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Human Resource Management in India: ‘Where From’ and

‘Where To?’
Samir R. Chatterjee


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 ‘Arlhãshastra’, 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

Value of Context of HRM in India

The managerial ideologies in Indian dates back at least four centuries.

Arthãshastra 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.

There has been considerable interest in the notion that managerial values
are a function of the behaviours of managers. England, Dhingra and
Agarwal (1974) were early scholars who contended that managerial
values were critical forces that shape organisational architecture. The
relevance of managerial values in shaping modern organisational life is
reflected in scholarly literature linking them to corporate culture (Deal &
Kennedy 1982), organisational commitment and job satisfaction
(O’Reilly, Chatham & Caldwell 1991), as well as institutional
governance (Mowday, Porter & Steers 1982). Thus, understanding the
source of these values and in particular societal work values (which link
the macro-micro relationships and in turn organisational practices) had
become a popular line of enquiry, and a great deal of evidence has been
presented to support the importance of national culture in shaping
managerial values. One of the most widely read formulations of this
literature is the seminal work of Hofstede (1980) who popularised the
notion of clustering culture in generic dimensions such as power
distribution, structuring, social orientation, and time horizons. In turn,
these dimensions could be employed to explain relevant work attitudes,
job incumbent behaviours and the working arrangements within
organisational structures. Two of these dimensions were individualism
and collectivism.

The traditional social ethos from the ancient roots, which was developed
over centuries, underwent profound transformation during the British
rule. Consequently, in the contemporary context multiple layers of
values (core traditional values, individual managerial values, and
situational values) have emerged (Chatterjee & Pearson 2000). Though
the societal values largely remain very much anchored in the ancient
traditions they are increasingly reflecting corporate priorities and values
of global linkages. But in the arena of globalisation where priorities of
consumerism, technological education, mass media, foreign investment
and trade union culture predominate, newer tensions are becoming
evident. For instance, contemporary Indian multi national companies
and global firms in India have started shifting their emphasis to human
resources with their knowledge and experience as the central area of
attention in extending new performance boundaries (Khandekar &
Sharma 2005). Considerable research evidence attests to this trend with
particular relevance to greenfield organisations with little or no historical
baggages in their organisational culture (Settt 2004, Roy 2006).

Within Indian traditions the choice of individualistic or collectivistic

behaviour depends on a number of culturally defined variables. The
dynamics of these variables are underpinned through three key elements
guiding Indian managerial mindscapes. These three constructs are Desh
(the location), Kaal (the timing), and Patra (the specific personalities
involved). Sinha and Kunungo (1997) claim that the interaction of these
three variables determines the guidelines for decisional cues. This
managing or nurturing of the outer layer of collectivism in an inner
private sphere of individualism is expressed in Figure 1 which
demonstrates the behavioural anchors in Indian organisational life.

Figure 1
Behavioral Anchors in Indian Organisational Life
DECISIONAL Desh Kaal Patra
CUES (place) (Timing) (Actors)
Rajas guna
SPIRITUAL Sattava guna Tamas guna
ORIENTATION (Virtue focus) (Negative focus)
Sradha Sneha
(Upward respect / (Downward
Loyalty) affection)

Figure 1 also presents another powerful insight of the Indian tradition of

the notion of ‘Guna’ dynamics. According to Sharma (1996), this culture
based framework, which has three types of gunas (attraction), is being
increasingly used in employee assessment and organisational team
building strategies. The contention is that each guna is a separate
contribution to the core of human personalities. The Sattava (or truth
orientation) is the sentiment of exalted values in people, organisations or
society. Alternatively, the Tamasik guna depicts a negative orientation
which can be expressed behaviourally as ignorance, greed or corruption.
Those individuals with a Rajasik guna are inherently driven by a desire
to make a worthwhile contribution to their surroundings. Collectively,
these spiritual orientations, which manifest as Sattava, Tamas or Rajas
gunas, articulate as positive or negative HRM functions such as
leadership, motivation or other institutional behavioural activity. The
third row of Figure 1 highlights the linking of HRM trends to socio
cultural roots. The culture of Sradha (upward loyalty) and Sneha
(mentoring with affection) outline the behavioural anchors derived from
the civilisational roots. The acceptance of ‘Sradha’ by youngers and the
display of ‘Sneha’ by the seniors have been the root of sustainability of
all types of Indian oragnisations. This has a striking similarity to the
concepts of ‘oyabun’ and ‘kobun’ in the Japanese cultural context.

Contemporary India

In a recent survey of Indian CEO’s, it was suggested that Indian

managerial leaders were less dependent on their personal charisma, but
they emphasised logical and step by step implementation processes.
Indian leaders focused on empowerment and accountability in cases of
critical turnaround challenges, innovative challenges, innovative
technology, product planning and marketing or when other similar
challenges were encountered (Spencer, Rajah, Narayan, Mohan & Latiri
2007). These social scientists contend.

