without putting in sufficient time to learn their profession. (And I could sympathize with this viewpoint. I watched an interview of a newly appointed, very young, CEO on a TV business channel. The interviewer fawned over him in a manner typically reserved for film stars and cricket players. Which young person wouldn’t want such treatment?) The fact that virtually none of the many business schools that have sprung up all over the country require work experience for admission exacerbates this problem; selections are done mostly based on the Indian equivalent of the GMAT and/or the candidate’s academic record. The desire of the young MBAs clashes with the realities of corporate life and is producing a serious problem: Indian executives estimate that 20% – 40% of their professional staff change employers each year.

Corporate leaders must address this challenge, even if these numbers are a wild exaggeration. I suspect that they will have to take a good hard look at their human resource policies to craft a uniquely “modern Indian” solution. A key part aspect must be the strengthening of company-specific management training; such an investment will convince seasoned managers that the company is truly interested in their professional wellbeing. Until Enron went down in flames, Tom Peters and others were preaching that every manager should adopt a “Me Incorporated” mindset; this doctrine is still prevalent on today’s Wall Street. In India, the most visible example of this mindset is the bitter fued between the two Ambani brothers, each a billionaire many times over. In a networked world, the rest of Indian industry simply cannot afford to fall into the same trap.

A model of what is needed already exists in India and I was privileged to visit it: The Tata Management Training Center in Pune is one of the oldest corporate universities in the world. It is using everything from in-class programs for senior executives to eLearning tools to meet the needs of managers at all levels. Some courses last for a few days, while others are delivered “Executive MBA” style over several months. Chetan Tolia, its Managing Director, told me that some 5,000 managers walk through TMTC’s gates each year. If other major business houses emulated the Tatas in this regard, India could develop a truly formidable competitive advantage.

The million dollar question is: Will they? The ten million dollar question is: What impact will this have on developed economies?

1 comment » | Business Environment, Corporate Culture, executive education, MBA education

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