human resource management in india
TRANSCRIPT
Human Resource Management in India: ‘Where From’ and ‘Where To?’
Samir R. Chatterjee
Abstract
India is being widely recognised as one of the most exciting emerging economics in the world. Besides becoming a global hub of outsourcing, Indian firms are spreading their wings globally through mergers and acquisitions. During the first four months of 1997, Indian companies have bought 34 foreign companies for about U.S. $11 billion dollars. This impressive development has been due to a growth in inputs (capital and labour) as well as factor productivity. By the year 2020, India is expected to add about 250 million to its labour pool at the rate of about 18 million a year, which is more than the entire labour force of Germany. This so called ‘demographic dividend’ has drawn a new interest in the Human Resource concepts and practices in India. This paper traces notable evidence of economic organisations and managerial ideas from ancient Indian sources with enduring traditions and considers them in the context of contemporary challenges.
Introduction
Over many centuries India has absorbed managerial ideas and practices from around the world. Early records of trade, from 4500 B.C. to 300 B.C., not only indicate international economic and political links, but also the ideas of social and public administration. The world’s first management book, titled ‘Arlhãshastra’, written three millennium before Christ, codified many aspects of human resource practices in Ancient India. This treatise presented notions of the financial administration of the state, guiding principles for trade and commerce, as well as the management of people. These ideas were to be embedded in organisational thinking for centuries (Rangarajan 1992, Sihag 2004). Increasing trade, that included engagement with the Romans, led to widespread and systematic governance methods by 250 A.D. During the
next 300 years, the first Indian empire, the Gupta Dynasty, encouraged the establishment of rules and regulations for managerial systems, and later from about 1000 A.D. Islam influenced many areas of trade and commerce. A further powerful effect on the managerial history of India was to be provided by the British system of corporate organisation for 200 years. Clearly, the socio cultural roots of Indian heritage are diverse and have been drawn from multiple sources including ideas brought from other parts of the old world. Interestingly, these ideas were essentially secular even when they originated from religious bases.
In the contemporary context, the Indian management mindscape continues to be influenced by the residual traces of ancient wisdom as it faces the complexities of global realities. One stream of holistic wisdom, identified as the Vedantic philosophy, pervades managerial behaviour at all levels of work organisations. This philosophical tradition has its roots in sacred texts from 2000 B.C. and it holds that human nature has a capacity for self transformation and attaining spiritual high ground while facing realities of day to day challenges (Lannoy 1971). Such cultural based tradition and heritage can have a substantial impact on current managerial mindsets in terms of family bonding and mutuality of obligations. The caste system, which was recorded in the writings of the Greek Ambassador Megasthenes in the third century B.C., is another significant feature of Indian social heritage that for centuries had impacted organisational architecture and managerial practices, and has now become the focus of critical attention in the social, political and legal agenda of the nation.
One of the most significant areas of values and cultural practices has been the caste system. Traditionally, the caste system maintained social or organisational balance. Brahmins (priests and teachers) were at the apex, Kshatriya (rulers and warriors), Vaishya (merchants and managers) and Shwdra (artisans and workers) occupied the lower levels. Those outside the caste hierarchy were called ‘untouchables’. Even decades ago, a typical public enterprise department could be dominated by people belonging to a particular caste. Feelings associated with caste
affairs influenced managers in areas like recruitment, promotion and work allocation (Venkatranam & Chandra 1996). Indian institutions codified a list of lower castes and tribal communities called ‘scheduled castes and scheduled tribes’. A strict quota system called, ‘reservation’ in achieving affirmative equity of castes, has been the eye of political storm in India in recent years. The central government has decreed 15 per cent of recruitment is to be reserved for scheduled castes, and a further seven and half per cent for scheduled tribes. In addition, a further 27 per cent has been decreed for other backward castes. However, the liberalisation of markets and global linkages have created transformation of attitudes towards human resource (HR) policies and practices (Khalilzadeh-Shirazi & Zagha 1994, Gopalan & Rivera 1997). Faced with the challenge of responding to the rationale of Western ideas of organisation in the changing social and economic scenario of Indian organisation, practitioners are increasingly taking a broader and reflective perspective of human resource management (HRM) in India.
This manuscript has three main parts. In the first part is provided an overview of important historical events and activity that has influenced contemporary managerial tenets, the second part of the manuscript describes the emerging contemporary Indian HRM practices and indicates some interesting challenges. Much of the second part is also summarised on four informative Figures. The concluding section, the third part of the manuscript, succinctly integrates the two preceding parts.
Value of Context of HRM in India
The managerial ideologies in Indian dates back at least four centuries. Arthãshastra written by the celebrated Indian scholar-practitioner Chanakya had three key areas of exploration, 1) public policy, 2) administration and utilisation of people, and 3) taxation and accounting principles (Chatterjee 2006). Parallel to such pragmatic formulations, a deep rooted value system, drawn from the early Aryan thinking, called vedanta, deeply influenced the societal and institutional values in India.
Overall, Indian collective culture had an interesting individualistic core while the civilisational values of duty to family, group and society was always very important while vedantic ideas nurtured an inner private sphere of individualism.
There has been considerable interest in the notion that managerial values are a function of the behaviours of managers. England, Dhingra and Agarwal (1974) were early scholars who contended that managerial values were critical forces that shape organisational architecture. The relevance of managerial values in shaping modern organisational life is reflected in scholarly literature linking them to corporate culture (Deal & Kennedy 1982), organisational commitment and job satisfaction (O’Reilly, Chatham & Caldwell 1991), as well as institutional governance (Mowday, Porter & Steers 1982). Thus, understanding the source of these values and in particular societal work values (which link the macro-micro relationships and in turn organisational practices) had become a popular line of enquiry, and a great deal of evidence has been presented to support the importance of national culture in shaping managerial values. One of the most widely read formulations of this literature is the seminal work of Hofstede (1980) who popularised the notion of clustering culture in generic dimensions such as power distribution, structuring, social orientation, and time horizons. In turn, these dimensions could be employed to explain relevant work attitudes, job incumbent behaviours and the working arrangements within organisational structures. Two of these dimensions were individualism and collectivism.
