THE INDIAN BUSINESS SCENE, CHALLENGES OF

CHANGE, AND CAPACITY-BUILDING THROUGH

PEOPLE-MANAGEMENT STRATEGY

Debi S. Saini

In todays business world of chaotic high incidence of competition, managing change is one of the most
critical factors for corporate success. Studies show that Indian corporate leaders of the pre-reform era
have not been able to sustain their growth rate in sales and profit. They have not been able to withstand the
winds of change caused by the new economic realities. Even those players who have demonstrated greater
incidence of success have not been seriously considering internationalization of their businesses. This
paper discusses the opportunities offered by the new economic policy (NEP) to corporates in India; some of
the achievements attained by them; and the problems and challenges they face in this regard. It identifies
the need for change as a corporate strategic priority. The paper argues that for organizational capacity-
building for performance excellence, Indian companies need to invest in learning and benchmarking in
different spheres of organizational working; and also resort to leveraging the empowerment model of
human resource management (HRM) strategy as a way of organizational life.

I. INTRODUCTION O big-sized companies, venture capitalists, and glo-

I
n the present era of globalization, the basic contours
of organizing and doing business have been chang-
ing at a fast pace. Organizations are increasingly
witnessing change, re-engineering, restructuring,
downsizing, transformation or merger/acquisition. If a
question is asked: what characterizes todays business
compared to that 15 years ago, the obvious answer in-
variably is likely to be: managing and coping with
change. In the corporate history, this period will be de-
scribed as the age of change, the age of chaos, the
age of surprise, the age of uncertainty. Besides glo-
balization, this dispensation is being caused by techno-
logical changes and information revolution. The demands
of managing change have also necessitated a re-defini-
tion in the roles of employers, employees, trade unions
and the state. Increasing tumult and chaos in the envi-
ronment has been adversely affecting business
viability. As has been noted by Saini (2005), some of
the contemporary business trends that are noticeable in
the changeful new economy at the global level are as
follows:
bal consulting firms are largely driving todays
economy;
O strategic alliances, and mergers and acquisitions are
taking place as devices to counteract competition;
O virtualization of organizations is being resorted to
in a big way to help promote a larger degree of co-
operation even amongst competitors so as to attempt
more effective organizational survival;
O the incidence of customization in manufacturing as
well as services sectors operations is increasing;
O product lifecycles are becoming shorter resulting in
constant need for research and innovations;
O bureaucratic organization structures are being dis-
mantled to expedite decision-making for more ef-
fective tapping of business opportunities;
O the lines separating different businesses are getting
blurred as technology and markets have been con-
verging fast, giving rise to new opportunities for
growth;
26 Saini
O

O corporates are searching for appropriate talent which
can be expected to deliver high degree of performance
under rapidly changing conditions; and
O effective people-management and change manage-
ment strategies are being evolved to cope with the
emergent realities.
In this scenario, it is believed that both at the global
and country levels only the best companies are likely to
thrive over a long period of time. As is shown in Figure
1, economy and society are in the course of the third
industrial revolution, which has led to the emergence of
the knowledge economy. In order to be successful in
todays business environment, companies have to come
out of the mindsets of the industrial economy and fully
grasp the impact of the factors that drive the knowledge
economy. While the knowledge economy provides op-
portunities to those who possess capacity to fight com-
petition, it also reflects complexities and uncertainties
in business environment.
As is shown in Figure 2, the globalization syndrome
characterizes, among others, the need for radical change
and management of flexibility. Companies which are not
able to promote these objectives, gradually get
marginalized and eventually even wiped out. It is well
known that of the 30 listed companies in the Dow Jones
Index (that was created in 1892) only one survives to-
day, i.e., General Electric founded in 1892 by Thomas
Alva Edison . And, the speed of change for successful
companies is likely to be much faster in the coming de-
cades, thanks to the increasing pace of globalization, the
emergence of changed technologies, and related reasons.
It would be difficult to imagine a situation where com-
panies may sit pretty on past laurels for long; they are
likely to be under dynamic tension. It is also important
to note that managing change is generally not done with
the requisite sensitivity. Companies often commit blun-
ders in handling change which may prove very costly.
Also, much of change is managed in a way which pro-
duces demoralization, fear and apprehensions amongst
employees, which impedes organizational performance.
Managing change involves taking strategic direction as
well as planning and implementing performance im-
provement agenda through more efficacious manage-
ment of systems, processes and people. Winners in
todays business environment will be those who are able
to efficaciously manage the transformational agenda.
In the context of the above scenario, it is important
to ask as to what is in store for the Indian corporate sec-

Information
Revolution

y
m
o no
Ec O People = Mindset, Talent
O New Technology
O Information/ data/
Industrial knowledge
Revolution O Internet
O Focus on services

O Raw material
O Machines
O Technology
O Focus on goods
O People=Presence
Agrarian Revolu-
? Weather
O
ty
tion e
O Climate
S o ci
O Livestock
O Irrigation

