Executive talent

Global Magazine from AESC

 

India Rising

India Rising

The State of Talent in the World's Fastest Growing Economy

The Business Environment Today

According to data from The World Bank, India’s GDP, school enrollment, and GNI have all experienced steep increases over the last decade.

Shailja Dutt, chairperson & founder at Stellar Search, India explains, “Despite a dip in absolute growth over the last few quarters, the outlook for the Indian economy remains positive.”

“It continues to be among the fastest growing economies in the world, but due to its nature of being a consumption-driven economy and not an export-driven economy, sustainability of this momentum will be difficult if the government does not nurture the right macro-economic environment,” Dutt adds. “But for the next couple of quarters, we do believe that the forecast is positive.”

Two recent, far reaching regulatory matters are having an impact on the business climate in India: demonetization and the movement to a single tax. Ramgopal Rao is a managing partner at Steinbach & Partner, India. “First, the entire cash economy was demonetized overnight which meant 86% of the cash in the system was withdrawn, which helped create a wider tax base. The second is the concept of one single tax across the country. Until then each state in India had a different tax rate, creating problems moving goods and services. This has been equalized by what is called the GST single tax, applicable across the board for goods and services. One benefit of this reform is that a whole lot of bureaucracy is now being simplified and it’s showing results.”

Specifically, foreign direct investment in India increased because of delicensing and deregulating, according to Rao. “Now companies can come in and invest, and they do not need to have a local Indian partner. Only areas like nuclear, the defense of the country and single brand retail are excepted. We also have started bringing a lot of manufacturing into India. One key interesting factor is that about 50% of the total investment is coming from the private sector in India, and the government is willing to partner with private companies for what we call a public-private partnership.”

Recent years have witnessed several other changes designed to improve India’s competitiveness in the market, according to Madhav Sharan, office managing director of Korn Ferry in New Delhi. He highlights “the Make in India Program,” created to promote manufacturing, encourage investment, build infrastructure and expand the skilled workforce. “Every sector, whether it is IT, whether it is manufacturing, healthcare, consumer goods, financial services, has seen government interventions helping the way business is conducted and helping the entry of new businesses into India. Given the fact that the country has worked a certain way for 50 years, these major changes need time to settle down, so it is true to say India is in flux right now from an internal standpoint.”

India also faces a shortage of critical skills that threatens the country’s economic growth trend. A report published by Accenture estimates that $1.97 trillion in GDP growth over the next decade is at risk if the country fails to bridge the skills gap. According to the World Economic Forum, “By 2022, over half of workers in India will require reskilling to meet the talent demands of the future.” India is working to close that skills gap in collaboration with the WEF.

“All these issues finally telescope into economic prosperity, and new businesses coming up which has a positive impact on recruitment and executive search,” Rao says.

What do these positive trends mean for executive search and leadership consulting? Sonal Agrawal, managing partner at Accord India, explains. “While organized recruitment was prevalent since 1969, retained search gained traction in the mid-90s on the back of the multinationals that entered the country post 1993, and further gained credence as Indian companies professionalized and started competing with the MNCs for senior talent. Twenty years on, companies are increasingly sophisticated buyers of search, though the lines between recruitment and search is often blurred. Apart from a broad marketplace, the pool of professionals with leadership experience in world class companies has deepened considerably.”

Market Specific Challenges and Insights

India has its own special challenges which, according to Sharan, “are demographic, which are cultural, and which are financial. It is a value market. People are very value conscious whether it is a product or a service. Even the big brands whether automobiles, clothing or services have had to localize to cater to the Indian customer. The most important thing is to figure out what it takes to be successful in India. Global products, global solutions don’t necessarily sell here. The companies that learned to create local products and solutions at a price point that is fair have done well.”

First among the challenges faced by India’s market for talent, according to Dutt, is that “India has a limited pool of employable leadership talent.”

Dutt explains, “In the past 20 years, India has become a net exporter of leadership talent and we are seeing an increasing number of Indians in leadership roles across the world. But the collateral effect is a much smaller leadership talent pool in the country. Increasingly, the challenge is about bringing back this leadership talent to Indian shores. And that is one of the many challenges we as search firms are grappling with.”

In addition to Indian talent overseas, there is an issue with regard to developing talent at home. Sharan identifies the challenge as “addressing why the country is not able to produce a larger employable workforce.”

Every sector is having to address the challenge of keeping a workforce, especially at the executive level. A number of sectors have opened up for which the country did not have trained people, and most companies have had to train people on the job. Companies often have to lure talent from others and be willing to pay more. This is a churn that every sector is seeing. The challenge is to deal with uncertainty, deal with global change, and deal with a workforce that is not always prepared.”

