Indian managers are being edged out by foreign nationals at the helm of TNC affairs
THE Bata Shoe Company has always conjured in Indian minds the image of reliability, comfort and sturdiness. Till last month. As record losses hit the Indian subsidiary of the Canada-based footwear giant, its first reaction was to jettison 20 senior managers. And replace them by men flown in from across the world, none of them Indian. This a year after Managing Director P.K. Dutt was replaced by Keith Weston.
Bata executives are in the growing list of Indian CEOs giving way to non-Indian managers: Gurcharan Das replaced by David Thomas at Procter & Gamble, Jaydev Raja by Richard Nicholas at Coca-Cola, Sumant Bakshi by David Jones at United Distillers. Rumours are rife that Sandeep Kohli will hand over charge at KFC to an American.
The initial euphoria of rising salaries and fancy designations is being replaced by a cynicism that Indians will be relegated to the second and third rung as transnational corporations (TNCs) 'put their own people' in the driving seat. Admits the country manager for a leading scotch company: "I feel a Damocles' sword hanging over my head. Consensus, communication and consultation are not the westerner's strong points. He has been bred on the hire-and-fire culture and that's what he is most adept at." So when CII Director General Tarun Das accused TNCs of hiring expatriate managers for their Indian ventures rather than give Indian talent a chance, he struck a chord with a generation of Indian executives.
There's little doubt that as comfort levels about working in the Indian environment rise, TNCs are looking to hike their stakes and wrest management control. Take the ITC-BAT fracas. Says ex-CEO K.L. Chugh: "The Indian management was fine and Krishan Lal Chugh was a hot favourite till the tobacco business turnover jumped in three years of my tenure from Rs 78 billion to Rs 100 billion in a shrinking market. I might even have been nominated on the BAT board of directors. But the minute we clashed on the strategic decision of whether ITC should confine itself to tobacco or diversify, they wanted me out and bring in their 'own man'. What would you call this but a question of control?" Says the managing director of an Indian company: "Chugh was one of the first victims of the power struggle as more TNCs get serious about India."
Most TNCs which have entered India recently, have shown a strong preference for bringing their own managers to head operations. Telstra, Samsung, Sony, Panasonic, Ericsson, IBM and Coke have expats holding key decision-making positions. Telstra's chief of Indian operations and head of finance, as well as the heads of Modi Telstra and Telstra V-Comm, are expatriates. At Samsung, three of the four key posi-tons at director level are held by Koreans. At Ericsson, an overwhelming number of managers are Swedish.
Is this a new brand of imperialism? Are expats displacing Indians when the western job market is shrinking? What impact will their dollar salaries have on Indian morales?
Like most things in life, it's not that simple. Why talk of nationality when technology, capital and expert managers fly across boundaries, ask Indian managers who see nothing wrong with the trend. Why talk of language barriers when English is the global lingua franca of business? Why talk of cultural sensitivity when you can surf the Inter-net? "I'm not at all excited if the expats are coming and taking over. A TNC can't be expected to be too comfortable with a CEO who is not known to the parent company. It's a question of confidence. If 20 or 30 expats come in and manage the show, it is unlikely to make any difference to the scene. The bogey raised by the CII on TNCs foisting expats on Indian counterparts is a non-issue," says Dr S.S. Baijal, ex-chairman of ICI.
"All promoter groups prefer to post a known, proven, trusted executive in charge of diversifications and new projects, even in the home market. More so when the new market is far away. If the market has massive long-term potential as in India, there is heightened security in sending out 'one of us, the club member'," says management guru Dr M.B. Athreya. "What are patriarchs sitting in CII complaining about expat managers? When a Ranbaxy or an Aditya Birla group company goes global, isn't the head of operations an Indian? Why look at managers from the myopic view of culture, race, language and colour? The Chief Financial Officer of Citicorp worldwide is an Indian as is the head of Unilever in Saudi Arabia. It is up to companies to decide who they want as their chief of operations," says analyst Jairam Ramesh.
On the other side, however, are managers who consider the coming of expatriates in top positions 'an opportunity denied' to them. Says Subodh Bhargava, CEO, Eicher group: "When you bring in too many expatriates in top positions, it's natural for the local aspiring manager to feel frustrated. The result: ego problems, squabbling members and a conflict-torn workplace." Says Pradeep Kapoor, head, Modifin: "Many TNCs lay a pre-condition that the CEO and CFO slots be manned by expats in a joint venture. In fact, some Indian companies with global aspirations are taking on expatriates just to increase their saleability in the global market." Adds R. Gupte, executive vice-chairman, UB group: "We're going back to the '50s and '60s when even middle-level positions were held by expats. It's also true that because job opportunites in the West are shrinking, more expatriates are going to Third World countries. The trend is ominous for Indian managers."