Figure 1: Shifts in Factors that Drive Todays Economy

VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005

 The Indian Business Scene and Capacity-Building Through People-Management Strategy O 27
my
no
co
lE
tria
us
Ind
Figure 2: The Globalization Syndrome in Knowledge Economy
tor. In the Asian context, many smaller countries includ-
ing the Asian tigers, i.e., Singapore, Taiwan, Hong Kong,
and South Korea have emerged as the newly industrial-
izing economies and are known to have managed change
exceedingly well. But especially in comparison to the
performance of these economies, corporate India has not
done too well in the new scenario of globalization. It
suffers from a problem that Ghoshal et al. (2000) label
as satisfactory under performance: a state in which a
company continues to make money but gradually loses
its competitive edge as a complacent management fails
to ask itself what it is doing to add value.
This paper discusses the opportunities offered by the
new economic policy (NEP) to corporates in India, some
of the achievements attained by them, and the problems
and challenges that they face. The paper makes a case
for investing in the intangible of capacity-building
through learning and benchmarking. The concluding part
discusses the increasing role of empowerment model of
HRM strategy in promoting global competitive excel-
lence.
II. THE NEW ECONOMIC POLICY AND THE
CORPORATE SECTOR
The post-Independence India followed an import-sub-
stitution model of economic development. But it did not
deliver results as per the goals envisaged by the eco-
nomic planners. This welfare-state model put primacy
on taking public sector to commanding heights as a de-
VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005
my
Globalization
o
on
Syndrome
Ec
O Chaotic Competition
ge
O Radical change
led
O Opportunities
Strategic alliances
ow
O
O Complexity
Kn
O Uncertainty
O Flexibility
O Digitalization
O Virtualization
velopment strategy. However, the model resulted in su-
premacy of procedures, bureaucratization, inflexibility,
inertia, corruption, and non-accountability. Most of the
250 central public sector enterprises (PSEs) were run-
ning into losses; so were majority of the nearly 850 state
PSEs. Since they were mostly headed or controlled by
bureaucrats, who were trained in state administration
rather than management of business enterprises, PSEs
were never run as per business exigencies.
The adoption of the new economic policy (NEP) by
the Narsimha Rao government in July 1991 involved
changes on several fronts: industrial policy; the policy
on monopolies; trade and exchange policy; fiscal con-
solidation; macro stabilization policy for low inflation
and faster growth; banking sector policy; foreign invest-
ment policy; and the competition policy including pub-
lic sector restructuring. The economy responded
positively to the new market needs as per the structural
adjustment programme. India is now considered as one
of the largest emerging economies. One of the manifes-
tations of the appropriateness of the NEP is that the coun-
try could successfully bypass the Asian economic crisis.
And, the World Bank forecasts that by 2020,
India could become the worlds fourth largest economy.
India adopted this policy fairly late compared to most
others in rest of the world. Even communist China started
modernizing as early as 1978. Despite many initiatives
in response to the demands of the globalization process,
India is comparatively slow in implementing the reforms
28 Saini
O
process. While globalization has helped the government
in confronting several causes of the systemic malaise in
the economy, a number of problems still remain unat-
tended. Many of these have to do with coalition politics
at the centre; others are related with India being a de-
mocracy. For example, labour law reforms could not be
carried out despite promise to this effect 15 years ago as
no government wanted to become unpopular by resort-
ing to these sensitive issues and giving the opposition
opportunity to take undue advantage of the situation.
Most established players in the Indian industry, es-
pecially those that were the beneficiaries of the favourable
attitude of government towards them during the control
era, were shocked by the new policy. They feared their
protected citadels to be attacked by the global market. They
were also fearful of the new indigenous geniuses in entre-
preneurship who were expected to enter the market con-
sequent to de-control policies of the Government as per
its globalization programme. Thus, they formed the
Bombay Club, which demanded (without success, of
course) what they called a level-playing field against
foreign competition and the invasion of the Indian
economy by the multinational companies (MNCs).
Rejection of the demands of the Indian industrial-
ists for greater protection to indigenous players put tre-
mendous pressure on them to introspect and modernize.
Tackling these problems necessitated reorienting man-
agement strategies, systems and processes; rethinking
continued involvement in certain businesses; and under-
taking programmes of attitudinal change. These included
mixed bags of hard and soft measures in managing sys-
tems and people. Despite this, the share of India in world
trade has not been substantial; it stood at one per cent
according to the latest figures in 2004 (IMF, 2005). Most
Indian companies fall way behind those that have at-
tained global standards. The country has to cross a large
number of hurdles in matching the competitive spirit and
attainments of its neighbour China, which has shown
exemplary growth in its manufacturing industry. Of
course, the growth of Indias service industry in the re-
cent past is also commendable.
III. ACHIEVEMENTS AND OPPORTUNITIES
Comparatively speaking, globalization policies in India
have led to a good incidence of positive results. This is
demonstrated by various indices including the gross do-
mestic product (GDP), exports and foreign direct invest-
ment (FDI). Consequent to the positive results of the
economic reforms, tidal waves of self-confidence, and
VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005
the resultant psychological revolution, have occurred
across most parts of India. This led the previous govern-
ment of National Democratic Alliance (NDA) to adopt
feel good factor as its election plank. It is being real-
ized that India had wasted precious time trying to make
it to the modern world by remaining prisoner of redun-
dant statist ideologies.
Though the NEP resulted in enhanced levels of glo-
bal competition and the consequent anxieties amongst
Indian firms, it has also created opportunities for those
entrepreneurs who have better competencies to operate
in a globally competitive framework. The arrival of new
entrants in both manufacturing and services sectors has
helped in fostering the beginning of entrepreneurial cul-
ture as a way of corporate life in India. A class of bril-
liant entrepreneurs is emerging which would not have
been allowed to be developed in the permit raj economy
due to cornering of licenses by the privileged few, who
were often in covert collusion with political and bureau-
cratic elites. It is interesting to note that the number of
students passing out of IITs (the Indian Institutes of Tech-
nology) and the IIMs (the Indian Institutes of Manage-
ment) and wanting to begin their career as entrepreneurs
is increasing.
The size of the Indian middle class is increasing too,
which is expected to result in a trickle down effect.
One reflection of the growing Indian economy is in the
exponential growth of its automobile industry. Analysts
of this industry have estimated that if things go right,
by 2010 India may have 36 times more cars than what it
had in 1990 (Mathew, 2005: 18).
So as to respond to the demands of a global market,
the need for development of new skills and competen-
cies is increasing across industries. Thus, domestic work-
force is being developed in different sectors to take on
the challenges thrown up by the new economic environ-
ment. Indian companies are also realizing the importance
of developing global vision, proactive mindsets and lead-
ing the change. These tendencies are not limited to large
private-sector companies. Managers in the small and
medium enterprises (SMEs) too are
facing intense challenges to deliver tangible value addi-
tions through appropriate interventionspeople-related
or otherwise.
Today, a large number of MNCs are operating in
India; they are attracted by its supposedly huge market
and a rising middle class. Interestingly, the emerging
scenario has also created a new flourishing industry of
international analysts and consultants. They have been
trying to understand the full import of the business dy-
 The Indian Business Scene and Capacity-Building Through People-Management Strategy O 29
namics in the new economic conditions in the country
so as to take full advantage of it for themselves and their
clients. The presence and operations of MNCs have put
tremendous pressure on the domestic companies to
search and implement state-of-the-art systems, manage-
ment practices and initiatives. Thus, there is greater need
for more appropriate management of strategy, change
and leadership issues in different professionally-man-
aged organizations in India. The management practices
of MNCs will eventually dilute the influence of cross-
cultural realities as has been discovered by Hofstede
(1980).
Thanks to the NEP and the influence of the MNCs, a
good degree of success has been achieved by some of the
Indian companies towards attaining the status of global
organizations. Among others, these include companies
like: Wipro, Infosys, Ranbaxy, Reliance, TCS, Satyam,
Bharat Forge, Tata Motors, Moser Baer, Hindalco and
Cognizant. Several young people in small companies that
work in customized software have done exceedingly well.
In terms of quality and professionalism, some of the In-
dian companies like Barista, Jet Airways and NDTV (New
Delhi Television) are, for example, world class brands
today, thanks to globalization.
The emergence of young professional and manage-