Leaders in other countries often tell about why they chose a peculiar
person for a certain role per task, detailing the personal characteristics
that made that person right for that situation. They may also consider, in
detail, how an assignment would help someone grow and develop their
abilities. In general, Indian leaders simply did not discuss how they
matched particular people to certain roles or tasks, nor did they usually
consider in detail how the personal characteristics of individuals might
shape or inform the best way to influence that person. (Spencer, et al

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

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.
Figure 2
Drivers of Contemporary Indian HRM Trends

Figure 2 presents the key drivers for contemporary Indian HRM trends.
In Figure 2 there are four external spheres of intervention for HRM
professionals and these spheres are integrated in a complex array within
organisational settings. The intellectual sphere, which emphasises the
mindset transaction in work organisations, has been significantly
impacted by the forces of globalisation. Indeed, Chatterjee and Pearson
(2000) argued, with supporting empirical evidence from 421 senior level
Indian managers, that many of the traditional Indian values (respect for
seniority, status and group affiliation) have been complemented by
newer areas of attention that are more usually linked to globalisation,
such as work quality, customer service and innovation. The most
important work related attribute of the study was the opportunity to learn
new things at work. Such cross verging trends need to be understood
more widely as practitioners face a new reality of human resource
development of post industrial economic organisations.

The other three spheres, of Figure 2, namely the emotional, the socio
cultural and the managerial domains are undergoing, similar profound
changes. For instance, the socio cultural sphere confronts the dialects of
the national macro level reform agenda as well as the challenge of
innovating by addressing the hygiene and motivational features of the
work place. Consequently, this sphere, which is underpinned by the
anchors of Sradha and Sneha, has the opportunity to leverage work
setting creativity in dimensions of autonomy, empowerment,
multiskilling and various types of job design. And the emotional sphere,
which focuses on creativity and innovation to encapsulate the notions of
workplace commitment and collaboration as well as favourable
teamwork, brings desirable behavioural elements of transparency and
integrity into organisational procedures and practices. The managerial
sphere provides the mechanisms for shifting mindsets, for in Indian
organisations HRM is viewed to be closely aligned with managerial
technical competency. Thus, understanding of the relativity of HRM to
strategic intended organisational performance is less well articulated in
Indian firms. The current emphasis of reconfiguring cadres (voluntary
and nonvoluntary redundancy schemes), downsizing, delayering and
similar arrangements will become less relevant as holistic perspectives
gain ground. A hallmark of future Indian workplaces is likely to be a
dominant emphasis on managerial training, structural redesign and
reframing of institutional architectures to achieve enterprise excellence.
Thus, a primary role of Indian managers will be to forge new
employment and industrial relationships through purposeful HRM
policies and practices. In Figure 3 is presented a variety of HRM
practices that are being employed in Indian organisations.
Figure 3
Key HRM Practices in Indian Organisations
HRM Practice Observable Features
Percentage of employees with formally defined work
Job Description
roles is very high in the public sector.
Strong dependence on formal labour market. Direct
recruitment from institutions of higher learning is very
common amongst management, engineering and similar
professional cadres. Amongst other vehicles, placement
agencies, internet and print media are the most popular
medium for recruitment.
Strong emphasis on security and lifetime employment
Compensation in public sector including a range of facilities like,
healthcare, housing and schooling for children.
Poorly institutionalised in Indian organisations.
Training and
Popularity of training programmes and their effect in
skill and value development undeveloped.
A very low coverage of employees under formal
performance appraisal and rewards or organisational
Moderately variable across industries. Seniority systems
Promotion and still dominate the public sector enterprises. Use of merit
Reward and performance limited mostly to globally orientated
Limited in scope. The seniority based escalator system
in the public sector provides stability and progression in
Career Planning career. Widespread use of voluntary retirement scheme
in public sector by high performing staff. Cross
functional career paths uncommon.
Driven by proactive court rulings, ILO guidelines and
Gender Equity legislature provisions. Lack of strategic and inclusion
vision spread.
Reservation The central government has fixed 15 per cent
System reservations for scheduled castes, 7.5 per cent for
Figure 3
Key HRM Practices in Indian Organisations
HRM Practice Observable Features
scheduled tribes and 27 per cent for backward
communities. States vary in their reservation systems.

IR 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.

In terms of collective bargaining, industry wide bargaining occurs in

certain industries where the employers are organized, but bargaining
otherwise is decentralised to enterprise level. Although there are no
restrictions on the subjects of bargaining, the Industrial Disputes Act of
1947 restricts the ability of employers to lay off or retrench employees
or to close business. (p.635).

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).

