There was a time when the competitive advantage that Japan had built in key industries like automobiles and electronics led to a world-wide scramble to understand the Japanese way of doing things. Everyone was researching Japanese management and the era produced a plethora of books on the subject, such as mega bestseller, The Toyota Way. Since then, the lessons of lean manufacturing have been digested by Western corporates and some of the less replicable best practises, such as Quality Circles, have been discarded. Now they’re is looking for new learnings, from newly emerging economies.
Hence The India Way, a new book by four professors of the The Wharton School, led by organisational behaviour guru Peter Cappelli. “This is just the beginning,” he says. “We’re the first to tell the basic story and describe the Indian corporation’s way of working. Maybe five years hence you’ll have more specific books like The Tata Way.
Three years in the making, The India Way project has been a massive one, with the four professors conducting interviews with the CEOs of 100 Indian corporates. Cappelli himself interviewed Mukesh Ambani of Reliance, KV Kamat of ICICI and even Ramalinga Raju of Satyam, just before he went to prison. His take: “The similarities in what they had to say were striking. They all taked about their employees, the social purpose of business. They never spoke of shareholders, analyst reports, competitive strategy or mergers and acquisitions. They were very different from American CEOs.”
American president Lyndon Johnson loved to tell a story about asking a truck driver working at NASA in the 1960s what his job was. The driver’s response: “I’m helping to put a man on the moon.”
That sense of purpose has all but disappeared from American organisational culture, says Capelli, though it’s still alive in India: “A generation ago, American CEOs still talked about balancing stakeholder interests. The new leadership only talks about the next quarter’s estimates. The US has taken the cult of shareholder value too far. We promised to make CEOs rich if they would make their companies great, but that has not worked. It’s a failed experiment.”
Indian CEOs, on the other hand give unequivocal priority to another stakeholder — the employee. Maybe it’s the lack of leadership band-width, maybe its part of a patriarchal culture in transition, but the CEOs interviewed in this project all tended to give the highest priority to developing and empowering their people. In fact, after business strategy formulation, the Indian CEOs next highest priority is building organisational culture, followed by acting as role model and teaching employees.
This was all the more so in the many new-gen companies like Bharti, which have no legacy and are still in the process of creating a culture that will endure. Cappelli points out that Indian corporates are still very young compared to their western counterparts and says, “They view culture as a magnetic force that would align even the most remote of their managers’ needles. The entire workforce is viewed as a family, with requisite obligations. It’s reminiscent of the ‘organisation man’ approach that was so common to American corporations in the 1950s.”
It’s an emotional over rational approach to management and some of this carries over to company Boards as well. Cappelli and his colleagues found that unlike in the West, independent directors in India do not see themselves primarily as the eyes and ears of minority shareholders: “Their commitment to investors is weak compared to their American counterparts. Instead, they stress social responsibility. They strive to balance the interests of all stakeholders, including the larger community. This is a luxury American boards have not had for a long time, given the pressure from Wall Street for quarterly results.”
The Indian board is an ‘entrepreneurial’ board (where non-executive directors see themselves in a strategic partnership role with company executives) as compared to a ‘compliance’ board (where they see their role as enforcing regulatory rules and monitoring management). The top Indian corporates interviewed by Cappelli have very eminent statesman-like personalities on their Boards and they all stressed the importance of inputs from non-executive directors in reaching key de-cisions. “But no one we interviewed talked about non-executive directors as adjudicating monitors. Most saw them as discussion partners,” he says.
From the big things discussed in board room to the small things that need to be tackled in order to get things done, the authors have a separate chapter on improvisation and adaptability (also referred to, somewhat unfortunately, as jugaad). Educated in Ivy League business schools, conversant with In Search of Excellence and Built To Last, most Indian CEOs are happy to follow well-established Western models of strategy formulation. But on-the-ground realities in India have required them to write their own manuals on how to succeed in a changing environment and this, in a way, is their unique contribution to management theory.
Here, The India Way talks of the ‘similarities of difference,’ a reference to Dale Berra, son of American baseball icon Yogi Berra. When asked whether he was similar to his father, Dale replied that their similarities were different. “American and Indian leaders use pretty much the same skill set, but they have evolved distinct approaches — critical leadership distinctions that, in India’s case, have helped the nation’s business survive,” says Cappelli in The India Way.
When American executives were asked to indentify their most critical challenges in a Conference Board survey of global CEOs a few years ago, they said “consistent execution of strategy.” Indian CEOs, on the other hand, said it was “speed, flexibility and adaptability to change.” This is because most successful Indian businesses to come up in recent years have been built through a process of trial and error, by negotiating hurdles in an uncertain environment. “The CEOs we interviewed said they faced some vexing bureaucratic and structural problems in their early careers. But they actively surmounted these barriers through creative adaption,” says Cappelli.
Which might explain why Indian CEOs are unwilling to farm out strategy to consulting companies. Americans would see the CEO of a large corporate meddling in the strategy process (considered a staff function in large American firms) as a recipe for disaster, but Indian CEOs see it as necessary to monitoring and maintaining their organisation’s architecture and culture. In The India Way Cappelli says this is partly because of their entrepreneurial mind-set, but also because the process of creating strategy itself is different from that of American companies: “Strategy in Indian firms emphasises enduring capacities, architecture and culture of the organisations. It’s based on social mission, engaging the energy and commitment of employees and improvisation.”
The melding of the Indian CEO’s stress on improvisation, mission and purpose has yielded a leadership style that is ‘transformational’ rather than ‘transactional.’ The later involves striking deals with employees, where the leader matches the individual’s interests to job-related out-comes — you want a promotion, meet these sales targets. Transformational or ‘charismatic’ leadership inspires the individual to work, not just for monetary reward, but for the overall success of the company, which they closely identify with.
Here, the authors briefly touch upon Max Weber’s The Protestant Ethic and the Spirit of Capitalism, which argues that European capitalism was not driven by the markets but by the religious ideology specific to that region and time. Is the Indian way influenced by the Hindu work ethic? For once, Cappelli hesitates to express an opinion. “I don’t think it’s a simple transfer of Hindu culture to business,” he finally says. “Indian society is hierarchical, but Indian CEOs are seeking to empower their people. They are also at a stage of life — in their 50s — when service to the community is important to them. Which I think is consistent with their religious beliefs.”
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