rial class from IITs, IIMs and other institutes, that are
imparting state-of-the-art professional education, has
been helping in enhancing Indias contribution to glo-
bal business in several sectors. Among others, this has
been happening in software, telecom, BPO and pharma-
ceuticals. A good amount of work is being outsourced
by global companies to India both in manufacturing and
services sectors. The BPO (business process outsourcing)
sector in India has been doing quite well in attracting
the attention of MNCs. It is not just cheap labour that is
attractive to them. But it is Indias unmatched intellec-
tual capabilities and proficiency in English language that
are attracting global companies. Indias outsourcing in-
dustry is expected to mature faster if it is able to sustain
the present growth rate. In this regard, India is undoubt-
edly ahead of other countries. The two million gradu-
ates passing out each year from different universities is
the greatest source of competitive advantage for Indias
BPO sector. A recent survey of 200, mostly 500 For-
tune, companies sponsored by Fuqua School of Busi-
ness, Duke University, USA, revealed that they are likely
to send work to the following countries: India (69 per
cent); China (8 per cent); the Philippines (5 per cent);
Latin America (5 per cent); Eastern Europe (4 per cent);
and the Caribbean/Mexico (2 per cent). The work in-
VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005
cluded call centres, research, engineering services and
HR functions (Silverthorne, 2005).
With the recent emergence of India as a major hub
for low-cost manufacturing and business process
outsourcing (BPO), a large number of MNCs are look-
ing towards setting up their operations in the country or
are already in this process of doing so. Small and me-
dium enterprises (SMEs) have also been growing rap-
idly, thanks to the impressive economic growth the
country attained in the last few years. This sector is ex-
pected to play a critical role in the economy, as it will
eventually provide opportunities to those at the bottom
of the pyramid. Indian economy needs to grow at over
10 per cent per year to solve its key problems and meet
the aspirations of its people.1 Making full use of these
opportunities will, among others, necessitate that indus-
try manages change exigencies efficaciously.
IV. PROBLEMS AND CHALLENGES
The favourable features of Indian industry notwithstand-
ing, there is considerable scope for Indian companies
attaining significant share in different industrial and ser-
vices sectors. For example, Indias share in the global
IT market is only one per cent. The share of services
sector in Indian GDP is increasing due to the outsourcing
and software boom which is a symbol of a promising
economy. The services sector contributes to about 55
per cent of the countrys GDP, whereas industry and
agriculture account for almost the same share in it. But
the matter of greater concern to planners is that two-thirds
of Indias human resources are still engaged in the agri-
culture sector, but most of them remain under-employed.
Besides, the rate of growth in this sector is much slower
compared to manufacturing and services. Also, the coun-
try has no coordination mechanism or a legal framework
for their skill-development and improvement so as to
respond to the changing needs of industry and the self-
employed people even as much smaller countries like
Malawi, Philippines and Tanzania adopted such frame-
works nearly a decade ago so as to cope with the reali-
ties of globalization (Saini, 2005a). The country is thus
in a situation of little done, much yet to be done. In
view of these realities, there should be nothing to feel
unduly excited about in the above-mentioned attain-
ments.
With the global economy changing rapidly, more
and more Indian companies need to march towards at-
taining global standards. Unless they build themselves
into globally accepted brands, it is difficult to think of
their viability in the global market despite remarkable
30 Saini
O
performance and growth at the domestic level. For ex-
ample, the Usha Martin group has world-class skills in
producing wire ropes; but international buyers do not
risk their application in areas such as bridge-building.
Likewise, Sundaram Fasteners could sell to General
Motors (GM) only the simplest of its products (radiator
caps), and that too for models that GM was gradually
phasing out. Despite phenomenal success of IT compa-
nies, they still find it difficult to sell their products for
some of the most complex jobs in IT at the global level
(Ghoshal et al., 2000).
Looking at the performance of Indian corporate lead-
ers of the pre-reform era, it is significant that their per-
formance in the post-reform era has been falling quite
rapidly. As revealed in a recent study, out of a total of
2151 companies, 1696 (i.e., 79 per cent) were making
profit in the year 1991 but in the year 2001, only 1000
(46 per cent) were making profit. And, the performance
of over 50 per cent of the pre-reform corporate leaders
has gone down both in terms of their sales rank and profit
position (Kumar, 2003). It is quite evident that Indian
corporates have not been able to withstand the winds of
change caused by the globalization syndrome.
Again, the scenario of performance of Indian indus-
try in terms of its share in exports and acceptability of
its products by global players, shows that senior corpo-
rate leaders in India in general have not developed the
requisite belief in themselves that they can succeed in
the global market. While Indian industrialists are aware
of the importance of radical response to the challenges
posed by globalization, they are somehow trapped in an
incremental mindset. They have not shown the requisite
sense of proactive urgency that global change dynamics
warrant. Of course, there are several cases of remark-
able success by Indian companies. But most of these are
untold stories, with the principal protagonists going
unsung.
What can help overcome this syndrome so as to ex-
pect exponential rise in the standard of corporate per-
formance and as a way of corporate life in the country?
First of all, Indian companies and managers need to learn
to discard their so-called tried and tested solutions and
old perspectives in understanding the scope of todays
business problems. They are still imbued with the strat-
egystructuresystem doctrine, which envisages that
structure follows strategy. This model has been seen by
the Indian managers as the primary lever for directing
performance of their organization. They have reconciled
to seeing this model as the most important. They have
been busy directing themselves towards building and
VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005
shaping strategy. Most have not yet fully realized the
extent to which the world has been changing in different
spheres of economic operations. In the new era, primacy
of strategy-building model stands much diluted in view
of the uncertainties caused by chaotic competition. Hence
it is not high on the agenda of the global organizations.
Rather, they are focusing on their capacity-building so
as to confront the unpredictable waves of competition
more competently. Researches have revealed that the
front-running companies are investing heavily in build-
ing their intangibles so as to improve their long-term
market value; some of the most significant intangibles
in this regard include: shared mindset, talent, speed,
learning, accountability, collaboration, and quality of
leadership (Ulrich and Smallwood, 2003: 14).
Intangibles reflect positive or negative value of a
company that is not explained by its current earnings.
The intangibles thesis has become more popular since
the publication of research findings of Baruch Lev, a
professor of finance at New York University. He has
questioned the traditional viewpoint on rise in stock
prices. The traditional thesis believed that when a firm
earns more money, its share value goes up in the mar-
ket. Levs research has argued that earlier, 7590 per
cent value of a firms market could be predicted by its
financial performance; however, since 1990 this figure
has come down to just around 50 per cent. Rather, it is
tied to the value of intangibles in a company as the
determining factor (Ulrich and Brockbank, 2005: 480).
Thus, the proponents of the intangibles thesis claimse
that companies that have high intangible value have
higher price/value of their stock. Jack Welch, the former
CEO of General Electric, has been credited as a master
in intangible-value building. The share prices of GE
could zoom due to the trust in the company that he cre-
ated through his promises. He communicated to the
shareholders, employees and customers exactly what he
planned. He also worked hard to see that his promises
were delivered.
On the basis of a survey of practices of globally-
successful organizations, Ulrich and Smallwood (2003)
claim that intangibles are as or even more important as
the hard strategies, systems and processes; for it is the
focus on the intangibles that helps build customer, in-
vestor, and employee confidence about the future. Their
architecture of intangibles suggests four layers of intan-
gibles: delivering predictable earnings; articulating a
future growth vision, say in the sphere of customer, in-
novation, and geography; ensuring future competencies
aligned to strategy, say through product innovation, op-
 The Indian Business Scene and Capacity-Building Through People-Management Strategy O 31
erating efficiency, customer intimacy, product distribu-
tion, and technological use and upgradation; and creat-
ing capabilities (intangibles) to build future
competencies. These capabilities include: performance
culture, talent, speed, learning, accountability, collabo-
ration, and quality of leadership. Managers and leaders,
who want to build confidence about shaping their future
in the chaotic business world, are making greater efforts
in attending to the needs of the above-mentioned intan-
gibles. It is time that Indian organizations make concerted
efforts towards investing in the building of intangibles