The traditional social ethos from the ancient roots, which was developed over centuries, underwent profound transformation during the British rule. Consequently, in the contemporary context multiple layers of values (core traditional values, individual managerial values, and situational values) have emerged (Chatterjee & Pearson 2000). Though the societal values largely remain very much anchored in the ancient traditions they are increasingly reflecting corporate priorities and values of global linkages. But in the arena of globalisation where priorities of
consumerism, technological education, mass media, foreign investment and trade union culture predominate, newer tensions are becoming evident. For instance, contemporary Indian multi national companies and global firms in India have started shifting their emphasis to human resources with their knowledge and experience as the central area of attention in extending new performance boundaries (Khandekar & Sharma 2005). Considerable research evidence attests to this trend with particular relevance to greenfield organisations with little or no historical baggages in their organisational culture (Settt 2004, Roy 2006).
Within Indian traditions the choice of individualistic or collectivistic behaviour depends on a number of culturally defined variables. The dynamics of these variables are underpinned through three key elements guiding Indian managerial mindscapes. These three constructs are Desh (the location), Kaal (the timing), and Patra (the specific personalities involved). Sinha and Kunungo (1997) claim that the interaction of these three variables determines the guidelines for decisional cues. This managing or nurturing of the outer layer of collectivism in an inner private sphere of individualism is expressed in Figure 1 which demonstrates the behavioural anchors in Indian organisational life.
Figure 1Behavioral Anchors in Indian Organisational Life
DECISIONALCUES
Desh(place)
Kaal(Timing)
Patra(Actors)
SPIRITUALORIENTATION
Sattava guna(Virtue focus)
Tamas guna(Negative focus)
Rajas guna(Action focus)
INTERPERSONALRELATIONS
Sradha(Upward respect / Loyalty)
Sneha(Downward affection)
Bandhan(Bonding)
Figure 1 also presents another powerful insight of the Indian tradition of the notion of ‘Guna’ dynamics. According to Sharma (1996), this culture based framework, which has three types of gunas (attraction), is being
increasingly used in employee assessment and organisational team building strategies. The contention is that each guna is a separate contribution to the core of human personalities. The Sattava (or truth orientation) is the sentiment of exalted values in people, organisations or society. Alternatively, the Tamasik guna depicts a negative orientation which can be expressed behaviourally as ignorance, greed or corruption. Those individuals with a Rajasik guna are inherently driven by a desire to make a worthwhile contribution to their surroundings. Collectively, these spiritual orientations, which manifest as Sattava, Tamas or Rajas gunas, articulate as positive or negative HRM functions such as leadership, motivation or other institutional behavioural activity. The third row of Figure 1 highlights the linking of HRM trends to socio cultural roots. The culture of Sradha (upward loyalty) and Sneha (mentoring with affection) outline the behavioural anchors derived from the civilisational roots. The acceptance of ‘Sradha’ by youngers and the display of ‘Sneha’ by the seniors have been the root of sustainability of all types of Indian oragnisations. This has a striking similarity to the concepts of ‘oyabun’ and ‘kobun’ in the Japanese cultural context.
Contemporary India
In a recent survey of Indian CEO’s, it was suggested that Indian managerial leaders were less dependent on their personal charisma, but they emphasised logical and step by step implementation processes. Indian leaders focused on empowerment and accountability in cases of critical turnaround challenges, innovative challenges, innovative technology, product planning and marketing or when other similar challenges were encountered (Spencer, Rajah, Narayan, Mohan & Latiri 2007). These social scientists contend.
Leaders in other countries often tell about why they chose a peculiar person for a certain role per task, detailing the personal characteristics that made that person right for that situation. They may also consider, in detail, how an assignment would help someone grow and develop their abilities. In general, Indian leaders simply did not discuss how they
matched particular people to certain roles or tasks, nor did they usually consider in detail how the personal characteristics of individuals might shape or inform the best way to influence that person. (Spencer, et al 2007:90).
Indian HRM in Transition
One of the noteworthy features of the Indian workplace is demographic uniqueness. It is estimated that both China and India will have a population of 1.45 billion people by 2030, however, India will have a larger workforce than China. Indeed, it is likely India will have 986 million people of working age in 2030, which well probably be about 300 million more than in 2007. And by 2050, it is expected India will have 230 million more workers than China and about 500 million more than the United States of America (U.S.). It may be noted that half of India’s current population of 1.1 billion people are under of 25 years of age (Chatterjee 2006). While this fact is a demographic dividend for the economy, it is also a danger sign for the country’s ability to create new jobs at an unprecedented rate. As has been pointed out by Meredith (2007).
When India’s young demographic bubble begins to reach working age, India will need far more jobs than currently exist to keep living standards from declining. India today doesn’t have enough good jobs for its existing workers, much less for millions of new ones. If it cannot better educate its children and create jobs for then once they reach working age, India faces a population time bomb: The nation will grow poorer and not richer, with hundred of millions of people stuck in poverty. (p.133).
With the retirement age being 55 to 58 years of age in most public sector organisations, Indian workplaces are dominated by youth. Increasing the retirement age in critical areas like universities, schools, hospitals, research institutions and public service is a topic of considerable current debate and agenda of political parties.
The divergent view, that each society has an unique set of national nuances, which guide particular managerial beliefs and actions, is being challenged in Indian society. An emerging dominant perspective is the influence of globalisation on technological advancements, business management, education and communication infrastructures is leading to a converging effect on managerial mindsets and business behaviours. And when India embraced liberalisation and economic reform in the early 1990s, dramatic changes were set in motion in terms of corporate mindsets and HRM practices as a result of global imperatives and accompanying changes in societal priorities. Indeed, the onset of a burgeoning competitive service sector compelled a demographic shift in worker educational status and heightened the demand for job relevant skills as well as regional diversity. Expectedly, there has been a marked shift towards valuing human resources (HR) in Indian organisations as they become increasingly strategy driven as opposed to the culture of the status quo. Accordingly, competitive advantage in industries like software services, pharmaceuticals, and biotechnology (where India is seeking to assert global dominance), the significance of HRs is being emphasised. These relativities were demonstrated in a recent study of three global Indian companies with (235 managers) when evidence was presented that positively linked the HRM practices with organisational performance (Khandekar & Sharma 2005). In spite of this trend of convergence, a deep sense of locality exists creating more robust ‘cross vergence’ in the conceptual as well as practical domain.
