Why every Indian subsidiary should have a local HR manager
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Is your subsidiary in India not delivering the results you expect in terms of revenue, profit or customer reach? Then it’s time to take a closer look at your organization’s HR policy in India. “HR is the driving force behind a successful Indian entity,” says our expert Deepmala Datta.
A survey we conducted among 100 companies with an entity in India found that 42% consider finding and retaining suitable staff to be the biggest challenge. 61% of these companies indicate that good, local HR policies are the solution to this problem, but only 20% of them actually have an HR team in India. “Good HR policies are neglected in Indian subsidiaries of European companies,” says Deepmala. “I have supported hundreds of companies in finding suitable staff, but never has the HR team from the head office travelled to India to participate in such a recruitment process. Many companies see it as a by-product, while it is the driving force behind a successful business in India.”
Focus on retaining talent
“I have a very controversial opinion about turnover,” says Deepmala. “I like turnover because it gives a company the opportunity to bring in an employee with better skills than their predecessor. Of course, it does depend on which positions have the highest turnover. If these are critical areas, a high turnover is very problematic for the results that a company can achieve.” According to her, it is therefore important that the local HR department determines which skills, positions or people the company cannot do without. “Instead of wasting all your energy and a lot of money on retaining 90% of your employees, it is smarter to focus on the most important talents, about 20% of the organization. Although a good salary is essential for retaining an employee, Indian employees, just like their European colleagues, are no longer satisfied with just a pay rise, but they want to be able to develop themselves professionally and personally. Therefore, make sure that you have a suitable HR policy that offers these talents growth opportunities.”
Lack of structure
Is your Indian entity stagnating in terms of growth, but you do not doubt your business strategies? Then, according to Deepmala, it is a good idea to check whether everyone within the company is in the right place. “If a company comes to IndiaConnected with such a problem, we start a corporate restructuring process. We conduct assessments with key employees and have interviews with all employees. This is the only way to find out what the underlying problem is that is holding back growth. One problem I often encounter is a lack of structure. There is a big cultural difference between India and Europe that needs to be kept in mind: hierarchy. In India, we have a strong need for a clear leader. If there is no clear leader, employees tend to build their own power structure, which does not always work to the advantage of the company.”
How an imbalance in corporate structure resulted in a hostage CEO
“I have been involved in an extreme example,” says Deepmala. “I was sent to a factory in Mumbai where the staff had been on strike for three days. The head office in Europe had no idea why and could not get in touch with the managing director. When I arrived, I found a man standing guard outside the door of the director’s office. I had to negotiate with him to get access to the office and once inside, I understood why. The factory workers had been holding the managing director hostage for three days. After many conversations with the strikers, I came to the conclusion that the problem was actually very simple and that there was absolutely no need to strike to solve it. But it had gotten so out of hand because the manager was not a good match for the position. He was chosen on the basis of his impressive CV, but he had no experience in managing such a large group of employees, let alone factory workers. If the HR team had checked for these skills when recruiting the director, this misery could have easily been avoided.”
HR as a sparring partner for management
HR should not be treated as an administrative department. “We have mentioned it several times, but the success of a company depends on its people. My advice to any company with an Indian entity is to be smart about the costs and hire only one senior HR manager. This HR manager must have a strong position within the company, in which he or she can not only intervene and handle abuses in the right way, but also guide the management. In addition, this HR manager must be a sparring partner for the manager. Future goals can only be achieved with the right people in the right places. The HR manager can not only ensure that the right people are retrained and promoted, but can also recruit new suitable people with these future goals in mind.”
Common mistake
“Many companies choose to start with one agent or manager and then make them responsible for building a team once the entity starts to grow,” Deepmala explains. “In many cases, this does not go well. What we often see is that European companies choose their first agent or manager based on his past success, but do not take into account how he was able to achieve that success. Is it all his own doing or did he have a supporting team?”
In almost all cases, according to Deepmala, it is the latter. “Such a manager or agent therefore starts a very difficult journey in a start-up company, in which he is completely dependent on himself and cannot perform at his full potential. This is often already visible in the results, but people attribute it to the fact that the entity is in the start-up phase. As soon as this manager is allowed to hire people, he will immediately choose former colleagues with whom he was able to work well in his previous work environment. They are the right choice for him, but not necessarily for the positions they will fill within the company. These employees are also being taken away from their current employer, which means a significant increase in salary in their new job. I have seen situations where this course of events resulted in the company selling more, but never making a profit.” According to Deepmala, this situation can be avoided very simply. “Don’t take HR lightly, but dare to invest in it from the start.”