While Indian university graduates line up for jobs that can propel them
into newly vibrant middle class, per India’s rural and urban poor, change
has been interminably delayed. Expectations, like incomes, are rising
across India, and not just for those working in call centres. Even as the
New India cohort thrives, much of the rest of India is making much
slower gains or even being left behind, creating social and political
tensions that cloud India’s impressive strides forward. The lowest paid
workers in the off shoring industry those working in the call centres earn
median wages of $275 a month. But most Indians still earn less than $60
a month or just $2 a day. (p.125).

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%) (Chatterjee 2006).

Over the past decade, there has been a sea change in the area of Indian
technical services and the associated HRM practices of recruitment and
retention. While the higher education system in the country has
remained overwhelming poor in infrastructure and weak in becoming
revitalised to grapple with the global imperatives, there has been a
mushrooming of private educational institutions. The recruitment
problem is further deepened by the emergence of a new culture of ‘job
hopping’ amongst employers who can demonstrate their world class
competencies. This phenomenon of turnover has seen a chain reaction in
entry level salaries, and an increase in graduates has created significant
social and economic disruption to the Indian labour market. A likely
scenario from this rampant activity is that the Indian HR scene will be
negatively impacted in the next decade unless the deregulation and
autonomy of the higher education sectors is initiated somewhat
immediately. An example of this widening gap between the university
system and market need has become a serious impediment in several
new industries in India. For an example, it has been reported in the
popular press (Time 2007), “…out of 13 million people who applied to
work at IT company Infosys last year, just 2% were qualified indicating
a sign of stress in the university system that graduates 2.5 million a
year.” (p.33).
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

Attrition is highest in traditional customer service jobs, where young

people find themselves having to spend all night on the phone, often
with irate callers. In other areas such as claims processing or accounting,
the turnover rate is much lower. More worrying for many companies is
the ‘merry go round’ in supervising and management jobs, as new
centers are only too willing to pay higher salaries to hijack experienced
staff. (p.34).

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.

Figure 4
Examples of Retention Strategies for young Professionals in India’s BPO
and Services Sectors
Name of the
Retention Strategy Impact
Tata Consulting • A choice of working in over • Significant
Services(TCS) 170 offices across 40 impact on job
countries in a variety of hopping
areas. achieved
• Paternity leave for adoption
of a girl child
Figure 4
Examples of Retention Strategies for young Professionals in India’s BPO
and Services Sectors
Name of the
Retention Strategy Impact

• Discounts on group parties

• Identification of potential • Have been able
talented staff to achieve
ICICI Bank • Alternative stock options higher retention
• Quicker promotion rate
• ‘Wings Within’ programme
where existing employees
• Has led to a
get a chance to quit their
WIPRO higher retention
current job role and join a
different firm within
• Fostering a sense of
belongingness, creative
artistic and social activities • Moderate
for the employees and their Retentions rate
INFOSYS families. increase
• Initiating one of the best achieved
‘corporate universities’ in
the world
Microsoft-India • Excellent sporting and • Struggling to
wellness facilities minimise job
• Employees allowed to hopping
choose flexible working

• Moving people across

functions and sections in
Figure 4
Examples of Retention Strategies for young Professionals in India’s BPO
and Services Sectors
Name of the
Retention Strategy Impact

assisting employees find

their area of interest
• Culture change valuing
innovation and talent over
age and experience
• Stabilised job
Mahindra & Co • Institutionalising a practice hopping
called ‘reverse mentoring’ significantly
where young people are
given opportunities of
mentoring their seniors

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, softwares, 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).
In Pune, a rapidly developing IT centre near Mumbai, the company has
been dispatching vans with signs saying, ‘IBM is hiring’, to the gates of
the rivals at lunch time. Their hit rate is pretty good laments a manager
at a tech firm that has lost employees to IBM.


The World Competitiveness Report rated India’s human resource

capabilities as being comparatively weaker than most Asian nations. The
recognition of world class human resource capability as being pivotal to
global success has changed Indian HRM cultures in recent years. While
the historical and traditional roots remain deeply embedded in the
subjective world of managers, emphasis on objective global concepts
and practices are becoming more common. Three very different
perspectives in HRM are evident. Firstly, Indian firms with a global
outlook; secondly, global firms seeking to adapt to the Indian context;
and thirdly, the HRM practice in public sectors undertakings (PSV’S).
As the Indian economy becomes more globally linked, all three
perspectives will move increasingly towards a cross verging
strengthening. Interestingly, within the national context, India itself is
not a homogenous entity. Regional variations in terms of industry size,
provincial business culture, and political issues play very relevant roles.
The nature of hierarchy, status, authority, responsibility and similar
other concepts vary widely across the nations synerging system
maintenance. Indeed, organisational performance and personal success
are critical in the new era.


Samir Chatterjee is professor of International Management at Curtin

University of Technology in Australia. He has been involved in
university teaching, research, corporate consulting and advisory role
with UN, ADB and many other scholarly activities in the Asian region
for over 35 years. He has authored and co-authored eight books, 22 book
chapters and over 150 refereed journal and conference papers. He is
currently the President of the Society for Global Business and Economic



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organizational design and role of ethics in ancient India. The Accounting
Historians Journal, 31(2), 125-148.