Figure 2Drivers of Contemporary Indian HRM Trends
Figure 2 presents the key drivers for contemporary Indian HRM trends. In Figure 2 there are four external spheres of intervention for HRM professionals and these spheres are integrated in a complex array within organisational settings. The intellectual sphere, which emphasises the mindset transaction in work organisations, has been significantly impacted by the forces of globalisation. Indeed, Chatterjee and Pearson (2000) argued, with supporting empirical evidence from 421 senior level Indian managers, that many of the traditional Indian values (respect for seniority, status and group affiliation) have been complemented by newer areas of attention that are more usually linked to globalisation, such as work quality, customer service and innovation. The most important work related attribute of the study was the opportunity to learn new things at work. Such cross verging trends need to be understood
more widely as practitioners face a new reality of human resource development of post industrial economic organisations.
The other three spheres, of Figure 2, namely the emotional, the socio cultural and the managerial domains are undergoing, similar profound changes. For instance, the socio cultural sphere confronts the dialects of the national macro level reform agenda as well as the challenge of innovating by addressing the hygiene and motivational features of the work place. Consequently, this sphere, which is underpinned by the anchors of Sradha and Sneha, has the opportunity to leverage work setting creativity in dimensions of autonomy, empowerment, multiskilling and various types of job design. And the emotional sphere, which focuses on creativity and innovation to encapsulate the notions of workplace commitment and collaboration as well as favourable teamwork, brings desirable behavioural elements of transparency and integrity into organisational procedures and practices. The managerial sphere provides the mechanisms for shifting mindsets, for in Indian organisations HRM is viewed to be closely aligned with managerial technical competency. Thus, understanding of the relativity of HRM to strategic intended organisational performance is less well articulated in Indian firms. The current emphasis of reconfiguring cadres (voluntary and nonvoluntary redundancy schemes), downsizing, delayering and similar arrangements will become less relevant as holistic perspectives gain ground. A hallmark of future Indian workplaces is likely to be a dominant emphasis on managerial training, structural redesign and reframing of institutional architectures to achieve enterprise excellence. Thus, a primary role of Indian managers will be to forge new employment and industrial relationships through purposeful HRM policies and practices. In Figure 3 is presented a variety of HRM practices that are being employed in Indian organisations.
Figure 3Key HRM Practices in Indian Organisations
HRM Practice Observable Features
Job DescriptionPercentage of employees with formally defined work roles is very high in the public sector.
Recruitment
Strong dependence on formal labour market. Direct recruitment from institutions of higher learning is very common amongst management, engineering and similar professional cadres. Amongst other vehicles, placement agencies, internet and print media are the most popular medium for recruitment.
CompensationStrong emphasis on security and lifetime employment in public sector including a range of facilities like, healthcare, housing and schooling for children.
Training and Development
Poorly institutionalised in Indian organisations. Popularity of training programmes and their effect in skill and value development undeveloped.
Performance Appraisal
A very low coverage of employees under formal performance appraisal and rewards or organisational goals
Promotion and Reward
Moderately variable across industries. Seniority systems still dominate the public sector enterprises. Use of merit and performance limited mostly to globally orientated industries.
Career Planning
Limited in scope. The seniority based escalator system in the public sector provides stability and progression in career. Widespread use of voluntary retirement scheme in public sector by high performing staff. Cross functional career paths uncommon.
Gender EquityDriven by proactive court rulings, ILO guidelines and legislature provisions. Lack of strategic and inclusion vision spread.
Reservation System
The central government has fixed 15 per cent reservations for scheduled castes, 7.5 per cent for
Figure 3Key HRM Practices in Indian Organisations
HRM Practice Observable Featuresscheduled tribes and 27 per cent for backward communities. States vary in their reservation systems.
IR Challenge
The Indian IR system has two main features. First, is the absence of the provision to recognise a union as a representative or agent for collective bargaining. Second, is the total dominance of government in regulating the industrial relations (IR) domain. Though it is relatively easy for members of a work organisation to be registered as a union under the law, it does not lead to the legal recognition by the employer in dispute resolution or bargaining process. This contention was made by Kuruvilla (1996) over a decade ago.
In terms of collective bargaining, industry wide bargaining occurs in certain industries where the employers are organized, but bargaining otherwise is decentralised to enterprise level. Although there are no restrictions on the subjects of bargaining, the Industrial Disputes Act of 1947 restricts the ability of employers to lay off or retrench employees or to close business. (p.635).
Indian industrial relations have evolved from political roots and labour market demands. An unique feature of Indian IR has been the dominance of political parties sponsoring unions. Union membership has been the most popular breeding ground for politicians, and political leaders have enjoyed the use of union platforms. Such politicisation has generated conflicts and rivalry creating mayhem and the hurting of labour interest. Nevertheless, in spite of wage determination by central government boards, and ad hoc industrial awards, enterprise level bargaining has yielded positive outcomes. Interestingly, during the 1970s in a period of the highest number of strikes, the registered number of unions grew fivefold. But a decade later profound economic and
political reform movement saw a new direction in the trade union movement. A section of scholarly trade union leaders began to incorporate new global thinking in the union outlook.
Since the 1980s, the Indian industrial relations culture has been considerably impacted by the intensification of globalised markets. During this time and beyond, there has been a clear departure from traditional personnel management. The shift has not only been in the general tone, but in the substantive visions. Adjustment to the global imperatives of an emerging service sector, sunrise industries, and demographic shifts in competencies has given rise to new thinking. In spite of most of the Indian labour laws being entrenched in a world view that is very different to the current realities, and the obvious urgency for them to be updated to incorporate more flexible, competitive work systems, the built in rigidities are still proving a formidable obstacle.
The most alarming issue in the HR and IR context is the lack of job opportunities outside urban areas where more than 70 per cent of the population lives. As has been pointed out by Meredith (2007).
While Indian university graduates line up for jobs that can propel them into newly vibrant middle class, per India’s rural and urban poor, change has been interminably delayed. Expectations, like incomes, are rising across India, and not just for those working in call centres. Even as the New India cohort thrives, much of the rest of India is making much slower gains or even being left behind, creating social and political tensions that cloud India’s impressive strides forward. The lowest paid workers in the off shoring industry those working in the call centres earn median wages of $275 a month. But most Indians still earn less than $60 a month or just $2 a day. (p.125).
