The exponential growth in India has seen it emerge as one of the fastest growing economies in the world. However, this, coupled with the scarcity of talent, has resulted in a new challenge for companies—the issue of leadership development.
Successful leadership development strategies need to take potential leaders through a career path that addresses long-term company objectives, so that when succession planning is undertaken, there are already names on the list. But, for many Indian firms, this is a journey through uncharted territory.
Global leadership development requires identifying high potential talent, and then moving it through various roles and markets. This is a strategy that organizations such as Citigroup Inc., General Electric Co. and Unilever N.V. have successfully implemented across their businesses. However, currently in India, there is strong resistance to this requirement to be mobile, particularly at senior management levels, and there are several contributing factors.
For one, there are few countries at an equivalent growth stage. A direct fallout of this is an increase in the breadth of opportunity as well as compensation, and this is keeping people in India.
That said, the desire for international experience is still there at the mid-level, but again, no one wants to stay away for too long.
Thus, for companies entering new business areas, this conflict is reducing the number of opportunities through which they can expose people to the development process. The phenomenon has also led to a larger number of senior-level exits across multinational companies (MNCs), even at the country head level, with individuals wanting to stay in India rather than move overseas.
The country’s expanding global footprint has also created a strong need for diversity in leadership; whether it means rotating senior people overseas or bringing in overseas talent to senior management teams.
While Indian companies are at the beginning of the learning curve, it would serve them well to learn from the experiences of MNCs. Globally, there has been a rapid increase in, and cross-pollination of, individuals from diverse nationalities going into various leadership roles—Indra Nooyi, CEO at PepsiCo Inc., Klaus Kleinfeld, chief operating officer at Alcoa Inc., the US aluminium maker, and Martin Sullivan, CEO at American International Group Inc., to name a few.
Being a global company today means having people who embody this cross-pollination, whether they are directors of company boards or C-level management. Globally, this trend has taken a very long time to develop, and offers Indian firms the opportunity to accelerate leadership development to compete with those MNCs that are learning slowly, and painfully, what it means to be global.
There has also been a universal talent flow into the boardrooms of large companies. While at an early stage in India, globally, there is a great demand for directors who know the country.
Mitsubishi Corp., Nestle S.A., Reuters and Nokia Corp. are just some of the companies that have had Indians on their boards. Global board directorships would be very interesting for senior executives who want to explore and contribute towards bringing the Indian/regional perspective to companies around the world that can benefit from having such people in the boardroom.
It would serve Indian companies well to take a cue from these global trends and internationalize their own boardrooms to take advantage of global talent to deal effectively with growth issues as they expand beyond the country’s borders.
Indian companies are also experiencing a demographic shift. On the one hand, the workforce is growing younger. On the other, buying power has expanded to new consumer segments—be it the youth, the urban woman or the vast rural hinterland—resulting in a focused shift towards these consumers in terms of growth opportunities.
And, as interfacing with the end consumer becomes critical, there are an increasing number of sectors that are making the shift from a predominantly business-to-business model to a business-to-consumer one, such as electronics, automobiles and technology.
This is likely to directly impact leadership development strategies. Companies are realizing they need to bring in talent that understands the new markets and can direct strategy at a firm level. That said, having a leader from a totally different environment or geography, rather than someone who thinks like the market, could also lead to more radical and more effective strategies.
Therefore, change in leadership profiles is not so much about the customer or mirroring the customer, but fundamentally about getting diversity and inclusion into the organization. This, in turn, enhances the quality of thinking and decision-making.
What is important for companies is the ability to define diversity as it applies to them, making sure that it is not merely a gender issue, but an issue that effectively addresses knowledge, experience and geography.
The main challenge in the area of leadership development is finding individuals who not only have the right capabilities, but who are also a good cultural fit.
Promote-from-within companies such as Procter and Gamble truly believe that if sincere efforts were made towards developing in-house talent and creating initiatives for growth, the results would be very positive. However, they also agree that they need to maintain an external focus.
So, whether it is new hires, talent acquisition through mergers and acquisitions, rigorous competitive intelligence or externship programmes, the firm has to ensure that it stays in touch with the changing talent landscape.
Indian conglomerates are faced with a lateral recruitment challenge, driven by the emergence of new business areas, which may not have an existing leadership pool in India. It is important to understand that lateral recruitment or search occurs when there is high growth and a gap in talent to staff a new leadership role, or if there is a failure in succession or retention. Companies are now balancing internal and external recruitment to ensure that value for performance is given due credit and company culture is maintained.
Ultimately, in order to be successful, it will be critical for companies to make sure that their strategies address core leadership needs and fit into the timeframe for leadership development that has been identified.
Anjali Bansal is a consultant in Spencer Stuart’s Mumbai office, and leads the India practice for the firm.
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