Sinha, J., & Kannungo, R. (1997). Context sensitivity and balancing in

organizational behaviour. International Journal of Psychology, 32(1),

Slater, J. (2004). Job-hopping central: Far East Economic Review,


Spencer, S., Rajah, T., Narayan, S., Mohan, S., & Latiri, G (2007). The
Indian CEO: A portrait of excellence. New Delhi: Response Books.

Time. (2007). Special Report: 60 years of Independence, 170(6), 4-42.

Venkatratnam, C., & Chandra, V. (1996). Sources of diversity and the

challenge before human resource management in India. International
Journal of Manpower, 17(4/5), 76-96.
Human Resource Practices in India:
Background and Federal Laws

Namaste (pressing of the palms together) is the traditional greeting of

• The Indian flag:
Colors have symbolic representation.
Namaste is the traditional greeting and is done as shown by the model in
the picture. This greeting can be used any time during the day. It literally
translates to "I bow to you". The word is derived from the Indian
language Sanskrit. Namas means to bow or salute and te means to you.
On the Indian flag orange represents courage and sacrifice; white
represents purity and truth; and green stands for faith, fertility and
chivalry. The wheel in the center represents each hour of the day, as well
as the endless circle of life.
India Quick Facts:
• Population: 1.1 billion.
• Political structure: Democratic republic.
• Government: President, prime minister and two Houses of
• The ruling party: Congress.
• Twenty-eight states and seven union territories.
• Seventeen distinct languages: Hindi and English are the official
• Religion: Hinduism (83%), Muslim (11%), Christian (2%), Sikh
(1.9%), Other (1.8).
• Literacy rate: 65%.
• Indian currency: Rupee ($1= 40 rupees).
India has a parliamentary form of government with two Houses in the
Parliament (Rajya Sabha and Lok Sabha). Though the president is the
supreme commander of the Indian armed forces, the prime minister
and the elected ministers are responsible for running the country.
The majority of Indians do not eat beef for religious reasons. Because
of this, hamburger giants like McDonalds opened restaurants in India
and offered soy burgers.
Hindi is as the national language because it is spoken by the majority
of the population. Indian children are exposed to at least two to three
languages during their school years as a part of their curriculum and
through social exposure to people from different states. Knowledge of
a regional language is considered a definite employment asset,
especially for supervisory employees.
History and Societal Background:
• British colony for 100 years.
• Great national leader: Mahatma Gandhi.
> Ghandi introduced the concept of non-violence protest.
• The Indian social system is dominated by a caste system.
> Four specific castes; Brahmins, Khastriyas, Vaishyas,
> Created distinct labor categories.
> Associated status differences.
Mohandas Karamchand Gandhi is rightly (and officially) known as
the father of the nation. He pioneered the concept of non-violent
protest that inspired other great freedom leaders like Dr. Martin
Luther King, Jr.
The Indian social system is dominated by a caste system that fosters
inequality, power and hierarchical management. The British
reinforced the caste system because they equated it to their own class
system. The British also introduced the census in India so they could
identify different labor groups and employ them to their best
advantage, thereby further emphasizing labor differences among
Caste is derived from the term castas, which was introduced by early
Portuguese invaders in the 16th century to describe the tribes, groups
or families they observed working in separate groups. The caste
system is divided into four principal labor categories based on a
social and economic hierarchy. Brahmins are considered the
intellectual leaders. Kshatriyas are considered the soldiers of war;
Vaishyas are business traders; and Shudras are unskilled laborers. The
caste system has created distinct labor categories and status
differences among the groups. Brahmins are considered the highest in
the caste hierarchy and Shudras the lowest.
You can learn more about the British presence in India and the caste
system by accessing “The Indian Caste System and The British”
online at