Technical Services Recruitment and Retention
There has been a dramatic shift in the expectations of employees in the organised and globally linked sectors of the economy. An unprecedented rise in the disposable income coupled with a declining dependency ratio, has led to young professionals becoming extremely mobile. The problem is critically evident in the off shoring industry where the average retention period of an employee is considered to be around six to eight months. And the retention of senior level executives is an additional challenge. The attrition rates are highest in information technology (IT) (30-35%), business process outsourcing (BPO) (35-40%), insurance (35-40%), retail and fast moving consumer goods (FMCG) (20-30%), and manufacturing and engineering (10-15%) (Chatterjee 2006).
Over the past decade, there has been a sea change in the area of Indian technical services and the associated HRM practices of recruitment and retention. While the higher education system in the country has remained overwhelming poor in infrastructure and weak in becoming revitalised to grapple with the global imperatives, there has been a mushrooming of private educational institutions. The recruitment problem is further deepened by the emergence of a new culture of ‘job hopping’ amongst employers who can demonstrate their world class competencies. This phenomenon of turnover has seen a chain reaction in entry level salaries, and an increase in graduates has created significant social and economic disruption to the Indian labour market. A likely scenario from this rampant activity is that the Indian HR scene will be negatively impacted in the next decade unless the deregulation and autonomy of the higher education sectors is initiated somewhat immediately. An example of this widening gap between the university system and market need has become a serious impediment in several new industries in India. For an example, it has been reported in the popular press (Time 2007), “…out of 13 million people who applied to work at IT company Infosys last year, just 2% were qualified indicating a sign of stress in the university system that graduates 2.5 million a year.” (p.33).
One of the most concerning issues for HR managers in India is the high staff turnover. In industries like call centres, staff attrition is the single biggest issue. The industry has grown from zero employment to an employer of quarter of a million young English speaking, well educated and ambitious people. The point is well made by Slater (2007), who wrote.
Attrition is highest in traditional customer service jobs, where young people find themselves having to spend all night on the phone, often with irate callers. In other areas such as claims processing or accounting, the turnover rate is much lower. More worrying for many companies is the ‘merry go round’ in supervising and management jobs, as new centers are only too willing to pay higher salaries to hijack experienced staff. (p.34).
The issue of retention is much more critical in the high value adding BPO sector such as R&D activities. This $40 billion industry has one of the highest attrition rates of around 20 to 25 per cent. The service laden BPO and Hord industry have the highest attrition rates. Many companies are developing innovative incentive packages in countering this job hopping phenomenon. Figure 4 illustrates some of these initiative by leading companies in India.
Figure 4Examples of Retention Strategies for young Professionals in India’s BPO
and Services SectorsName of the Company
Retention Strategy Impact
Tata Consulting Services(TCS)
A choice of working in over 170 offices across 40 countries in a variety of areas.
Paternity leave for adoption of a girl child
Significant impact on job hopping achieved
Figure 4Examples of Retention Strategies for young Professionals in India’s BPO
and Services SectorsName of the Company
Retention Strategy Impact
Discounts on group parties
ICICI Bank
Identification of potential talented staff
Alternative stock options
Quicker promotion
Have been able to achieve higher retention rate
WIPRO
‘Wings Within’ programme where existing employees get a chance to quit their current job role and join a different firm within WIPRO
Has led to a higher retention rate
INFOSYS
Fostering a sense of belongingness, creative artistic and social activities for the employees and their families.
Initiating one of the best ‘corporate universities’ in the world
Moderate Retentions rate increase achieved
Microsoft-India Excellent sporting and wellness facilities
Employees allowed to choose flexible working schedule
Moving people across functions and sections in
Struggling to minimise job hopping
Figure 4Examples of Retention Strategies for young Professionals in India’s BPO
and Services SectorsName of the Company
Retention Strategy Impact
assisting employees find their area of interest
Mahindra & Co
Culture change valuing innovation and talent over age and experience
Institutionalising a practice called ‘reverse mentoring’ where young people are given opportunities of mentoring their seniors
Stabilised job hopping significantly
A dramatic shift in recruitment practices has been taking place as globally pretend Indian companies as well as global technical services rivals have made India a battlefield of recruitment for the best workers. For example, IBM’s workforce in India has more than doubled in two years to a cadre of 53,000. This outcome has come with the elimination of 20,000 jobs in high cost markets like the U.S., Europe and Japan. The R&D centre of IBM is staffed by 3,000 world class engineers and is being recognised for its ability to innovate on all areas from simple processes, softwares, semiconductors as well as supercomputers. It is interesting to note that IBM has dominated the recruitment market in technical services in India during 2006. This leading company recruited 10,000 employees out of a total of 25,000 people who were recruited to the technical services industry. The prominence of IBM as an employer of technically qualified personnel has been acknowledged in the popular press (Business Week 2007).
In Pune, a rapidly developing IT centre near Mumbai, the company has been dispatching vans with signs saying, ‘IBM is hiring’, to the gates of
the rivals at lunch time. Their hit rate is pretty good laments a manager at a tech firm that has lost employees to IBM.
Conclusion
The World Competitiveness Report rated India’s human resource capabilities as being comparatively weaker than most Asian nations. The recognition of world class human resource capability as being pivotal to global success has changed Indian HRM cultures in recent years. While the historical and traditional roots remain deeply embedded in the subjective world of managers, emphasis on objective global concepts and practices are becoming more common. Three very different perspectives in HRM are evident. Firstly, Indian firms with a global outlook; secondly, global firms seeking to adapt to the Indian context; and thirdly, the HRM practice in public sectors undertakings (PSV’S). As the Indian economy becomes more globally linked, all three perspectives will move increasingly towards a cross verging strengthening. Interestingly, within the national context, India itself is not a homogenous entity. Regional variations in terms of industry size, provincial business culture, and political issues play very relevant roles. The nature of hierarchy, status, authority, responsibility and similar other concepts vary widely across the nations synerging system maintenance. Indeed, organisational performance and personal success are critical in the new era.
Author
Samir Chatterjee is professor of International Management at Curtin University of Technology in Australia. He has been involved in university teaching, research, corporate consulting and advisory role with UN, ADB and many other scholarly activities in the Asian region for over 35 years. He has authored and co-authored eight books, 22 book chapters and over 150 refereed journal and conference papers. He is currently the President of the Society for Global Business and Economic Development.