so as to further add to the strength of corporate India.
In the architecture of intangibles, creation of future
competencies has assumed critical importance. This is
being highlighted by most strategy gurus and practiced
by corporate stalwarts. Some of the great Indian indus-
try leaders like NR Narayanamurthy of Infosys and
Deepak Parekh of HDFC, for example, have been fo-
cusing on what Ghoshal et al. (2000: 317) refer to as a
sense of purpose within the company in terms of the
value the company will create for its employees and other
stakeholders. Instead of formal structure in an
organogram, they focused on building core organiza-
tional process and develop new capabilities on the basis
of existing resources and challenges. They have been
focusing basically on people development. That is how
they could march towards attaining global performance
standards. Many Indian companies like Ranbaxy, Wipro,
Bajaj Auto, Hero Honda, and Hindustan Lever have also
shown that they have learnt to adapt to the new environ-
ment in different degrees. The emergence of competency-
building paradigm in strategy literature warrants that
companies need to soften their strategy focus at the top
and give way to generation of new possibilities as per
change exigencies. The corporate world is now in the
era of, what Mintzberg (1994) would refer to as, emer-
gent and not rationalist strategy. This thinking ne-
cessitates that the vision and values have to be brought
down to the level of each individual rather than viewing
them as aspects of the strategy and system hypothesis.
More and more globally successful companies are be-
coming increasingly individualized in their attempt to
develop competitive advantage (Ghoshal and Bartlett,
1997). Indian corporate sector has yet to build in a big
way on the realities involved in the corporate individu-
alization thesis, which would mean considerable invest-
ment in capacity-building through people focus and
development.
At a general level, the Indian business world and
people working in it face problems of attitude. Some of
VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005
the key problems of Indian business include: lack of as-
piration to be world class, lack of vision, lack of profes-
sionalism, lack of process sensitivity, lack of cost
consciousness, lack of sense of ownership, indifference
to customer needs, lack of transparency, little respect
for time, and lack of a professional system of skill de-
velopment, among others (Prahalad, 1998; Rao, 1999;
Saini, 2000). Besides problems of attitude, most enlight-
ened employers also realize a greater need to tackle the
problem of outdated technology, excessive workforce,
inadequacy of skills, lack of concern for customer satis-
faction, and unsatisfactory levels of productivity. Indian
organizations have also had serious problems of hierar-
chy and caste dynamics. Most family-based industrial
groups have not recognised the need to decentralize
power to professionals, which impedes their potential to
attract and retain the best possible talent. This leads to a
situation where no one really values the idea of a lower-
level employee (Singh and Bhandarker, 2002: 11). Great
organizations in todays context are working towards
building on the power of the idea and by investing in build-
ing a great place to work for people in general (Sachdev
and Bhattacharya, 2004). If one looks at the state of the
sick organizations in the country, most of them suffer pre-
dominantly from one or the other of these problems. They
have been often overly managed and poorly led, allowing
incompetent managers to create bureaucratic bastions be-
hind which they esconced themselves safely.
V. ORGANIZATIONAL CAPACITY-BUILD-
ING THROUGH LEARNING
AND BENCHMARKING
A look into the working of Indian companies that have
been striving towards attaining global standards in their
operations and performance would show that there is
considerable scope for improvement. The country needs
a much larger number of successful corporate experi-
ments. Most companies in todays chaotic environment
are feeling the pressure of the new dispensation but do
not know how to cope with the change and efficaciously
align their operations with global market realities. This
would especially necessitate focusing on, among others,
leadership of change and developing learning mindsets
and organizations as ways of corporate life. In a recent
study by Carter, Ulrich and Goldsmith (2004), majority
of their worlds best organizations described leadership
development and organizational change as the real work
of the organization. This study found strong demand in
the following five areas in order of importance: leader-
ship development; performance management; organiza-
32 Saini
O
tional development and change; innovation and service
enhancement; and coaching. These interventions can play
an important role in organizational capacity-building.
Due to the increasing influence of globalization on
corporate practices, there is talk of the emergence of
convergence theory in management. As per this think-
ing, management practices would eventually come close
to becoming similar across the length and breadth of the
globe, with reduced impact of local cultures and indig-
enous factors. Of course, it would be too simplistic to
completely wish away the impact of cultural influences
on organizational working in the short or medium run.
The acceptance of the convergence theory strengthens
the case for investment in learning and benchmarking.
The eminent social historian Francis Fukuyama (Ohtaki
and Bucknall, 2005: 23) endorses the convergence the-
sis when he observes as follows:
In all three areas, howevereconomic, political and
socialthere are good reasons for thinking that the
distinctive institutions and practices fostered by
Asias cultural systems will converge over time with
the pattern seen in the West. That is, economic life
will be more open and subject to market forces; gov-
ernance will be increasingly democratic; and social
structures (as well as social problems) will come to
resemble that of post-industrial Western societies.
Far from reinforcing Asian exceptiona-lism, the cur-
rent economic crisis will accelerate homogenizing
trends in all three areas.
In view of the converging realities at the global level,
the desire to gain knowledge about management prac-
tices in similar as well cross-cultural locales will increase.
It is doubtful if Indian industry can become a global gi-
ant without the leaders reaching out to the knowledge
resources and markets within as well as in other coun-
tries. Many Indian companies have reconciled to remain
in the mould of exploring mainly short-term opportuni-
ties, which clashes with their need to promote long-term
growth and viability. This somehow is the corporate cul-
ture in the country.
In the era of globalization, only those companies will
survive in the long run that are able to not only continu-
ously learn but also rapidly transform learning into ac-
tion. Learning organizations are able to instill in their
employees desire to experiment, learn and innovate so
as to improve processes and output. With steep rise in
the intensity of competition, the average life expectancy
of most business organizations will decline over the
years. Successful companies will be those which acquire
VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005
ideas from different sources and make use of them to
educate themselves and their employees so as to serve
the long-term interest of the organization. A study by
De Geus (1997) showed that learning companies were
those which had the inbuilt capacity to live in harmony
with their business environment and continued to learn,
develop and change when business is slower and more
stable. In Federal Express India, in the last few years, 60
employees have suggested process improvements of dif-
ferent types, which resulted in the company saving $ 6
million annually. The company spends about $ 155 mil-
lion on training at the global level which is seen as in-
vestment in cost-saving and revenue-generation
(Mahajan and Daftari, 2004).
Learning and innovation culture can be created only
if the organization has patience and can tolerate mistakes
or even encourage people to commit mistakes and re-
spect dissent. At MindTree Consulting, making mistakes
by employees is accepted as a part of growing and learn-
ing (Jaishankar, 2004: 51). Intel Technology India looks
at innovation as one of its seven core values; and be-
lieves that the only way to innovate is by questioning
the status quo. In fact, the company provides coaching
to its employees for developing the skill of constructive
confrontation. Hamel (2001: 76) has rightly observed:
for every 1000 ideas, only 100 will have enough com-
mercial promise to merit a small-scale experiment, only
ten of these will warrant a substantial financial commit-
ment, and of those, only a couple will turn out to be un-
qualified successes. With the increasing chaos caused
by globalization, Indian companies need to learn to get
best of the ideas from all over the world; and implement
them to local conditions. That will eventually help them
in their march towards internationalization. Perhaps,
there can be few as good example of passion for learn-
ing and benchmarking as that of Sam Walton, the founder
of Wal-Mart. The tale below, as narrated by Collins
(2003), shows his commitment to learn more and more
about retailing.
A Brazilian businessman wanted to know more on
secrets of success in retailing. Therefore, he wrote to ten
U.S. retailers for appointment and cooperation with him.
Sam Walton was the only one who replied. Walton re-
ceived the Brazilian when he arrived at Bentonville,
Arkansas. On the way to town, he showered a volley of
questions on the Brazilian. The latter realized that Walton
had invited him to Bentonville so that he could know
from his team about retailing in Brazil. Soon the Brazil-
ian returned the favour by hosting Walton to Sao Paulo.
The Brazilian received a call from the police. It said
 The Indian Business Scene and Capacity-Building Through People-Management Strategy O 33