Business Facts:
• Today, India is the fourth largest economy in the world.
• Until 1991, there was an import substitution policy that favored
domestic industries.
• After 1991, there was active foreign investment with a very strong
trade liberalization policy.
> Foreign direct investment in India increased dramatically
($15.8 million in 1997 compared with 0.3 million in 1991).
• In 2000, the Y2K computer crisis required worldwide computer
remediation provided by software engineers.
• Indian software engineers were found to be very dedicated and
hard-working (Friedman, T. 2005; “The World is Flat”).
Prior to 1991, India had a closed-door policy toward direct foreign
investment, and the government controlled most economic and
business activities. There were strict ownership restrictions that
allowed foreign companies to have only 40 percent equity when
collaborating with domestic companies. While multinational
companies generally complied, the classic case often quoted in
business text books is that of IBM and Coca-Cola. Both organizations
were asked to leave India because of lack of ownership compliance.
In 1991, a new prime minister realized that to compete in the global
market, India needed foreign investment. As a result, the government
slowly began to ease some multinational ownership restrictions. The
United States quickly became the largest investor in India with nearly
$570 billion invested between 1991-2002. You can learn more about
India’s foreign investment policies by accessing “Foreign Direct
Investment in India” at
India is recognized as a global leader in software development. The
Indian software industry has been instrumental in the international
attention the country receives today. India has a well-educated
English-speaking workforce who can communicate easily with other
English-speaking cultures. The workforce is also often commended
for its strong work ethic and willingness to work 12-hour days, six
days a week. In addition, professional labor costs are significantly
lower in India--almost 25 percent lower than in the United States.
Global consulting group McKinsey estimates that if a multinational
bank of 1,000 employees moved to India, the bank would save $18
million annually in labor costs.
Mercer’s 2006 Best Companies to Work For in India:
• Infosys Technologies Limited (IT industry).
• MindTree Consulting (IT industry).
• Satyam Computer Services Limited (IT industry).
• Dr. Reddy’s Laboratories Limited (pharmaceutical company).
• Sapient Corporation (business and technology consulting).
• Agilent Technologies (IT industry).
• Johnson & Johnson (consumer health care company).
• Covansys India (IT industry).
• HCL Comnet (IT industry).
• HSBC; Hongkong and Banking Corporation (banking services).
A study by Mercer identified these companies to be the best
companies to work for in India. As you will notice, most of the
companies are from the IT industry, further demonstrating how
important the IT industry is to the Indian economy.
The Indian software industry has grown from a mere US $150 million
in 1991-92 to a staggering US $5.7 billion (including more than $4
billion of software exports) in 1999-2000.
In 2003, Infosys Technology, the top company on Mercer’s list, was
identified by the American Society for Training and Development
(ASTD) as one of the best companies providing global training. The
results of the Mercer study helped benchmark best employment
practices in the industry.
Federal Employment Laws:
• HR began to play a significant role with the early enactment of
these employment-related laws:
• The Workers’ Compensation Act of 1923 ensured that
employers compensate employees for work-related injuries.
• The Trade Union Act of 1926 gave formal recognition to
trade unions.
• The Industrial Disputes Act of 1947 led to the increased role
of industrial relations (employees were distinguished by the
work they did such as permanent, temporary, trainee etc.).
• The Factories Act of 1948 regulated the work environment in
factories to ensure the safety of employees.
• The Employees Provident Funds and Miscellaneous
Provisions Act of1952 required employers to provide
contributions for retirement.
The chronological enactment of employment laws reflects the
increased importance of HR in the workplace. Indian organizations
also noted the increased visibility and value of HR by migrating away
from the use of the term “personnel” to “human resources.”
Please read the following articles to get a better understanding of
employment laws in India:
Employment Law (scroll to Employees' Rights and Remuneration) :
Doing business in India:
• The Minimum Wage Act of 1948 established minimum
wages that vary from state to state.
• The Payment of Bonus Act 1965 provides for a minimum
bonus of 8.33 percent of salary, even if the organization is
not making any profit.
• The Persons with Disabilities Act (PWD) of 1995 was
landmark legislation for disabled people in India.
The Payment of Bonus Act guarantees that a bonus is paid to
employees who have worked for at least 30 working days in the year
and have salaries of at least Rs.3,500 per month. The payment of a
bonus is applicable to every establishment where 20 or more workers
are employed, but there are exceptions. Employees who work in
insurance corporations, educational institutions, hospitals, chambers
of commerce, federal banks and social welfare institutions are not
entitled to a bonus under the Act.
Bonuses do not have to be paid if the employee is dismissed from
service for fraud or misconduct on the premises or for theft,
misappropriation or like of the property of the organization. The law
is quite controversial because employees want this bonus regardless
of whether company is profitable or not; employers do not agree with
this required entitlement.

Disability in the Indian context includes the following: blindness; low

vision; leprosy cured; hearing impairment; locomotor disability;
mental retardation; or mental illness. About 50 million people, or 5
percent of India’s population, are affected by some sort of disability.
Indian HR Associations:
• In the 1940s and early 1950s, two professional HR
associations were established to acknowledge the importance
of HR:
• Indian Institute of Personnel Management (IIPM).
• National Institute of Labor Management (NILM).
• In1980, the two associations merged to form the National
Institute of Personnel Management (NIPM).
• NIPM is the only group engaged in the advancement of HR,
industrial relations and labor welfare.
• NIPM has a working relationship with HR groups in the
United States, Australia and the United Kingdom.
• The creation of NIPM demonstrates the growing importance
of HR in India. Further, links with other global HR
organizations allow Indian members to understand and share
best practices.
Affirmative Action:
• Affirmative Action:
• Based on the caste system.
• Federal jobs and admissions to colleges are strongly
influenced by quotas for caste reservations.
• State governments can set aside 50 percent of jobs based on
different castes. To get increased support from the public,
some states have 75 percent of job reserved.
India’s Constitution provides for affirmative action based on the caste
system in both education and employment. In federal jobs, it is
common to have departments comprised of a single caste groups.
Similarly, trade unions are also organized along the caste lines.
Creation of such groups poses organizational challenges because
these groups carry their personal differences to the workplace. Please
read following articles for more information about the caste system
and its effect on HR:
Mozumdar, Suman Guha. (2007). Of job hunting and Indian Cast
System. Rediff India Abroad.
Anonymous (2007, October 6). With reservations - Business and
caste in India. The Economist. London. 385, 8549, 93.
Indian Culture and HR Practices:
Cultural Profile (GLOBE Study)
• Power distance:
o India: 5.47 (rank 16).