Email: [email protected]
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Human Resource Practices in India:
Background and Federal Laws
Namaste (pressing of the palms together) is the traditional greeting of Indians.
• The Indian flag:
Colors have symbolic representation.
Namaste is the traditional greeting and is done as shown by the model in the picture. This greeting can be used any time during the day. It literally translates to "I bow to you". The word is derived from the Indian language Sanskrit. Namas means to bow or salute and te means to you.
On the Indian flag orange represents courage and sacrifice; white represents purity and truth; and green stands for faith, fertility and chivalry. The wheel in the center represents each hour of the day, as well as the endless circle of life.
India Quick Facts:
• Population: 1.1 billion.
• Political structure: Democratic republic.
• Government: President, prime minister and two Houses of Parliament.
• The ruling party: Congress.
• Twenty-eight states and seven union territories.
• Seventeen distinct languages: Hindi and English are the official languages.
• Religion: Hinduism (83%), Muslim (11%), Christian (2%), Sikh (1.9%), Other (1.8).
• Literacy rate: 65%.
• Indian currency: Rupee ($1= 40 rupees).
India has a parliamentary form of government with two Houses in the Parliament (Rajya Sabha and Lok Sabha). Though the president is the supreme commander of the Indian armed forces, the prime minister and the elected ministers are responsible for running the country.
The majority of Indians do not eat beef for religious reasons. Because of this, hamburger giants like McDonalds opened restaurants in India and offered soy burgers.
Hindi is as the national language because it is spoken by the majority of the population. Indian children are exposed to at least two to three languages during their school years as a part of their curriculum and through social exposure to people from different states. Knowledge of a regional language is considered a definite employment asset, especially for supervisory employees.
History and Societal Background:
• British colony for 100 years.
• Great national leader: Mahatma Gandhi.
> Ghandi introduced the concept of non-violence protest.
• The Indian social system is dominated by a caste system.
> Four specific castes; Brahmins, Khastriyas, Vaishyas, Shudras.
> Created distinct labor categories.
> Associated status differences.
Mohandas Karamchand Gandhi is rightly (and officially) known as the father of the nation. He pioneered the concept of non-violent
protest that inspired other great freedom leaders like Dr. Martin Luther King, Jr.
The Indian social system is dominated by a caste system that fosters inequality, power and hierarchical management. The British reinforced the caste system because they equated it to their own class system. The British also introduced the census in India so they could identify different labor groups and employ them to their best advantage, thereby further emphasizing labor differences among groups.
Caste is derived from the term castas, which was introduced by early Portuguese invaders in the 16th century to describe the tribes, groups or families they observed working in separate groups. The caste system is divided into four principal labor categories based on a social and economic hierarchy. Brahmins are considered the intellectual leaders. Kshatriyas are considered the soldiers of war; Vaishyas are business traders; and Shudras are unskilled laborers. The caste system has created distinct labor categories and status differences among the groups. Brahmins are considered the highest in the caste hierarchy and Shudras the lowest.
You can learn more about the British presence in India and the caste system by accessing “The Indian Caste System and The British” online at http://www.infinityfoundation.com/ECITcastebritishframeset.htm.
Business Facts:
• Today, India is the fourth largest economy in the world.
• Until 1991, there was an import substitution policy that favored domestic industries.
• After 1991, there was active foreign investment with a very strong trade liberalization policy.
> Foreign direct investment in India increased dramatically ($15.8 million in 1997 compared with 0.3 million in 1991).
• In 2000, the Y2K computer crisis required worldwide computer remediation provided by software engineers.
• Indian software engineers were found to be very dedicated and hard-working (Friedman, T. 2005; “The World is Flat”).
Prior to 1991, India had a closed-door policy toward direct foreign investment, and the government controlled most economic and business activities. There were strict ownership restrictions that allowed foreign companies to have only 40 percent equity when collaborating with domestic companies. While multinational companies generally complied, the classic case often quoted in business text books is that of IBM and Coca-Cola. Both organizations were asked to leave India because of lack of ownership compliance. In 1991, a new prime minister realized that to compete in the global market, India needed foreign investment. As a result, the government slowly began to ease some multinational ownership restrictions. The United States quickly became the largest investor in India with nearly $570 billion invested between 1991-2002. You can learn more about India’s foreign investment policies by accessing “Foreign Direct Investment in India” at http://www.london.edu/assets/documents/PDF/foreign_dir_investment_india.pdf.
India is recognized as a global leader in software development. The Indian software industry has been instrumental in the international attention the country receives today. India has a well-educated English-speaking workforce who can communicate easily with other English-speaking cultures. The workforce is also often commended for its strong work ethic and willingness to work 12-hour days, six days a week. In addition, professional labor costs are significantly lower in India--almost 25 percent lower than in the United States. Global consulting group McKinsey estimates that if a multinational bank of 1,000 employees moved to India, the bank would save $18 million annually in labor costs.
Mercer’s 2006 Best Companies to Work For in India:
• Infosys Technologies Limited (IT industry).
• MindTree Consulting (IT industry).
• Satyam Computer Services Limited (IT industry).
• Dr. Reddy’s Laboratories Limited (pharmaceutical company).
• Sapient Corporation (business and technology consulting).
• Agilent Technologies (IT industry).
• Johnson & Johnson (consumer health care company).
• Covansys India (IT industry).
• HCL Comnet (IT industry).
• HSBC; Hongkong and Banking Corporation (banking services).
A study by Mercer identified these companies to be the best companies to work for in India. As you will notice, most of the
companies are from the IT industry, further demonstrating how important the IT industry is to the Indian economy.
The Indian software industry has grown from a mere US $150 million in 1991-92 to a staggering US $5.7 billion (including more than $4 billion of software exports) in 1999-2000.
In 2003, Infosys Technology, the top company on Mercer’s list, was identified by the American Society for Training and Development (ASTD) as one of the best companies providing global training. The results of the Mercer study helped benchmark best employment practices in the industry.
Federal Employment Laws:
• HR began to play a significant role with the early enactment of these employment-related laws:
• The Workers’ Compensation Act of 1923 ensured that employers compensate employees for work-related injuries.
• The Trade Union Act of 1926 gave formal recognition to trade unions.
