Lead Story

Local Business Leader Falls Short of Global Standards

A critical area for the future, particularly in Indian corporates with family governance and management, will be the separation of control and day-to-day management

Illustration: Saahil Bhatia

The landscape of leadership in Indian corporates has evolved over the years, mirroring the dynamic shifts in politics, business, technology, customer expectations, societal demands and globalised markets. The definition of leadership should not be limited solely to individuals who govern and manage organisations, but should also encompass the capabilities that organisations develop to enhance their ability to tackle challenges. The 17 centennial companies in India [which have been profiled in this issue] have diverse origins, ownership and governance mechanisms. Some of these have ventured into related or unrelated sectors, depending on the available opportunities and the leadership vision within the organisation.

Indian businesses have adopted a variety of approaches to ensure their survival and success in the upcoming century. The adoption and effectiveness of these approaches may vary among the centennial companies, but discernible trends can be observed. Some companies like the Hinduja Group, Tata Steel, Tata Consumer, Britannia, and ITC are far ahead of other companies.

Going to the Next Level

Companies are transitioning from a family-centric approach to professional leadership. They acknowledge the necessity of professional expertise and skills to effectively navigate the intricacies of the contemporary business landscape. As a result, they have brought in professional managers from diverse backgrounds, possessing expertise not only in general management, marketing and operations but also industry-specific knowledge and experience.

Given the global competition and the customer-centric approach, Indian corporates are acutely aware that their products and services must match, if not surpass, those offered by global organisations. To achieve this, they must not only create products and services that meet the needs of Indian consumers but also ensure their competitiveness in foreign markets.

In pursuit of this objective, they embrace collaboration with external partners to introduce new and exciting offerings to the market. However, the performance of the centennial companies on this front has not been uniform. Companies that directly cater to customers like Hamdard, MDH, Tata Coffee, Britannia, TVS and ITC have done much better. Some with government ownership, like Bank of Baroda and Central Bank of India, have been outdone by competitors. Others, like Birla Corporation and Gammon India, have been beset with internal problems and have failed to adopt a customer-focused approach.

The performance and success of Indian corporates in integrating sustainability practices into business strategies have been varied. Sustainability is closely related to the operations of organisations, with a focus on minimising the adverse impact of their technologies, products and services. However, most companies have adopted a compliance orientation rather than proactively contributing to sustainable practices. Despite the existence of environmental and sustainability regulations, their implementation is hindered by inadequate human and technical capacity, as well as corruption within the government machinery.

While progress has been made in terms of inclusivity and diversity, discussions in political circles and the popular press indicate that gender and caste representation across organisational levels require improvement. Accurately assessing these issues without insider information is challenging, and we often have to rely on the claims made by companies in this regard.

The Elusive Global Leadership

While Indian corporates have achieved success and growth in domestic markets, their performance in international markets has been a mixed bag. None of them have been able to establish themselves as truly global organisations comparable to those from the USA or Japan. The one big exception is the Hinduja group which stands out among all these companies. Tata Consumer is another organisation which has brands and presence across the world. Tata Steel made a large investment in Corus Steel in the United Kingdom, though that has not worked well for it.

Similarly, the success of organisations in diversifying from their core businesses to become conglomerates operating in various sectors has also been varied. ITC started with cigarettes, diversified into agri-business and expanded beyond that into FMCG, hotels, paper and packaging, and information technology. The Hinduja Group is the most diversified with presence in 11 sectors, including heavy vehicles, oil and gas, information technology, energetics, explosives, electronics and realty.

However, most of the other companies have a dominant focus with investments in other businesses; for example, MDH (spices), Hamdard (traditional medicine), Godrej Interio (furniture), Bank of Baroda, Central Bank of India (financial services), Britannia Industries (food), Berger Paints (paints), and so on. Many of these operate globally, but their global operations are mostly limited to exporting products and services. For instance, ITC exports its products to 90 different countries and TVS has a manufacturing facility in Indonesia.

Getting Leadership Right

A critical area for the future, particularly in Indian corporates with family governance, will be the separation of control and day-to-day management. While owners may have a significant equity stake and manage the governing structures and processes, they will need to entrust operational management to professional managers.

On the other hand, Indian managerial talent suffers from a shortage of leadership skills, including the ability to navigate uncertainty, drive innovation and embrace technological advancements. Effectively leading business requires a global mindset, establishing global-level governance mechanisms and structures, adeptly handling diverse workforces, expanding businesses and capabilities worldwide, identifying and capitalising on new opportunities, fostering a culture of creativity and learning and encouraging entrepreneurial thinking. Professional Indian managers must evolve and mature to become world-class leaders, while owners need to develop the capacity to govern through professional managers rather than assuming the direct management of organisations.

The next century will throw up unforeseen challenges. The biggest force for change will be the digital technologies. Emergence of new power centres with changes in India’s stature in the geo-political order will invariably result in changes in global governance institutions. New opportunities will continue to emerge. It remains to be seen how Indian business leaders will navigate these challenges and build organisational capabilities to survive and thrive for another century.

Amit Gupta is associate professor of organisational behaviour and human resources at the Indian Institute of Management, Amritsar