The end result, he says, is that “at least for the near future, high attrition is a reality we will have to face.”

Could that shortage be addressed by elevating more women in the workplace?

“As a country, we lack diversity in leadership,” Dutt says. “It is a country where the gender skew is a lot worse than it is elsewhere, so another challenge for search firms is to partner with Boards to correct the gender gap at leadership levels.”

According to the World Economic Forum’s 2018 Global Gender Gap Report, India ranks 142 out of 149 countries in the economic opportunity and participation index.

Dutt also describes a country “in the midst of a huge transformation.” She says, “Digital disruption is affecting every industry like it is across the world. Here in India there are new sectors opening up—fin tech, edu tech—there is a “tech” at the end of every sector, now. We need agile leadership in the country now which can quietly adapt and face this brave new world,” she says.

Patrick Rooney, AESC regional managing director for Asia Pacific and the Middle East, has seen significant changes in the market acceptance of retained search models in India over the last five years. “Indian business leaders are becoming far more familiar with executive search and leadership advisory services as solutions to challenges they face, including rapid growth, supply of leadership talent, and demographics."

With so much foreign direct investment, Rao describes the role consultants have in helping bridge the gap between the investor’s and the local culture, “Especially when it’s a multinational that comes into India.” For example, he says, “Let’s take my company. We are originally German, so we have a very strong German and Germanic clientele, clients who tend to be very focused, very precise, and prefer to have everything planned a month in advance. But when I go to Germany and talk with German companies about possibly investing in India, I tell them ‘when you come to India you’ve got to learn and unlearn,’ because what works in Frankfurt and Dusseldorf will not work in Delhi and Mumbai."

Rao often advises clients to hire Indian nationals who have either studied or lived abroad, or who have worked with multinationals. “They are much more adept at understanding the culture, the dynamic of infrastructure, and also they are able to understand the client, so the client has someone who can be a good bridge between what they want and what the ground realities in India are.”

Rooney adds that there are an increasing number of local businesses using executive search and leadership advisory services across Asia, “one of the most significant recent trends has been the increased interest in search and leadership advisory services from Asian businesses, whether they are traditional businesses or start-ups. Many are going through significant internal change while also trying to expand their market reach, meaning there is a simultaneous demand for both talent and advice. That’s absolutely an opportunity.”

The Impact of Global Events

In a deeply interconnected world, events on the world stage can have varying degrees of impact on local economies.

For Rao, global events pose both an opportunity and a threat. “India is transitioning to a manufacturing hub, and many manufacturing companies are de-risking by building factories in India,” in response to the uncertainty in China.

Rao is not concerned about the potential exit of the UK from the EU. “The UK and India have traditionally had a good trade relationship because of our past heritage as well as the English language. There are a lot of companies from India who are invested in the UK because of the good bilateral trade which will increase if the UK exits the EU, but we will know all that shortly because it’s still very hazy.” Rao is a chairman of his local British business group, the UK, India Trade Platform. “It’s a bilateral trade platform that consists of about 60 companies, includes businesses like the TAPPA Group who are Land Rover, and other fairly large companies. We constantly need people from the UK and my information is that trade will be affected positively if the UK exits from the EU.”

According to Dutt, compared to other countries, India may be fairly insulated from the disruption of global events. “The Indian economy is a domestic consumption driven-economy, it is not an export driven economy, so despite being a fast-growing economy it is possibly the least affected by global turmoil,” Dutt says.

“That being said, it is an economy that is very sensitive to internal issues, political change, policy change, etc. As long as the Government continues to bolster growth and government policy continues to push the growth agenda, we will continue to see India growing.”

From a search perspective, according to Agrawal, “the market in India continues to be deep, and growing. A large domestic market insulates us—to some degree—from global headwinds.”

Leadership in India

Is there a general profile of Indian leadership? Dutt observes, “One of the things that makes a lot of Indian leaders unique especially in the context of their Asian counterparts is that they speak the language of business fluently and have strong academic fundamentals. In the past 10 years Indian leaders have also demonstrated (and continue to do so) the ability to adapt to change with ease.”

Dutt also recognizes the benefits of leaders who live and work in a complex, fragmented multicultural environment. She explains, “India is a very large, very complex country where languages change every 500 kilometers, customer preferences change in every state, so given that it has this very large, fragmented, diverse diaspora, people who have led companies in India tend to be extremely flexible, extremely agile, and their understanding of diverse multicultural nuances is extremely well-developed.”

“I find Indian leaders to come across as far more strategic, demonstrating a tendency to take a long-term, holistic and analytical view of business versus their other Asian counterparts. This is data that comes from the many studies available. You have leaders who are English-speaking, with strong fundamentals, agile, culturally aware and very strategic.”