o Morocco : 5.80 (highest score).

• Institutional collectivism:
o India : 4.38 (rank 25).

o Sweden: 5.22 (highest score).

• In-group collectivism:
o India: 5.92 (rank 4).

o Philippines: 6.36 (highest score).

• Uncertainty avoidance:
o India: 4.15 (rank 29).

o Switzerland: 5.37 (highest score) .

Source: Chhokar, J., Brodbeck, F., & House, R (Eds) .(2007).

Culture and leadership across the world. The GLOBE book of in-depth
studies of 25 societies. Lawrence Erlbaum Associates. Mahwah, New
The GLOBE (Global Leadership and Organizational Behavior
Effectiveness) study, conducted by the Wharton Business School
(University of Pennsylvania), is an analysis of the cultural, societal,
organizational and leadership differences between 62 different societies
around the world. The goal of the study was to determine the extent to
which the practices and values of business leadership are universal (i.e.,
are similar globally), and the extent to which they are specific to just a
few societies. India was included in the study.
India’s high scores on power distance reflect a society that is
characterized by a clear hierarchy engendered by both the Indian caste
system and British rule. On average, there are at least 12 to 15 levels
between a production worker and the CEO in a manufacturing
environment. The Indian corporate world is characterized by clear
hierarchies and formal structures. Employees are reluctant to disagree
with a boss or even call them by their first name. Formal titles such as
Mr., Mrs., Dr., Sir or Madam are widely used in both organizations and
Collectivist cultures are characterized by a tight social framework where
members distinguish themselves from in-groups and out-groups. In
India, in-group members are usually from the same caste, religion or
family. It is easy to distinguish a person’s caste and religion by last
name, making it possible to make prejudiced staffing decisions.
Recruiting, hiring and promoting employees from one’s own caste are
quite common.
Many Indian social customs suggest a culture that is ritualistic and
avoids the uncertain or unknown. For example, many business decisions,
such as opening a new plant, are based on astrological predictions to
identify if the time is favorable. For marriages, social customs dictate
that the astrological stars of the prospective groom and bride are
matched before wedding plans are started.
Definition of Cultural Dimensions (GLOBE Study):
• Power distance: The degree to which organizations and societies
accept power.
• Institutional collectivism: The degree to which organizational and
institutional practices encourage collective action.
• In-group collectivism: The degree to which individuals in societies
reflect collectivist behavior.
• Uncertainty avoidance: The degree to which organizations and
societies avoid uncertainty by relying on practices and procedures.
• Performance orientation: The degree to which upper management
in organizations and leaders in societies reward group members for
performance excellence.

Cultural Profile (GLOBE Study):

• Performance orientation:
o India: 4.25 (rank 9).

o Switzerland : 4.94 (highest score).

• Assertiveness:
o India: 3.73 (rank 53).

o Albania : 5.80 (highest score).

• Future orientation:
o India : 4.19 (rank 15).

o Singapore: 5.07 (highest score).

• Gender egalitarianism:
o India: 2.90 (rank 55).

o Hungary: 4.08 (highest score).

• Humane orientation:
o India: 4.57 (Rank 9).

o Zambia: 5.23 (highest score).

High scores on future orientation reflect a society that plans for the
future. Indian culture socializes children with axioms such as “always
save for a rainy day” from an early age. This future orientation is
reflected in personal bank accounts that most Indians open. The
government encourages opening such accounts by providing tax
breaks for them.
There is a societal preference toward male dominance in both
corporate and social settings, even though a female prime minister
governed India for a long time. Indian women do not enjoy gender
equality as many women in Western cultures do (Chhokar, 2007).
There is a strong preference for recruiting only men for upper-level
management positions.
Definition of Cultural Dimensions (GLOBE Study):
• Assertiveness: The degree to which individuals in organizations or
societies are assertive in social relationships.
• Future orientation: The degree to which individuals in
organizations or societies plan for the future.
• Gender egalitarianism: The degree to which organizations or
society promote gender equality.
• Humane orientation: The degree to which individuals in
organizations or societies reward individuals for positive behavior.
National Culture and HR Practices:
• Scholars have found a strong connection between cultural
dimensions and HR practices.
• High power-distance cultures create:

 Hierarchical organizational structures.