• The Industrial Disputes Act of 1947 led to the increased role of industrial relations (employees were distinguished by the work they did such as permanent, temporary, trainee etc.).
• The Factories Act of 1948 regulated the work environment in factories to ensure the safety of employees.
• The Employees Provident Funds and Miscellaneous Provisions Act of1952 required employers to provide contributions for retirement.
The chronological enactment of employment laws reflects the increased importance of HR in the workplace. Indian organizations also noted the increased visibility and value of HR by migrating away from the use of the term “personnel” to “human resources.”
Please read the following articles to get a better understanding of employment laws in India:
Employment Law (scroll to Employees' Rights and Remuneration) : http://www.iptu.co.uk/content/india_employment_law.asp.
Doing business in India: http://www.indialaw.org/laws.html#law1.
• The Minimum Wage Act of 1948 established minimum wages that vary from state to state.
• The Payment of Bonus Act 1965 provides for a minimum bonus of 8.33 percent of salary, even if the organization is not making any profit.
• The Persons with Disabilities Act (PWD) of 1995 was landmark legislation for disabled people in India.
The Payment of Bonus Act guarantees that a bonus is paid to employees who have worked for at least 30 working days in the year and have salaries of at least Rs.3,500 per month. The payment of a bonus is applicable to every establishment where 20 or more workers are employed, but there are exceptions. Employees who work in insurance corporations, educational institutions, hospitals, chambers of commerce, federal banks and social welfare institutions are not entitled to a bonus under the Act.
Bonuses do not have to be paid if the employee is dismissed from service for fraud or misconduct on the premises or for theft,
misappropriation or like of the property of the organization. The law is quite controversial because employees want this bonus regardless of whether company is profitable or not; employers do not agree with this required entitlement.
Disability in the Indian context includes the following: blindness; low vision; leprosy cured; hearing impairment; locomotor disability; mental retardation; or mental illness. About 50 million people, or 5 percent of India’s population, are affected by some sort of disability.
Indian HR Associations:
• In the 1940s and early 1950s, two professional HR associations were established to acknowledge the importance of HR:
• Indian Institute of Personnel Management (IIPM).
• National Institute of Labor Management (NILM).
• In1980, the two associations merged to form the National Institute of Personnel Management (NIPM).
• NIPM is the only group engaged in the advancement of HR, industrial relations and labor welfare.
• NIPM has a working relationship with HR groups in the United States, Australia and the United Kingdom.
• The creation of NIPM demonstrates the growing importance of HR in India. Further, links with other global HR organizations allow Indian members to understand and share best practices.
Affirmative Action:
• Affirmative Action:
• Based on the caste system.
• Federal jobs and admissions to colleges are strongly influenced by quotas for caste reservations.
• State governments can set aside 50 percent of jobs based on different castes. To get increased support from the public, some states have 75 percent of job reserved.
India’s Constitution provides for affirmative action based on the caste system in both education and employment. In federal jobs, it is common to have departments comprised of a single caste groups. Similarly, trade unions are also organized along the caste lines. Creation of such groups poses organizational challenges because these groups carry their personal differences to the workplace. Please read following articles for more information about the caste system and its effect on HR:
Mozumdar, Suman Guha. (2007). Of job hunting and Indian Cast System. Rediff India Abroad. http://www.rediff.com/money/2007/nov/02hire.htm.
Anonymous (2007, October 6). With reservations - Business and caste in India. The Economist. London. 385, 8549, 93.
Indian Culture and HR Practices:
Cultural Profile (GLOBE Study)
• Power distance:
o India: 5.47 (rank 16).
o Morocco : 5.80 (highest score).
• Institutional collectivism:
o India : 4.38 (rank 25).
o Sweden: 5.22 (highest score).
• In-group collectivism:
o India: 5.92 (rank 4).
o Philippines: 6.36 (highest score).
• Uncertainty avoidance:
o India: 4.15 (rank 29).
o Switzerland: 5.37 (highest score) .
Source: Chhokar, J., Brodbeck, F., & House, R (Eds) .(2007). Culture and leadership across the world. The GLOBE book of in-depth studies of 25 societies. Lawrence Erlbaum Associates. Mahwah, New Jersey.
The GLOBE (Global Leadership and Organizational Behavior Effectiveness) study, conducted by the Wharton Business School (University of Pennsylvania), is an analysis of the cultural, societal, organizational and leadership differences between 62 different societies around the world. The goal of the study was to determine the extent to which the practices and values of business leadership are universal (i.e., are similar globally), and the extent to which they are specific to just a few societies. India was included in the study.
India’s high scores on power distance reflect a society that is characterized by a clear hierarchy engendered by both the Indian caste
system and British rule. On average, there are at least 12 to 15 levels between a production worker and the CEO in a manufacturing environment. The Indian corporate world is characterized by clear hierarchies and formal structures. Employees are reluctant to disagree with a boss or even call them by their first name. Formal titles such as Mr., Mrs., Dr., Sir or Madam are widely used in both organizations and education.
Collectivist cultures are characterized by a tight social framework where members distinguish themselves from in-groups and out-groups. In India, in-group members are usually from the same caste, religion or family. It is easy to distinguish a person’s caste and religion by last name, making it possible to make prejudiced staffing decisions. Recruiting, hiring and promoting employees from one’s own caste are quite common.
Many Indian social customs suggest a culture that is ritualistic and avoids the uncertain or unknown. For example, many business decisions, such as opening a new plant, are based on astrological predictions to identify if the time is favorable. For marriages, social customs dictate that the astrological stars of the prospective groom and bride are matched before wedding plans are started.
Definition of Cultural Dimensions (GLOBE Study):
• Power distance: The degree to which organizations and societies accept power.
• Institutional collectivism: The degree to which organizational and institutional practices encourage collective action.
• In-group collectivism: The degree to which individuals in societies reflect collectivist behavior.
• Uncertainty avoidance: The degree to which organizations and societies avoid uncertainty by relying on practices and procedures.
• Performance orientation: The degree to which upper management in organizations and leaders in societies reward group members for performance excellence.
Cultural Profile (GLOBE Study):
• Performance orientation:
o India: 4.25 (rank 9).
o Switzerland : 4.94 (highest score).
• Assertiveness:
o India: 3.73 (rank 53).
o Albania : 5.80 (highest score).
