HRM Environment in India

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.


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 'Ardhashastra', 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. The managerial ideologies in Indian dates back at least four centuries. Arthashastra 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.

Contemporary India

HR industry grows at 21% over 4 years: Executive Recruiters Association and E&Y report

The human resource industry in India has grown at a compounded annual growth rate of 21% over the past four years and is pegged to be around Rs 22,800 crore, according to a report by Executive Recruiters Association and Ernst & Young. As the industry gets more organised, new players, emerging sectors and multinationals are dropping anchor, and a changing mindset in traditional companies makes space for HR firms rather than referrals for hiring, it adds.

The 'Human Resource Industry Solutions Report 2012' indicates a maturing industry which is moving from being fragmented to getting more organised. The industry has players that are segregated into recruitment , temporary staffing and executive search. HR consultants' image has moved many notches up from being a vendor to that of a partner who plays a key role in the company's growth trajectory , says the report.

While the permanent recruitment in India is estimated at Rs 3,000 crore, the search industry is pegged to have a market size of Rs 600 crore to Rs 700 crore. The search sector gets its boost from foreign players entering Indian markets and expanding into different geographies and industries. Companies that deal with the automobile, luxury , agricultural and food business that have entered India in the past few years have used search firms to expand further.

The Economic Times, News Paper, 24 Jan, 2012,

Women executives flying high in Indian liquor industry

MUMBAI: Women breaking the glass ceiling in financial services, FMCG (fast moving consumer goods) and media sectors are a common sight today. But the picture is fast evolving in traditionally male-dominated industries too. The Indian alcohol industry is for the first time seeing women manage the show in some companies, an unthinkable idea five or 10 years ago.

The world's largest drinks company, Diageo, has uncorked a bouquet of women to run its Indian operations following a quiet organizational rejig in recent days. Twelve of the top 30 managers are women. Four women directors, including a deputy managing director, spearhead Diageo's ambitions in the local alcoholic beverages sector. Feb,,21,2012

India among top 10 in number of immigrants in the world

Mar, 2012, NEW DELHI: The number of foreign immigrants living in India is steadily declining, but India continues to be among the 10 countries with the highest in-migration in the world. At the same time, India sends the fourth largest number of emigrants to other countries.

In 2010, there were 5.4 million foreign-born people living in India, according to new estimates released by the Population Division of the United Nations Department of Economic and Social Affairs. These numbers make India home to the ninth largest number of foreign-born people in the world.

But this number has been in decline since post-Partition migration and an influx of refugees from Bangladesh following the 1971 war.

There were 7.5 million foreign-born persons living in India in 1990. By 2000, this number was down to 6.4 million on account of the death of these older immigrants and refugees.

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.

Industrial Relations 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.

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).

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%) .

Over the last many years, the Indian software companies have also added over 25,000 jobs in the US for local citizens. "The kind of numbers Indian companies are adding is unprecedented. They will have to hire from every part of the world," said Nasscom vice-chairman and TCS CEO N Chandrasekaran. About 5-6% of the workforce employed by Indian companies are locals. Chandrasekaran said the right way to look at these figures would be absolute numbers and not percentages because Indian talent was being hired by all companies, and even by industries outside of technology. Over the last 20 years, the Indian IT industry has grown from $ 100 million to $ 100 billion, recording a phenomenal growth. Allocation for IT in India by central and state governments stands at whopping $ 10 billion but so far only $1 billon-$ 1.5 billion has been spent, said Pawar. Nasscom has also submitted a list of recommended procurement processes to the government, so the government projects don't become unviable.

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.

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.

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, software, 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).

Microsoft, Amazon among top recruiters in IIM-C laterals

Feb, 2012,NEW DELHI: Indian Institute of Management, Calcutta (IIM-C) has received a total of 116 job offers from 54 companies during the lateral placement process at the campus, a placement coordinator from IIM-C, who did not wish to be named, told ET.

This includes five international offers from IT services giant Infosys. The institute has received about 100 pre-placement offers (PPOs) so far, taking the total number of students placed to 210 plus.

The lateral placements, which began on in the second week of January, concluded a couple of days ago at the campus. It saw participation from companies across sectors such as Information Technology, Private Equity, consulting and infrastructure, to name a few.

Software and Internet technologies company Microsoft has made the largest number of offers to candidates at IIM-C. The company has recruited nine people, across three different profiles- Microsoft IT, India Development Centre ( IDC) and Microsoft Finance.

Internet companies like, Zynga, and Amazon have also recruited candidates in large numbers, the placement coordinator said. The institute, however, did not reveal specific number of candidates hired by these companies.

Amazon offered 10 profiles at IIM-C, which includes job profiles such as business development manager and operations manager. However, not all profiles were taken and the final number of candidates hired was less than 10.

Google, too, has hired across different profiles like industry manager, account manager and account strategist from IIM-C this year. The international positions offered by Infosys are for its client-servicing group. All these candidates will be based in the US or London. Other recruiters include GE Capital and Baring Private Equity.

Record hiring by BCG and McKinsey shift focus from finance sector to consulting cos at B-schools

Feb, 2012: More freshly-minted MBAs from top B-schools are likely to make their way into consulting this placement season. Record hiring by The Boston Consulting Group and McKinsey & Co at B-school campuses this year and fewer offers from the traditional top recruiters, investment banks, have shifted the focus from the high-paying finance sector to the all-weather consulting companies.

BCG kicked off the IIM placement season by hiring 17 at the Indian Institute of Management-Ahmedabad , six more than the previous year. month of January, McKinsey picked 17 grads from the Indian School of Business, stepping up its 2012 hiring by 50% at the institute.