Walton had been arrested as he was found crawling workplace governance that suit the needs and expecta-
around in stores on his hands and knees measuring the tions of the individual employees. For, employees are
width of aisles . seen as the key resource which can help deliver com-
petitive performance. This is a comparatively difficult
Japanese, who are known to be the best bench mark-
task in the Indian context as it involves complete over-
ers in the world, have been doing this for more than 100
hauling of the hierarchical mindsets of top management,
years, and are industry leaders at the global level in sev-
HR managers and all those involved in people manage-
eral sectors. In India, among others, Gujarat Ambuja
ment including line managers. Attempts to dilute hier-
Cement is an excellent case study in bench-marking.
archy also clash with the values of caste and
There is a need to take change management as a strate-
power-distance that are pervasively prevalent in Indian
gic challenge and search for new models in this regard.
society. Carrying out such an agenda involves need for
In the power sector, North Delhi Power Limited (NDPL),
creative destruction in different spheres of organizational
a Tata company, which is one of the three companies
working, including management of managers egos and
that took over the ailing Delhi Vidyut Board (DVB) in
their working styles. But investment in this kind of em-
July 2002, has attained tremendous success through pro-
ployee-focused managerial behaviour is necessary for
motion of learning, effective performance management
organizational capacity-building. As Andy Grove,
and change management. Right from the first year of
former CEO of Intel, has said, Only the paranoid sur-
the takeover, the company has been earning profits.
vive in todays business. The paranoid in Semler (1994)
Against the Government-fixed target of AT&C (Aggre-
led him to create a radical workplace governance struc-
gate Technical and Commercial) loss reduction at 40 per
ture and undertake corporate re-engineering in his Bra-
cent by March 31, 2005 it has not only attained this tar-
zilian company Semco. The company has one of the most
get within the stipulated time but has further brought
incredible types of industrial democracy, which gives
down these losses to 35 per cent. It has managed the
power to employee collective, among others, to decide
change involved in the takeover remarkably well. The
the employee pay structure. Under Semlers leadership,
company sent its employees abroad to benchmark the
the companys revenue has grown from $4 million in
processes and working pattern of some of the best elec-
1982 to $212 million in 2003. His innovative business
tricity-distribution companies in USA and other coun-
management policies have attracted widespread interest
tries. It sent its union leaders to Tata Steel in Jamshedpur
around the world. Indian business needs many Semlers
to benchmark the exemplary unionmanagement coop-
to fully tap the immense capabilities which people
eration there that has helped in making Tata Steel the
possess, which can help build intangibles of global stan-
cheapest steel-producing company in the world. Along
dard.
with other measures, this initiative considerably checked
the incidence of union hostility towards the NDPL Literature on general management shows that we
change agenda. (Bhatnagar and Saini, 2005). are presently in the HRM era of evolution of manage-
ment thought. Some even argue that HRM era has fur-
There is tremendous scope for Indian companies to
ther given way to talent era, whereby all managerial focus
learn through experimentation of new management sys-
is centred on recruiting, retaining and motivating talent
tems, processes and styles as tools for managing change.
for securing competitive advantage. This era gives pri-
Recently, Tata Steel could humanely downsize 29,000
macy to adopting state-of-the-art practices in people
workers over a period of seven years without tears,
management and/or in talent management that are aligned
through a voluntary retirement scheme (VRS). This has
with organizations vision and mission. Managers have
helped it to become the cheapest steel-producing com-
to demonstrate behaviour that fits the employees and
pany in the world. Other Indian organizations can learn
other stakeholders new expectations from the organi-
immensely from such experiences.
zation. In fact, behaviour modification is becoming a
flourishing industry in strategic HRM discourse at the
VI. TOWARDS LEVERAGING THE global level. Behaviour expected in todays business
EMPOWERMENT MODEL OF world is demand-led and customer focused. HRM strat-
STRATEGIC HRM egy is being used as the key device to help shape the
Stretching the intangibles thesis as discussed in sec- requisite people behaviour. That is why, HRM strategy
tion IV further, many great companies consider it criti- is becoming the single most important area in manage-
cally important to devise structures and processes of ment consultancy at the global level.

VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005

34 Saini
O

Several themes have emerged in contemporary HRM egy. This is a way of telling people that they matter, and
strategy that are being worked upon to promote the requi- that the organization survives as a high performance sys-
site beahaviour and performance standard. They include: tem because of them. This helps realize the full poten-
empowerment, communication, diversity management, tial of people working in the organization. Companies
flexibility management, employee involvement, total qual- having belief in this model generally develop some or
ity management, de-unionization, team building, reward all of the above-mentioned super-ordinate mantras or
strategy, quality improvement, learning organization, values to guide and drive their purpose. They communi-
knowledge management culture, worklife balance, and cate to the outside world the values and behaviour
human resource development (Saini, 2000). that are considered important by the organization and
use soft HRM strategy to make it happen. Employees at
HRM strategy interventions can be broadly divided
Susken Communication Technologies in Bangalore take
into two categories: instrumentalist (hard) and em-
pride in the work culture that the company has been able
powerment (soft) (Saini, 2000). Hard HR interventions
to create and the values it upholds; they are inspired by
are generally resisted by employees as such interven-
the companys vision of unleashing India creativity.
tions view people like any other resource and often in-
Some companies democratize the value-generation pro-
volve enhanced managerial control on them.
cess and adopt those values that are on higher priority of
Empowerment interventions on the other hand involve
the organizational members in general; such democrati-
trusting the employees, ensuring transparency and fair-
zation facilitates the actual practice of the values in the
ness in the organizational working, and involving em-
organization. For example, at MindTree Consulting (In-
ployees in decision-making as individuals. But HR
dia), each employee gave a vote on values the company
interventions in actuality are generally an amalgam of
stands for, to arrive at these values as CLASScaring,
hard and soft measures. This was the case at NDPL re-
learning, achieving, sharing and social conscience
ferred to earlier, which has been studied by Saini and
(Jaishankar, 2004: 52). Values reflect what people and/
Bhatnagar (2005). This company used, among others,
or organizations stand for. Boatright (1999) has rightly
performance management system, new technology, flex-
argued that what people in general want is respect for
ibility management, and transformational leadership as
the rights of others, a sense of justice and fairness, the
key HRM strategy devices for managing and internaliz-
value of human dignity, and honesty in relationships. If
ing change. NDPL acquired part of an ailing Delhi-Gov-
management can get them right, values can promote in
ernment-owned electricity distribution entity called the
employees, customers and other stakeholders a sense of
Delhi Vidyut Board (DVB) along with 3000 of its exist-
belonging and commitment with the organization. They
ing employees. As part of its HRM strategy, after the
also enhance customers and shareholders faith in the
acquisition the company recruited a new staff of 600
company. Employees faith in the company gets en-
employees who were savvy with new technology and
hanced if the employer demonstrates fairness and pro-
had a more professionally-oriented mindset than that of
motes a sense of organizational justice. Sapient has a
the existing employees. They came to be seen as the most
global ethics hotline where employees can report any
significant change agents. The existing employees were
kind of workplace harassment they are facing, which is
implicitly expected to benchmark their performance
acted upon fast. NDPL has introduced saarathia sys-
against that of the change agents. For reinforcing and
tem of online submission of employee grievance, which
institutionalizing change, the company carefully selected,
minimizes chances of procrastination by managers in
trained and motivated the change agents. They helped
grievance redressal. FedEx has a still better Guaran-
build enlightened internal competition among different
teed Fair Treatment Procedure. The thinking of fair-
organizational members as they were projected as some
ness, ethics, openness and involvement is becoming
kind of role models amongst employees. While the ex-
popular in the contemporary HRM discourse, which
isting employees initially saw them as a threat, they
among others is concerned with internalization of the
slowly learnt to adjust with their pace and quality of
chosen values. Also, extensive literature is developing
work. Thus, uncritical acceptance of soft model exclu-
on various dimensions of the empowerment model of
sively may not deliver the desired results in all contexts;
HR especially in the Western world.
situational factors help determine the appropriate inter-
ventions to be used. Some have extended the empowerment model to-
Many high-performing organizations are going all wards building a concept of Great Place to Work
out to build on the empowerment model of HRM strat- (GPW). GPW is built on the belief that inspired people

VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005

 The Indian Business Scene and Capacity-Building Through People-Management Strategy O 35

show higher degree of commitment for work, and that
inspiration creates great intangible assets. When people
are trusted they develop a pride in what they do. This
model as developed by Great Place to Work Institute,
Inc. of USA envisages five dimensions on which a
companys attainments in terms of its attitude to its em-
ployees should be assessed: credibility, respect, fairness,
pride, and camaraderie. Figure 3 shows the various in-
gredients of these dimensions. Recently, an Indian HR
consulting company, Grow Talent and a popular busi-
ness magazine, Business World in collaboration with the
Great Place to Work Institute, Inc have launched a
GPW survey2 in India. This is a good beginning for popu-
larizing the practice of empowerment model of HRM.
More companies are coming forward to participate in
the GPW survey. This will facilitate more efficacious
exploitation of the human potential for realizing indi-
vidual and organizational goals.
Several companies in India, especially those in soft-
ware and other services, have adopted some or the other
of the five broad values espoused in GPW model. Some,
like Intel Technologies India, have adopted building
great place to work itself as a core value. Susken Com-
munication is a situation of complete trust and equality.
No doubt, lack of monitoring leads to transparency and
freedom from fear. Susken believes in this. Thus, it has
no attendance system and no limit on sick leave that an
employee can avail. It gives complete freedom to employ-
ees to come and go, and also freedom to think and inno-
vate. The rules are the same for all categories of people.
When on travel, everyone stays in similar hotels; and the
CEO as all others fly economy class; the CEO sits in
similar cubicles as all others (Hari, 2004: 54).
Removing hierarchical differences is difficult to
practice in status-conscious and caste-ridden societies
like India. But the passion to excel, which thus trans-
lates into retaining the talent along with its idiosyncra-
sies in a chaotic competitive situation, drives companies
to adopt it. Many of the top-25 employer companies are
becoming open, friendly and no-hierarchy companies.
Thus, financial rewards are not the key reasons for em-
ployees to stick to a place. Companies are trying hard to
create special feeling of camaraderie among employees
as an organizational value. Many companies are trying
to create family-like situation at the workplace. Some
like Tata Steel, Hero-Honda, and Sapient Corporation
invite family members to visit the workplace to see the
wonderful environment in which their near ones are
working, thus creating a link between home and work-
place. When a worker gets dissatisfied at the workplace
for any reason, the family controls those sentiments by
reminding him/her how great and caring the employer
is. This is one of the strategies that have helped Hero-
Honda at Gurgaon to remain union-free. It helped Tata
Steel to legitimize retrenchment of 29,000 excess em-
ployees over a period of seven years so as to become the
cheapest steel-producing company in the world.
Workplace is a forum where individual and organi-
zational goals must be made to coincide. Great organi-
zations take care that an equilibrium takes place to the
satisfaction of both. Secretan (1996) has argued that or-

Dimension How it plays out in the workplace

Credibility O Communications are open and accessible T
O Competence in coordinating human and material resources
O Integrity in carrying out vision with consistency R
Respect Supporting professional development and showing appreciation
O
U
O Collaboration with employees on relevant decisions
O Caring for employees as individuals with personal lives S
Fairness O Equitybalanced treatment for all in terms of rewards
O Impartialityabsence of favoritism in hiring and promotions T
O Justicelack of discrimination and process for appeals
Pride O In personal job, individual contributions
O In work produced by ones team or work group
O In the organizations products and standing in the community
Camaraderie O Ability to be oneself
O Socially friendly and welcoming atmosphere
O Sense of family or team
Figure 3: Great Place to Work Model of Great Place to Work Institute, Inc.
Source: Great Place to Work Institute, Inc., San Francisco (2005).

VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005

36 Saini
O
ganizations need to inspire not just the physical self of
the employees but also the soul. He makes a case for a
shift from mechanical organization, which characterizes
control and power, to chaotic organization which blends
goal dominance with fun, learning and camaraderie.
While companies do tend to make people stretch so as
to cope with competitive pressures, they are trying to
ensure that this happens with a smile and that they should
be able to feel Thank God Its Monday! (Mahajan and
Daftari, 2004: 77). Infosys and Microsoft may not be
able to inspire its employees merely through more
money, as a good number of them are already million-
aires. They have to innovate motivation devices so as to
provide for their higher order needs. Thus the practices
used by Infosys include: prioritizing internal communi-
cation, creation of an IBU structure for activating the
entrepreneurial competencies of employees, and conduc-
tion of an annual employee-satisfaction survey called
Litmus. (Jaishankar, 2004: 74).
The pressure of performance in the globalizing world
is resulting in an increasing number of Indian compa-
nies responding to the needs of employees. This can be
seen from the results of the second GPW survey pub-
lished in 2004, which shows that a larger number of com-
panies are offering themselves to compete for the
best-employer status through adoption of innovative HR
practices. But the front-runners in this GPW survey were
mostly MNCs, their Indian subsidiaries, or software com-
panies; only a small minority from other categories could
find a place in the Top 25. If we examine the general HR
scenario in the country, it would be noticed that the num-
ber of companies which super impose business strategy
on people issues, and treat people like any other resource,
is so large that the practice of empowerment model is
just a tip of the iceberg. There is a great scope for im-
provement in the practice of soft HRM interventions by
Indian companies. Of course, this prescription cannot
be made uncritically, especially in view of the fact that a
large number of Indian firms are sustaining themselves
by providing low-cost products and services. They em-
ploy casual and contract labour to survive; this is done
even in core operations.
At the same time, it is important that all soft HRM
interventions do not involve cost. And even if some do,
the benefits derived in most cases can far exceed the costs
involved. Somehow, companies have not come out of
the control mindsets. The case of Classic Stripes is worth
noting in this regard. It employs 214 workers including
contract workers in a manufacturing unit in Mumbai.
Majority of its employees are blue-collared. The com-
VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005
pany started with four employees 25 years ago in a 10
by 5 space; it is shortly moving to a 44 acre campus in
Vasai!. The founders main motto was dignity at work.
The company believes in valuing every individual, giv-
ing people their due, freedom, respect, and opportunity
backed by lots of training (Krishnan, 2004: 73). The
company won the prestigious Safety and Environment
2003 award from SIGA given to only five companies
worldwide. Each employee spends 150 minutes every
month on training which includes kaizen; the company
has a library with trade journals, magazines and books;
most employees have been with the company for the last
15-20 years; women make up a third of the workforce
and it includes handicapped people as per its proactive
diversity policy; the company shares with the employ-
ees a percentage of its annual profits. The company got
19th place in the 2004 GPW survey. SMEs as well as
larger companies can learn many lessons in people man-
agement from Classic Stripes.
Global literature on HRM strategy makes a case for
change in the attitude of the HR managers and HR de-
partments so as to serve the changed needs of the inter-
nal and external customers. They are now expected to
perform more of the roles of business managers. They
have to learn to talk the language of, among others, busi-
ness, performance, satisfaction, capacity-building. To-
day, CEOs are not prepared to receive just the emotional
therapies from the HR managers. Rather, they expect
them to design and implement interventions which lead
to measurable business development and tangible per-
formance-improvement. Of course, a precondition for
effectiveness of HR managers in their new role is top
managements faith in the philosophy of HRM.
VII. CONCLUSION
It is axiomatic that in the face of a dynamically change-
fuland even traumatically changeful for someworld
economic order, the performance of the Indian economy
in the post-globalization era is satisfactory enough in
terms of the increase in the GDP. While many estab-
lished Indian companies could not cope with the winds
of change and had to leave the field, new entrepreneurs
have joined the globalized band-wagon to establish them-
selves in the emergent business realities. The entry of a
large number of MNCs and the consequent inflow of
foreign direct investment has enhanced the incidence of
competition and thus the expected standard of corporate
performance. And, given the increasing incidence of glo-
balization and the convergence thesis in management
 The Indian Business Scene and Capacity-Building Through People-Management Strategy O 37
across countries, Indian corporates have great scope of
learning from the experience of MNCs and other more
professionally-managed organizations. More than four
decades of statist philosophy and the consequent pro-
tectionist policies of the Indian Government have cre-
ated mindsets of complacency, rule-supremacy, and
change resistance in public as well as private sectors,
which are hindering the Indian companies in attaining
world-class status. Much needs to be done in the sphere
of managing and internalizing change.
The ability to lead organizational and cultural change
will be perhaps the most important competency that lead-
ers would be expected to demonstrate in the new busi-
ness era. Studies have shown that at the global level,
barely around 20 to 25 per cent of the corporates are
able to sustain long-lasting change management strate-
gies (Kotter, 1995). Given the mindset of operating in
closed systems, Indian companies have to be more pro-
active to manage the change dynamics. For attaining last-
ing success, an organizations people-management
strategy must find an important place in its top manage-
ment philosophy. In this regard, there is a case for lead-
ership development; inculcation and nurturing of core
values in organizational governance; developing culture
of learning, benchmarking and innovation; and chang-
ing of mindsets of organizational members through the
use of proactive, and not reactive, HRM strategy includ-
ing building of ideal workplaces.
As the Indian economy moves ahead on its growth
trajectory, the shift from cutting cost to investing in
people will become more apparent. HR managers will
be seen performing the roles of strategic partners and
change agents in organizational transformation. But it is
more important to make it happen today through a change
agenda so that the process can be speeded up as a cul-
tural attribute of corporate India. Large-scale
operationalization of the empowerment model of HR in
India is an ambitious agenda as it necessitates a kind of
social change apart from economic reorganization. And,
the Indian corporate sector has miles, miles to go to make
it happen as a national work ethos. But given the speed
with which Indian services industry is flourishing, for
example, it is certainly not impossible to achieve.
NOTES
1. Presently, India has settled around an average of 6 per cent
growth rate in gross domestic product (GDP) in the post-lib-
eralization period, which in some years even reached 8 per
cent. This improvement is from an earlierto use late Pro-
fessor Raj Krishnas term Hindu rate of growth of around 3
VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005
to 4 percent. If it can ensure appropriate leadership and gov-
ernance structure at macro and micro levels, as is being
promised in the second-generation reforms in the country,
the possibility of crossing 10 per cent growth rate will not be
over-arching.
2. The first Business WorldGrow Talent Great Place to Work
(GPW) survey was launched in 2003 in which 120 firms par-
ticipated. This figure went up to 179 in the second GPW
survey in 2004. The survey came out with a list of Top-25
firms as great places to work. In the 2003 survey 78 per cent
employees of the Top-25 firms agreed that they were a part
of a Great Place to Work. In the 2004 survey, this figure has
gone up to 86 per cent (Sachdev and Bhattacharya), 2004).
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IsntHow to Build Value Through People and Organiza-
tion, Hoboken: John Wiley & Sons.
Ulrich, Dave, Louis Carter, Marshall Goldsmith and Debi S. Saini
(eds.) (2005), The Change Champions Field Guide: Strate-
gies and Tools for Leading Change in the New Era. New
Delhi: Excel Books.

Debi S. Saini, Ph.D. (debisaini@mdi.ac.in), is Professor of Human Resource Management (HRM) at Management Development
Institute (MDI), Mehrauli Road, Gurgaon-1220 001, Haryana. Besides authoring four dozen research papers, articles and management
cases in journals and edited volumes published from India and abroad, he has authored or edited seven books in the area of HRM,
industrial relations, and labour law. He has also authored a 275-page volume on Social Security Law in India which forms part of the
International Encyclopaedia of Laws published by Kluwer Law International, the Netherlands. Among others, he has done assign-
ments for ILO and GTZ (Germany). Dr. Saini is the editor of VisionThe Journal of Business Perspective, the journal of MDI. He was
the first editor of Management and Change; and, has been on the editorial board of Industrial Relations Journal (Blackwell, Oxford).
Among others, he is on the Board of the Best Practice Institute, Boston, USA, and the Advisory Board of the Society for Leadership of
Change, Huntersville, USA.

VISIONThe Journal of Business Perspective O Vol. 9 O No. 3 O JulySeptember 2005