The importance of the link between success factor and housing a worthy staff is often underestimated by foreign companies, especially by the SMEs in India. In a country like India, where different religions, languages, cultures and business practices work together, it is extremely important that the right kind of employees should be hired. Sometimes they would have to be trained and nurtured to deliver business goals. Encouraging them to work hard and retaining the good ones would lead to considerable success in business.
In the World Bank ranking for “Ease of Doing Business” India is on the 134th place, far behind the other BRICS countries. Perhaps, this is proof enough that doing business in India is much more complicated than in most countries of the world. While large companies often rely on outrageously expensive lawyers and consultants to manage the complexity of the India business, most SMEs rely on their leadership staff on site. An experienced manager who has already done business for foreign companies in India successfully can reduce risks and costs dramatically and at the same time significantly speed up business processes.
Things to consider while choosing human capital
In addition to professional qualifications, companies should attach considerable importance to the intercultural competences of the staff while hiring them. Imagine the case of a German entrepreneur who wishes to expand his operations to India. He may even hire an expat who has worked for years in an Indian metropolis. Even so, the employee will not necessarily find his way to the business culture in a rural area. And an Indian employee who had tremendous success in the South / North India may not enjoy the same amount of success in the South / North India. This is because of regional and cultural mismatch. It is therefore important to understand that India is heterogeneous, and cultural mismatches may or may not play a part in overall operations.
According to a study by the Hay Group the year 2014, India is expected to enjoy a turnover rate of 27.5% Additionally, it is clear from this study that this high turnover is expected to continue in the coming years. This could also be attributed to insufficient salary adjustment (most important reason), high or monotonous work load, low educational opportunities and even personal reasons.
To understand this problem even closely and counter accordingly, one must understand the following conditions:
(1)Certain institutions have already predicted that the number of working people in the age-group of 15-64 is going to rise by 70% by the year 2026.
(2) Over a million graduates come out of universities every year, and the Indian economy cannot provide jobs for at least half of them, forcing them to take up jobs for which they are overqualified or for which they have the least bit interest.
Although the demographic development in the Western context has been very impressive, it is the level of education of the future prospects that require serious evaluation. This is because only very few universities in India meet high standards of education. This had triggered a condition called “the war of talent”, especially among the large corporations. This affects SMEs in particular because they are forced to give up talented candidates, probably because they cannot pay what the biggies offer. If they are able to evaluate candidates properly, then they can avoid this situation.
Additionally, socio-cultural and family background has a significant impact on interpersonal relationships in India. If an employee has reservations on working with a particular person in the management, perhaps his boss, he would leave the company. German companies who have their offices in India often receive a rude shock when this happens, as it affects their long-term planning.
Imagine this scenario: A German company opened a subsidiary in India as part of a joint venture. But before much could be planned, many of the middle managers quit the company. The reason they gave was that they could not adjust to the socio-cultural prejudice felt towards the joint venture partner. The result – the company’s future hung in balance.
The above scenario proves that German companies should adopt measures to prevent situations like this from happening. They must develop employee retention measures to ensure long-term planning. They must also keep the communication channel open to the Indian subsidiary, and adapt to the cultural needs of the employees. Additionally, they must be aware of the high inflation rate, because salary is the key factor that binds employees to a company (in India) in the long term. Other key factors are a long-term job security, the financial health of the employer, the reconciliation of work and family, and a pleasant working atmosphere.
German SMEs, who come in as new entrants to the Indian market have trouble relating to these factors. It is therefore advisable to work with an experienced local consultant, especially at the beginning of their business activities in India. This consultant would act as a mediator between the German company and the future employee, and solve all likely differences. This would also be helpful in crafting employee retention strategies for the Indian subsidiary, which are based on the local conditions.
Additionally, it can be said that many companies are insufficiently familiar with the typical market conditions before and after entering the market. With a suitable partner, German companies can coordinate training and retain employees who are really talented, skilled and dedicated to the future of the company. Depending on the industry sector, business philosophy and especially the region of the company headquarters, the human capital must be selected according to their academic, professional and (inter) cultural skills.