• Future orientation:
o India : 4.19 (rank 15).
o Singapore: 5.07 (highest score).
• Gender egalitarianism:
o India: 2.90 (rank 55).
o Hungary: 4.08 (highest score).
• Humane orientation:
o India: 4.57 (Rank 9).
o Zambia: 5.23 (highest score).
High scores on future orientation reflect a society that plans for the future. Indian culture socializes children with axioms such as “always save for a rainy day” from an early age. This future orientation is reflected in personal bank accounts that most Indians open. The government encourages opening such accounts by providing tax breaks for them.
There is a societal preference toward male dominance in both corporate and social settings, even though a female prime minister governed India for a long time. Indian women do not enjoy gender equality as many women in Western cultures do (Chhokar, 2007). There is a strong preference for recruiting only men for upper-level management positions.
Definition of Cultural Dimensions (GLOBE Study):
• Assertiveness: The degree to which individuals in organizations or societies are assertive in social relationships.
• Future orientation: The degree to which individuals in organizations or societies plan for the future.
• Gender egalitarianism: The degree to which organizations or society promote gender equality.
• Humane orientation: The degree to which individuals in organizations or societies reward individuals for positive behavior.
National Culture and HR Practices:
• Scholars have found a strong connection between cultural dimensions and HR practices.
• High power-distance cultures create:
Hierarchical organizational structures.
Loyal and committed subordinate workers.
Autocratic relationships between managers and subordinates.
• What kind of HR practices would low power-distance cultures adopt?
• What staffing practices would high power-distance cultures encourage?
Low power-distance cultures tend to have flatter organizational structures, democratic managers and a focus on fairness and equity. High-power distance cultures create loyalty; staffing practices such as internal recruitment and succession planning are very significant. Such practices foster a committed workforce.
• High institutional-collectivism cultures prefer:
Group harmony and cooperation.
Conformity to societal norms valued.
• High in-group collectivism cultures feel:
A very close bond with their organization family, friends and relatives.
• What kind of HR practices would low institutional collectivism cultures adopt?
• What staffing practices would high in-group collectivism cultures encourage?
• High uncertainty-avoidance cultures create:
o Formalized procedures to minimize unpredictability.
o Clearly defined roles for employees.
o Focus on security and trust.
• What kind of HR practices would low uncertainty-avoidance cultures create?
• What staffing practices would high uncertainty-avoidance cultures encourage?
Low uncertainty-avoidance cultures promote risk takers, flexible roles and quick decision-making.
Cultures high in uncertainty avoidance adopt a lot of test-taking and seek elaborate information from job applicants, such as age, family background, etc., to minimize or reduce any unpredictability in the hiring process.
Indian HR Practices:
Staffing Practices:
• Resumes seek strong educational background.
• Employee referrals (predominantly used for middle and senior management).
• Succession planning (predominantly used for middle and senior management).
• Elaborate employment tests related to the job, especially at entry level.
• E-recruitment: Naukri.com was the first e-portal established in 1998 (naukri means job in Hindi ).
Resumes are closely examined to identify successful work experiences, career stability and, most importantly, continuous academic achievements such as enrollment in relevant graduate classes, certification, etc. Such academic achievements are considered by the employer as a barometer of the potential learning capability of the applicant. The emphasis on learning and education can be linked to the cultural dimension of future orientation.
Employee referrals and succession planning are predominant in the Indian work environment, especially for middle and upper-level jobs. Employers from collectivist cultures like India hire and promote employees whom they know. These staffing practices promote loyalty and retention.
Employment testing is also common for entry-level positions. Potential employers subject applicants to rigorous math, analytical and communications tests to identify high-potential learners. It is believed that having such cognitive information about the applicant
increases the reliability of the hiring process. Such extensive testing is associated with the cultural dimension of uncertainty avoidance.
In India, the sheer magnitude and size of online recruiting is staggering by Western standards. On average, large Indian companies recruit about 10,000 entry-level positions annually; screening resumes for authenticity and relevance is a staffing nightmare.
• Newspaper advertisements are used to brand the company to potential applicants.
• Newspaper advertisements will specify age and gender requirements.
• Personal questions will be asked in interviews/resumes about:
Age
Marital status
Family plans (women planning to start a family)
Family background
Caste background
Photos to be included
Verification of educational certificates
Indian job advertisements often specify educational qualifications and age requirements for potential jobs. Indian companies use branding in their recruitment process. The status-minded Indian employees like to work for employers that have a name and are well-recognized in employment and social circles. Therefore, newspaper advertisements
frequently provide detailed company information. Subsequently, the employee is considered the “brand” and a walking advertisement for the company.
Personal questions are often asked during the hiring process. Questions about marital status, caste and family background will be asked during the interview or on a bio-data form. Employers frequently discriminate on the basis of caste, which is easily recognizable by the first and last names. Verification of recent educational certifications, degrees and certificates is asked from applicants during the interview process. Married female applicants are frequently asked during the interview if they are planning to start a family.
Training Practices:
• Training (future orientation):
• Education is extremely valued, and training is an extension of it.
• Entry point training programs (3 to12 months of orientation).
• Ongoing training programs.
• Development programs (promotions involve training).
• In-house training centers are a common feature in Indian organizations.
• Deductive learning style in training: Known as “top-down approach” where learning principles start with general concepts and move toward specific application.
Indian organizations spend quite a bit of money on training because it is considered an extension of academic learning, which is very valued in India. It also relates to the cultural dimension of future orientation, which makes employees seek any form of learning to have constant marketable skills.
Among Indians, training creates loyalty to the company. For entry-level employees, there is often a large disconnect as to what they are taught in graduate school and what they have to do when they enter the workplace. Therefore elaborate entry-level training focuses on soft skills such as effective communications, team dynamics and also relevant product-based and technical knowledge.
Training programs in India are more extensive and longer in duration. Entry-level employees are in training for between three and 12 months, depending on the size of the company. The average annual corporate training hours can range anywhere between 60 and 120 hours. The best company in providing training is Infosys, with an annual training budget of about $145 million. Entry-level Infosys employees spend about four weeks on initial training. Organizations often pair with both well-known local and international universities to provide continuing education for their employees.
To learn more about training in India, instructors may want to review the following articles: Training 2008: World View, Focus on India (available at http://www.itapintl.com/focusonindia.htm).