 Loyal and committed subordinate workers.

 Autocratic relationships between managers and subordinates.

• What kind of HR practices would low power-distance cultures
• What staffing practices would high power-distance cultures
Low power-distance cultures tend to have flatter organizational
structures, democratic managers and a focus on fairness and equity.
High-power distance cultures create loyalty; staffing practices such as
internal recruitment and succession planning are very significant.
Such practices foster a committed workforce.

• High institutional-collectivism cultures prefer:

 Group harmony and cooperation.

 Conformity to societal norms valued.

• High in-group collectivism cultures feel:
 A very close bond with their organization family, friends and
• What kind of HR practices would low institutional collectivism
cultures adopt?
• What staffing practices would high in-group collectivism cultures

• High uncertainty-avoidance cultures create:

o Formalized procedures to minimize unpredictability.

o Clearly defined roles for employees.

o Focus on security and trust.

• What kind of HR practices would low uncertainty-avoidance

cultures create?
• What staffing practices would high uncertainty-avoidance cultures
Low uncertainty-avoidance cultures promote risk takers, flexible roles
and quick decision-making.
Cultures high in uncertainty avoidance adopt a lot of test-taking and
seek elaborate information from job applicants, such as age, family
background, etc., to minimize or reduce any unpredictability in the
hiring process.
Indian HR Practices:

Staffing Practices:
• Resumes seek strong educational background.
• Employee referrals (predominantly used for middle and senior
• Succession planning (predominantly used for middle and senior
• Elaborate employment tests related to the job, especially at entry
• E-recruitment: was the first e-portal established in
1998 (naukri means job in Hindi ).
Resumes are closely examined to identify successful work
experiences, career stability and, most importantly, continuous
academic achievements such as enrollment in relevant graduate
classes, certification, etc. Such academic achievements are considered
by the employer as a barometer of the potential learning capability of
the applicant. The emphasis on learning and education can be linked
to the cultural dimension of future orientation.
Employee referrals and succession planning are predominant in the
Indian work environment, especially for middle and upper-level jobs.
Employers from collectivist cultures like India hire and promote
employees whom they know. These staffing practices promote loyalty
and retention.

Employment testing is also common for entry-level positions.

Potential employers subject applicants to rigorous math, analytical
and communications tests to identify high-potential learners. It is
believed that having such cognitive information about the applicant
increases the reliability of the hiring process. Such extensive testing is
associated with the cultural dimension of uncertainty avoidance.
In India, the sheer magnitude and size of online recruiting is
staggering by Western standards. On average, large Indian companies
recruit about 10,000 entry-level positions annually; screening resumes
for authenticity and relevance is a staffing nightmare.
• Newspaper advertisements are used to brand the company to
potential applicants.
• Newspaper advertisements will specify age and gender
• Personal questions will be asked in interviews/resumes about:

 Age

 Marital status

 Family plans (women planning to start a family)

 Family background

 Caste background

 Photos to be included
 Verification of educational certificates

Indian job advertisements often specify educational qualifications and

age requirements for potential jobs. Indian companies use branding in
their recruitment process. The status-minded Indian employees like to
work for employers that have a name and are well-recognized in
employment and social circles. Therefore, newspaper advertisements
frequently provide detailed company information. Subsequently, the
employee is considered the “brand” and a walking advertisement for
the company.
Personal questions are often asked during the hiring process.
Questions about marital status, caste and family background will be
asked during the interview or on a bio-data form. Employers
frequently discriminate on the basis of caste, which is easily
recognizable by the first and last names. Verification of recent
educational certifications, degrees and certificates is asked from
applicants during the interview process. Married female applicants are
frequently asked during the interview if they are planning to start a

Training Practices:
• Training (future orientation):
• Education is extremely valued, and training is an extension of
• Entry point training programs (3 to12 months of orientation).
• Ongoing training programs.
• Development programs (promotions involve training).
• In-house training centers are a common feature in Indian
• Deductive learning style in training: Known as “top-down
approach” where learning principles start with general
concepts and move toward specific application.
Indian organizations spend quite a bit of money on training because it
is considered an extension of academic learning, which is very valued
in India. It also relates to the cultural dimension of future orientation,
which makes employees seek any form of learning to have constant
marketable skills.
Among Indians, training creates loyalty to the company. For entry-
level employees, there is often a large disconnect as to what they are
taught in graduate school and what they have to do when they enter
the workplace. Therefore elaborate entry-level training focuses on
soft skills such as effective communications, team dynamics and also
relevant product-based and technical knowledge.
Training programs in India are more extensive and longer in duration.
Entry-level employees are in training for between three and 12
months, depending on the size of the company. The average annual
corporate training hours can range anywhere between 60 and 120
hours. The best company in providing training is Infosys, with an
annual training budget of about $145 million. Entry-level Infosys
employees spend about four weeks on initial training. Organizations
often pair with both well-known local and international universities to
provide continuing education for their employees.
To learn more about training in India, instructors may want to review
the following articles: Training 2008: World View, Focus on India
(available at
Top 5 IT firms spend $438 million on training (available at

Performance Appraisal:
• Cultural dimensions of collectivism and power distance make
objective appraisals a challenge.