THE flip side. First, the value that expats can add. "At Ericsson, we are bringing to India the world's most advanced digital standards. And technology has to be provided in the marketplace quickly, supported by training and maintenance. This is where expats come in. Every expatriate has a mandate to train two local staff in a manner that makes him redundant tomorrow," says Tommy Eriksson, executive director. "Technology transfer doesn't take place through books and manuals, but at the human level. This is where expats are needed. This relationship between the parent company and its offspring will last two to five years until the offspring matures to take care of its basic needs," says Byung Mun Park, CEO, Samsung India. Thus expats can be chaperones for technology transfer.
Second, the areas where the till-now cocooned Indian manager falls short. For instance, he is out of touch with international ways of doing business. Says N.S. Chawla, vice-president, ITC: "Indian corporations are way behind western companies in three respects—management systems, infotech applications, training and development." Agrees S.G. Awas-thi, managing director, DCM-Daewoo: "Many Indian companies have not even thought of training their managers, leave alone making it a priority issue." Thus the Indian manager, while second to none in terms of 'basic stock', has a lot to learn from the expat.
Also, say some, blame it on the 'Lala culture' or 'the British Raj', but Indian managers can't think creatively. Says Awasthi: "Indian managers suffer from mental blocks of indispensability, are less open about information sharing and afraid to voice opinions and dissent. Such managers would be misfits in a global environment. And if they can't cope with the change, there will be a shakeout and they will lose out." Adds Ramesh: "Indian managers are just not used to concepts of meritocracy and accountability." By contrast, western managers have less 'mental blocks'. "No sense of deprivation in them that blocks the ability to take independent and bold decisions," says Chawla. Their ability to cope with change is also better. Says Athreya: "Just as within an all-India, diversified firm, executives who have had rotation between functions, divisions and regions usually cope better with variety, expatriates by virtue of their having worked in two or more countries and across continents are more resilient and resourceful. They have a broader paradigm and repertoire to draw from."
Finally, how much chance does an Indian manager have anyway, to reach the first rung in an average Indian firm? Doesn't he have to stop at the second rung and report to the scion of the promoter's family? Better a professional American or Korean manager, goes the view, than an Indian who's at the top by virtue of his birth.
SO should expats then be welcomed? "It's like putting a car that runs at 80 km per hour on a road where all cars are moving at the speed of 20 km per hour. There will be casualties and some fatal accidents can be avoided," says M.A. Ramaswamy, former director-general of the Department of Telecommunication, and now consultant to telecom TNCs. "Indian managers may be out of sync with global practices. But if you don't throw a person into the pool, he'll never learn to swim. By bringing in expats, even if for a few years, you are putting back the integration of the Indian manager by that many years. The move will be resisted," says Kapoor.
But the issue that irks Indian managers most is the differential in pay. The expats come in at dollar salaries which bear little correlation to the cost of living here. "This is in contrast with the tradition being followed by most TNCs or world bodies like the UN where Indians are paid much less on the basis of the cost-of-living index that reflects the expenditure vs savings potential of individuals in their home country. In India, however, this norm is being flouted," says Bhargava. Many Indian managers point out that the expat manager lives in the poshest of localities, be it Vasant Vihar or Maharani Bagh in Delhi or Malabar Hill in Bombay. They have a retinue of servants. "They live lifestyles they couldn't even dream about in their home countries and then they get a hardship allowance!" complains a local manager. "They even have the audacity to complain about the dust, cows on Indian roads and the humidity," says another.
"If the expatriate's salary is much above that of his local counterpart, there's bound to be heartburn. Such a person will never be accepted as a team-mate. So TNCs must take into consideration issues of local sensitivities. If salaries move in a band and are discussed with the local partner, there'll be greater understanding, cooperation and respect in joint ventures," says Bhargava.
Still another bone of contention is the profile of the expats, junior managers suddenly elevated to CEO rank in India and their management styles. "Tarun Das has a legitimate point when you consider the Rambo-style, impatient, rush-in and rush-out style of TNC operations in new markets. TNCs can't do business by making high-pro-file statements from five-star hotels, backtracking and then coming back to the negotiating table like Enron did. You need mature and seasoned managers to handle situations as complex as they are in India," says Subhash Agarwal who is consultant for several TNCs on their India entry strategies.
But for proponents of the liberal view, the profile of expat managers and their management styles are non-issues. "If TNCs bring in second-rate managers to run Indian operations, it will reflect in the bottomlines. If a manager doesn't pay back every penny he earns in terms of value-addition, no company can afford to keep him," says Baijal.
Thus the debate goes on. And only one thing is certain. As globalisation takes all into its vortex, the future will belong neither to the local nor to the expatriate manager. It will belong to the global manager with a local sensitivity.