Top 5 IT firms spend $438 million on training (available at traininghttp://www.livemint.com/2007/11/12001337/Top-5-IT-firms-spend-438-mn-o.html).
Performance Appraisal:
• Cultural dimensions of collectivism and power distance make objective appraisals a challenge.
Supervisors and subordinates develop close relationships.
Organizational loyalty is as important as work performance.
Employee promotions are frequently based on seniority.
• Annual performance appraisals.
• Supervisors provide performance ratings that are frequently inflated due to personal relationships.
• Employment at will does not exist in India. Employment termination carries a social stigma.
The collectivist culture of India makes performance management quite challenging. Superiors and subordinates develop close relationships, making a formal appraisal process difficult. Supervisors frequently inflate the work performance of subordinates because personal friendships between supervisors and subordinates blur objective evaluations. The Indian work culture also emphasizes organizational loyalty over performance and efficiency. Further, promotions are usually based on seniority, making organizational tenure an important performance criteria.
Organizations usually have annual performance reviews with the supervisor providing comments on employees performance. However, leading Indian companies are adopting a very progressive approach to performance management by adopting a 360-degree approach or management by objectives (MBO).
Instructors: Please read “Performance appraisal takes center stage” for more information about the Indian performance management system. This article is available online at http://hrinindia.multiply.com/journal/item/43/Performance_Appraisals_take_centre_stage_ .
Compensation and Benefits:
• In addition to a base salary, compensation includes:
> House rent allowance (HRA*).
> Medical allowance.
> Dearness allowance (DA*).
> Leave travel allowance (LTA*).
> Commuter allowance.
> * These allowances are frequently referred by their acronyms
• Several categories of leave (vacation) exist:
> Sick leave: 7 days (medical certificate required).
> Casual leave: 7 days (for personal and family emergencies, requires prior permission of boss). Employees can take maximum 2 days at a time
> Annual leave: 3 weeks (after one year of employment).
> Federal holidays: About 20 days.
A base salary is provided with several other allowances that are typical to Indian employers. The base salary usually accounts for 40
to 50 percent of an employee’s salary. The remaining salary is comprised of several allowances.
Housing is expensive in India, and employers often reimburse a portion of the housing expenses through a House Rent Allowance, or HRA. Medical allowances come in a variety of forms. Organizations may reimburse expenditures incurred by the employee or his or her family for medical treatment; pay a fixed allowance for routine check-ups; or participate in a group medical insurance policy.
The dearness allowance (known as cost-of-living in the United States.) is calculated as a percentage of the base salary. It is an allowance provided to adjust the cost of living and may vary depending on the job’s location (rural vs. urban areas).
Leave travel allowance (LTA) permits two tax-free travel opportunities in India within a four-year period. LTA is provided based on an employee’s salary and level in the organization. This includes employees and their family members.
For more information about these additional allowances, instructors may want to read the following online articles:
http://www.pacificbridge.com/publication.asp?id=31: Recruiting in India
http://www.pacificbridge.com/publication.asp?id=30: Recruiting in India
For public holidays in India, please read:
http://www.worldtravelguide.net/country/120/public_holidays/Indian-Subcontinent/India.html
• Retirement age:
> 55-60 years (private sector);.
> 60 years (public sector).
• Retirement Benefits: Employees receive two lump-sum payments when they retire:
> Provident Fund (similar to 401(k))
• Typical contributions: 10-12 percent of base salary (employer and employee).
• Payable on retirement, voluntary separation, death.
> Gratuity
• Only employer contributes (15 days salary per year of service).
• Tax-exempt for employees.
• Payable on retirement, voluntary separation, death.
There is a distinct retirement age in the private and public sectors. Public-sector employees retire at age 60. Private-sector employees have a choice of retiring anytime between ages of 55 and 60.
Two specific retirement funds are available to all Indian employees:
Provident Funds: This fund is similar to the 401(k) in the United States, where both employees and employers contribute.
Gratuity: Employees do not contribute to this fund. It is calculated based on years of service.
• Organizations are seen as an extension of the family.
Provide both short-term and long-term personal loans.
Personal loans for housing, car, home maintenance and family emergencies.
Loan amounts vary by position and level in organization.
All employees after their probation (confirmation) period are eligible.
• Many medium and large organizations have cafeterias with subsidized lunch facilities.
Organizations are seen as an extension of the family, and they often help employees achieve both personal and material goals by providing short- and long-term loans. Some organizations provide a variety of food at a subsidized cost, encouraging a family atmosphere.
• Executives receive special benefits to reflect status such as:
• Club memberships.
• Overseas training.
• Company housing.
• Company cars.
• Provided with drivers.
• International cars.
• Operational and maintenance costs.
• Phone bill reimbursements.
• Organizations provide business and cell phones.
Executives or senior management are frequently offered special perks. These special perks are associated with increased social status. Employees in the Indian culture like to have visible indicators of increased status and wealth because they signify work achievement.
Refrences:
• Budhwar, P., Luthar, H., Bhatnagar, J. (2006). The dynamics of HRM systems in Indian BPO firms. Journal of Labor Research, 27(3), 339-360.
• Babu, V. (2006). Infosys: Incredible Infy; What's the secret sauce that makes Infosys the best company to work for, year after year? Business Today, pp 88.
• Budhwar, P., & Khatri, N. (2001). A comparative study of HR practices in Britain and India. International Journal of Human Resource Management, 12(5), 800-826.
• Challapalli, S. (2005). Those grand jobs. The Hindu, Business line. Retrieved from http://www.thehindubusinessline.com/catalyst/2005/03/31/stories/2005033100070100.htm
• Chhokar, J., Brodbeck, F., & House, R. (Eds). (2007). Culture and leadership across the world. The GLOBE book of in-depth studies of 25 societies. Lawrence Erlbaum Associates. Mahwah, New Jersey.
• Deshpande, S. (1992). Compensation Legislation in India. What US investors need to know. Compensation & Benefits Review, 24(5), 57-60.
• Grossman, R. (2006). HR's Rising Star in India. HR Magazine, 46-52.
• Saini, D., & Budhwar, P. (2004). HRM in India. In Managing Human Resources in Asia-Pacific. Routledge. London and New York.
• Srinivasan, N. (2002). Flawed Law. India Together.