 Supervisors and subordinates develop close relationships.

 Organizational loyalty is as important as work performance.

 Employee promotions are frequently based on seniority.

• Annual performance appraisals.
• Supervisors provide performance ratings that are frequently
inflated due to personal relationships.
• Employment at will does not exist in India. Employment
termination carries a social stigma.
The collectivist culture of India makes performance management
quite challenging. Superiors and subordinates develop close
relationships, making a formal appraisal process difficult. Supervisors
frequently inflate the work performance of subordinates because
personal friendships between supervisors and subordinates blur
objective evaluations. The Indian work culture also emphasizes
organizational loyalty over performance and efficiency. Further,
promotions are usually based on seniority, making organizational
tenure an important performance criteria.
Organizations usually have annual performance reviews with the
supervisor providing comments on employees performance.
However, leading Indian companies are adopting a very progressive
approach to performance management by adopting a 360-degree
approach or management by objectives (MBO).
Instructors: Please read “Performance appraisal takes center stage”
for more information about the Indian performance management
system. This article is available online at
s_take_centre_stage_ .

Compensation and Benefits:

• In addition to a base salary, compensation includes:
> House rent allowance (HRA*).
> Medical allowance.
> Dearness allowance (DA*).
> Leave travel allowance (LTA*).
> Commuter allowance.
> * These allowances are frequently referred by their
• Several categories of leave (vacation) exist:
> Sick leave: 7 days (medical certificate required).
> Casual leave: 7 days (for personal and family emergencies,
requires prior permission of boss). Employees can take
maximum 2 days at a time
> Annual leave: 3 weeks (after one year of employment).
> Federal holidays: About 20 days.
A base salary is provided with several other allowances that are
typical to Indian employers. The base salary usually accounts for 40
to 50 percent of an employee’s salary. The remaining salary is
comprised of several allowances.
Housing is expensive in India, and employers often reimburse a
portion of the housing expenses through a House Rent Allowance, or
HRA. Medical allowances come in a variety of forms. Organizations
may reimburse expenditures incurred by the employee or his or her
family for medical treatment; pay a fixed allowance for routine
check-ups; or participate in a group medical insurance policy.
The dearness allowance (known as cost-of-living in the United
States.) is calculated as a percentage of the base salary. It is an
allowance provided to adjust the cost of living and may vary
depending on the job’s location (rural vs. urban areas).
Leave travel allowance (LTA) permits two tax-free travel
opportunities in India within a four-year period. LTA is provided
based on an employee’s salary and level in the organization. This
includes employees and their family members.
For more information about these additional allowances, instructors
may want to read the following online articles: Recruiting in
India Recruiting in
For public holidays in India, please read:

• Retirement age:
> 55-60 years (private sector);.
> 60 years (public sector).
• Retirement Benefits: Employees receive two lump-sum payments
when they retire:
> Provident Fund (similar to 401(k))
• Typical contributions: 10-12 percent of base salary
(employer and employee).
• Payable on retirement, voluntary separation, death.
> Gratuity
• Only employer contributes (15 days salary per year of
• Tax-exempt for employees.
• Payable on retirement, voluntary separation, death.
There is a distinct retirement age in the private and public sectors.
Public-sector employees retire at age 60. Private-sector employees
have a choice of retiring anytime between ages of 55 and 60.
Two specific retirement funds are available to all Indian employees:
Provident Funds: This fund is similar to the 401(k) in the United
States, where both employees and employers contribute.
Gratuity: Employees do not contribute to this fund. It is calculated
based on years of service.

• Organizations are seen as an extension of the family.

 Provide both short-term and long-term personal loans.

 Personal loans for housing, car, home maintenance and

family emergencies.

 Loan amounts vary by position and level in organization.

 All employees after their probation (confirmation) period are

• Many medium and large organizations have cafeterias with
subsidized lunch facilities.
Organizations are seen as an extension of the family, and they often
help employees achieve both personal and material goals by
providing short- and long-term loans. Some organizations provide a
variety of food at a subsidized cost, encouraging a family atmosphere.
• Executives receive special benefits to reflect status such as:
• Club memberships.
• Overseas training.
• Company housing.
• Company cars.
• Provided with drivers.
• International cars.
• Operational and maintenance costs.
• Phone bill reimbursements.
• Organizations provide business and cell phones.
Executives or senior management are frequently offered special
perks. These special perks are associated with increased social status.
Employees in the Indian culture like to have visible indicators of
increased status and wealth because they signify work achievement.
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