For Agrawal, “There is no one answer to this. However, Indian leaders are particularly well exposed to managing complexity and uncertainty. The interface with government continues to be a key element of their jobs. They understand scale and complexity better than most, given the contours of the market. They tend to be problem solvers, often resorting to JuGAAD (Justified Guideline to Achieve the Desired State), [a colloquial problem-solving approach] which at its worst is cutting corners, but at its best is finding innovative, out of the box solutions.”

She adds, “Indian talent tends to be well-travelled, well-read and commercially sound, and very cost conscious. Many leaders have actively sought out overseas or regional/global roles and are increasingly ‘global’ in their outlook.”

Clients in India: Multinational and Domestic

The environment for business in India has transformed in the past 25 years. Agrawal explains the evolution of the largest employers in India: multinational corporations, domestic family conglomerates, and government sector companies. “Pre-1993, the number of multinational corporations were fewer and regulated quite heavily. These grew manifold as the economy opened up. Since they often paid higher salaries and provided access to international careers, professionals strongly preferred working in MNC companies. With the advent of capital markets and the professionalization of the family conglomerates in India, those started offering competitive salaries, globally benchmarked work practices and structured wealth creation opportunities for senior leaders through the use of equity or profit share. Of late, some government sector companies—particularly banks—have reinvented themselves and attract good talent. Another segment is PE portfolios, a growing segment of the employment market.”

Rao explains, “A large portion of the business in India is family-controlled. Many of these family-owned businesses also have international operations, and of course many of them are global tier 1 and tier 2 suppliers. In India, a family-owned company tends to be not very progressive, and in many of the cases senior management is not given the independence that is there for instance in a German family-owned business.”

However, Rao describes a shift within many family-owned companies. “Many family-owned businesses have realized that the family members have to step back. They step out of their operational roles and tend to be at best shareholders; they now allow the senior management a lot of independence. The companies who have recognized the need to professionalize have been very successful, they’ve been able to attract good people from multinationals who are then willing to join and be part of a family-owned business.”

Sharan says, “The country has seen Indian groups that have grown very well: they have professionalized, and they are growing internationally.”

What do domestic companies have over MNCs? Sharan explains:

“First, the level of empowerment in a local company is very high, but with multinationals it is limited. Second, there is more job security at an Indian company. And finally, the predictability of career opportunities is better at an Indian company. Senior level opportunities in multinational companies tend to dry up because of global challenges, directional changes every 2-3 years, so we are seeing a preference for good Indian corporations.”

Role of Executive Search and Leadership Consulting

The growth of domestic and multinational companies, the emergence of new sectors, and the influx of foreign investment coupled with the shortage of talent create a growing and challenging market for executive search and leadership consulting.

Dutt says, “The need for young, agile leadership will continue to exceed the existing availability of talent. Interestingly the challenge is a huge opportunity. For executive search firms as well as leadership consulting firms.”

For all types of organizations in India, Agrawal recognizes the need for “a trusted advisor, providing both access and deep insights into the talent base, what motivates them and how to attract, assess and retain them. As in most markets, it’s no longer about access but deep assessment of fit to a situation and then conversion.”

She says, “It’s very important for search consultants to have credibility and longevity—not just from talent access but having trusted networks who are willing to provide candid insights and feedback on candidates.”

Rao observes, “Search has grown considerably across India. It is a very good market, and people are willing to pay for talent using the search route instead of the pure contingency recruitment or advertised recruitment. They find it makes sense to use the services of search firms and if the search firm is international it gives you a certain advantage.” For example, he says, “Especially the international entities find a comfort level in using someone in India who is very ‘glocal’—global as well as local, someone who understands the ground reality in India.”

“Search is doing well and will do better as people see the value, as they understand that the expense is justified in terms of getting good leadership talent,” Rao says.

What might the future look like?

“Riding the wave of India’s economic growth, search is poised to grow as well,” Dutt says. “There is opportunity as new industries open up in India. The global wave of digital disruption is sweeping across India and we’re seeing the rise of a new set of industries, from milk-tech, med-tech, edu-tech, fin-tech to several other ecommerce-led businesses, supplemented by hiring for private equity-backed companies, and of course the brick & mortar sector which continues to grow.”

Sharan reflects on the transformation in India. “In 2001 the Indian market was still looking at talent pretty much on their own. Executive search was a very limited option. Close to 20 years later, the way companies look to attract and retain talent has changed dramatically. Challenges are still population and poverty, and lately pollution. But look back 30 years and now there is more money, more education, better health, and people have more to look forward to.”

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