The Telegraph
Since 1st March, 1999
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- How foreign companies started their localizing process in India

It is strange how the tide has turned for Indian managers in the last seventy years. In the Thirties, British nationals preferred life in lively Britain to nationalistic India.

Prakash Tandon qualified as a chartered accountant in Britain, returned to India in 1937, and looked for a job in Bombay to bring his fiancée to India. He writes in Punjabi Saga: “Into the temples of European commerce, Indian acolytes had begun to be accepted, but not into the sacred inner precincts. I had called on many of them: Volkart, Dunlop, Burmah Shell, ICI, Bata; the managing agency houses of Bird, Gillander, Andrew Yule; and the practitioners of accounting and auditing, the partnership firms of chartered accountants. There were no Indian managers, and this seemed to apply to the whole of Ballard Estate which was almost entirely European, mostly British, with a German, a Swedish and a Swiss house”. Unilever began a corporate culture bringing “together a diversity of cultures and sub-cultures and unit[ing] them through a common purpose into a flexible yet strong framework with a total corporate personality”.

Tandon’s first job offer was from Lever’s of “Rs 350 per month (raised on negotiation to Rs 400) and Rs 450 on confirmation. English accountants started at Rs 650 in India, but this was beyond my hopes. I would have to accept.” The salary was meager, less than what the British manager was paid, and the treatment was unequal. “I was on six months probation at four hundred rupees a month, and that was about all I could boast of. I had recently begun to get tea on a tray and had a towel with my name in the managers’ toilet. I had no contract, no perquisites or privileges beyond the tea and the towel.”

Socializing between the British and the Indian managers was not customary, and this remained so for many years. Invitations to the homes of his British colleagues began years later, when India was nearing independence, and it was clear that he was the rising star. Deeply hurt by the lack of socialization in his early years when he joined the company, Tandon refused later overtures. “Things could have been left to slide into a new harmony; there was no need to Indianize social relations so hastily.”

Ajit Haksar, the first Indian Chairman of ITC, (and the earliest Harvard MBA in India) corroborates the racism of that day. “Socially, there was generally only superficial communication between the whites and blacks, with the former living apart in their four walls, using clubs barred to the Indians; the latter condescendingly invited to a ‘servants’ ball or dinner by the boss once a year, usually at Christmas, sometimes not even then.” Haksar writes of the superior and paternalistic attitudes of British managers. “Anyone below the status of a manager had to have his head covered when in the presence of one of the sahibs.”

Haksar identifies this discrimination in both individual and company behaviours. BAT, the parent company, looked at its investment in India in 1902, as giving the right to exploit the Indian company, “without the willingness to put in fresh capital and continue risk-taking”. He writes about the “systems built on mistrust” of Indians at all levels. Indians in British companies like ITC had to bear this cross of foreign owners who wanted to milk the Indian company and at the same time control it closely. This animosity came to a head in the Nineties when K.L. Chugh chaired ITC. The Indian managers of the company won that battle.

Yet, as Tandon says, life in these foreign companies at that time was easy and not at all stressful. “A British business house then had its main contact with head office through the weekly mail steamer, and its whole routine centred round the P & O mail days. It rose to a climax from Thursday morning, when the mail came in, till Friday evening when it was posted for the westbound mail boat on Saturday.”

Realizing that India would become independent and Indians had to be developed to run the company, Unilever in 1956 brought about the extraordinary transformation of a company run until then by relatively uneducated British managers in India into one run by brilliant Indians. For example, the first Indian Directors of Lever were: K.T. Chandy (educated in law in the United Kingdom, a close associate and friend of Indira Gandhi and later the first Director of the IIMC); K.S. Basu (a Bengali-Punjabi medical practitioner who introduced the first formal management training scheme into India, that developed outstanding managers, long before the entry of management education and became the first director of the J. Bajaj Institute in Bombay); and Prakash Tandon (who made modern marketing research an essential part of business, an outstanding public sector manager, policy-maker and keen observer of the country’s changing society).

British owners prepared to leave, as independence neared. Some like Clarkes Hotel in Simla and the Grand in Calcutta or the Carews Brewery in Calcutta and others, sold out cheap to one of their favourite Indian employees or to the highest bidder. Many were distress sales as the English owner was in a hurry to leave. That happened to many managing agency houses and many jute and textile mills, sugar factories and tea estates. Indians, especially Marwaris, Gujarati Banias, and Chettiars, bought them. Other British owners reluctantly, and sometimes with anger, recruited Indian managers. Lever had planned for Indianization, perhaps earlier and in greater depth than ITC. Many others also recruited Indians, but resentfully and with no intention of handing over the top jobs. In many of them, especially in Madras and Calcutta, Indian CEOs took over only in the Seventies.

Many of the new Indian owners continued with the Indian managers. The prevailing high taxes brought close family relations of new owners into management. From 1955 to 1986, getting industrial and import licenses was a guarantee of quasi-monopoly positions and easy profits. Competence of management did not make much difference. By 1986 however, as economic liberalization began, these companies began searching for competent and qualified managers from outside the family as well.

The Indians who came into management in foreign companies inherited the salaries and perquisites of their white predecessors. The independent Indian government taxed these perquisites. Soon, the tax rates reached extortionate levels. The companies then found other ways to compensate their managers.

Today, American and European companies face increasing difficulty and cost in sending their nationals to companies in the developing world. Many simply refuse to go, not wanting to remove children from schools; or because spouses were unwilling to sacrifice their own careers. Companies became aware that having locals in top jobs was a boon. Indianization has come a long way today, and the reverse process is more common. Indians are posted in foreign subsidiaries of multinational employers or in top jobs at their headquarters. On the other hand, Japanese companies have lost market shares to South Korean companies because the Japanese rely on people sent from the home office, even for mid-level technical jobs. The Koreans are quite happy to appoint Indians even to the top jobs.

Indians have taken many of the positions for which companies could not find their own nationals. They did very well and now, Unilever like so many others, has not only Indian managers running the Indian company for fifty years, but has them in top positions in other countries and main boards.

As Indian companies go global, they must learn from the experience of the localization process that foreign companies started in India. Careful thought must be given to posting Indian managers to these countries, developing local managers, designing fair compensation structures, being responsive to local cultural sensitiveness. Indian companies should closely study the experience of Indianization in India over sixty years ago.

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