Drgantzationat Dynamics (2011) 40, 517-525, journal homepage: www. avatiable at www.setencedirect.com sevior com/locatejargaye Emerging HR management trends in India and the way forward Pawan S. Budhwar, Arup Varma INTRODUCTION ‘Over the last decade or so, India has emerged as a major player an the global economic front, Toa great extent, ndia’s ‘enhanced global economic importance iscue to the economic reforms that were initiated in 1991, The reforms have been Instrumental In creating tremendous opportunities for bust nesses, in particular for foreign operators. Bodies like the World ‘Bank predict that if India can sustain its economic growth over the next decade, then its likely to become one: lof the leading ecenomies of the world. Needless to say, there are many Issues that stil need urgent attention — among, these, development of jnfrastructure, control over corrup: tion and bureaucratic red tape, opening-up of key sectors for foreign investments, political and legal reforms, enfancing employable skills in new graduates, control over increasing poverty, internal and external security, and divestments in the pubtic sector, etc. In addition, issues related to the ‘management of human resources have become crucial for India’s sustained economic growth. The liberalization of ‘econamie policies calls for a switch from labor intensive to more capital-intensive methods of production, and thus requires organizations to remove surplus labor and generate new sustainable employment systems. In the new economic ‘environment, there are additional challenges relating to the need to increase productivity, reduce cost, improve quality, reduce voluntary and involuntary absenteeism, and cope vith the subsequent de-shlling, r:skilling and multi-sklling problems and career development issues. In this regard, given the huge demand for new recruits with varied competencies, issues related to creation, attrac- lon, retention and overall management of talent have become critical. Despite the large number of students grac- ating every year, organizations are struggling to recruit due to lack of required and desirable employable skills. Forelgn Investors operating in India (whose numbers are increasing at ‘a rapid pace) face additional challenges of deating with the ‘unique Indian business context. The key to their success in India Lie not ony in their own competencies, but also in how ‘well they understand the Indian business context and develop efficient human resource (HR) systems for it. The main aims of thisarticle are two-fold: ist, to provide an overview of the key developments in Indian HRI (human Fesource mamagement); and second, to highlight the key HR ‘challenges ia India and delineate future foci. The article Is structured along three sections. The next section summarizes the historical development in Indian HR0A and highlights the kind of HR management research being pursued in India, Section two fecuses on the emerging and experienced HAM challenges in the Indian ousiness context. Finally, the last section proposes the future focus of HRin India, drawing upon the current challenges. The analysis Isbased both on our own analyses (our extensive experience in India as executives, consultants, executive trainers, and researchersover the last 20 years) and e-mail interviews with senior HR executives of ‘several firms operating in India (see Table ( for a Uist of ‘companies that participated in the rescarch). We asked the senior HR managers to comment an: (a) alist of 510 key challenges for HR in india based on their observations/experi- ‘ences, etc., with a brief explanation on each; and (b) their thoughts on what should/will be the 5~10 most important foci for Indian HR in the future, with a brief explanation of each, HISTORICAL DEVELOPMENTS IN INDIAN HRM {inorder to speculate about the future of HR management in Inia, it willbe helpful to understand how the HR function has evolved in the Indian context, The origins of the Indian personnel function can be traced back to 19206, when busi: ‘ess groups Uke the Tatas expressed concern forthe welfare fof factory labor, The Trade Union Act of 1926 gave format (0090-26165 — se front matter 1) 2011 Elsevier ne. Aight rosorves (fr. 10064}.orgdyn, 2017.07 008318 5, Buehrar, A. Varma Table 1 List of Executives/Compantes that Participated in thls Research, ‘Name\s) of Executives and their Affiliation(s)” Kannan, CEO, ASSeSsPeeple ‘Abhijit Bhadun, Chief Learning Officer, Wipro Ltd 1K. Shankar, Executive Director — HR Airtel hella Ganesh, Founder and CEO, Totus Consulting Hemant Share, VP-HR, Danaher Ine. Ravi Buchwar, VP-HRG, Sita India [MY Rao, VP and Head — HR, Larsen & Teubro Infotech Lid, sridhar Ganesh, Director, HR — Murugappa Group 5. Varadarajan, EVP and Chief HR Offiet, Quatro Global Services * Three interviewees have requested anonymity ecognition to the workers’ union. The 1931 Royal Commis- sion of Labor recommended the appointment of tabor-wel- fare officers, ang the Factories Act of 1948 lald down the ‘duties and qualifications of labor welfare officers. Further, ‘due to the requirements of a number of labor and industrial relations laws, personnel managers began practicing indus- trial relations (IRs) as a significant part of their soles. The IR role of personnel managers formed such an important part of their work that they came to be known a6 children of the Industrial Disputes Act 1947 (IDA), Such developments formed the foundation of the personnel function in Indi Inthe early 1950s, several professional bodies emerged, specifically created (0 professionalize the Indian personnel function, These were the Indian Institute of Personnel Man- agement (IPI) at Calcutta, and the National institute of Labor Management (NILM} at Bombay (now Mumbai). Inthe 1960s, the personnel function began to expand beyond the weltare aspect with three areas of Labor Welfare, Industral Relations, and Personnel Administration, developing as the constituent roles for the emerging HR’ profession. In the 1970s, the thrust of the personnel function shifted towards greater organizational efficiency, and by the 1980s t began to se and focus on terms ang fsues such as HRM and human resource development (HRD). The two professional bodies (ie, IPM and NILM) were merged in 1980 to form the National Institute of Personnel Management (NIPM), based jn Mumbai. In summary, the HR function in India has con: tinued to evolve aver the past 90 years orso, Table 2 provides a summary of the evolution of the HR functian in India ‘As a result of the liberalization of economic policies, a significant number of (oreign firms entered India in a short ‘Table 2 The Evolution of the Indian HR Function. span of time, resulting in increased competition for Indian fFrms. This created immense pressure on Indian firms to ‘change fram indigenous, costly, and probably less effective technology to high, more effective and cost-effective tech= ology. This also led to the need to change organizational ‘culture (one founded on performance-based systems) and ‘demanded changes in the nature of the Indian HR function to ‘odemize, Due to such pressures, the focus of the Indian HR function changed to human resource development in the early 1990s, and It soon became the mast dominant topic {nthe broad area of the HR function. Accordingly, organiza tions such as BHEL, TISCO, Steel Tubes of India, the Taj Group fof Hotels, LAT, Bharat Earth Movers, SAIL, NTPC, and Voltas Limited (amongst others) began to create, as well as adopt, HRD and organizational development (00) programs. The formation of the HRD Network (which today has a one of the largest memberships of academics, HR and other man= agers), along with the Indian Society of Applied Behavioral Sciences, acknowledged the importance of employee devel- ‘opment and the need to sharpen the abilities of HR profes sonal. ‘This period also saw an elevation jn the status of HR managers to the board level, though only in a few profes sionally managed organizations. There was also a massive Upsurge in relabeting the ttle of HR managets to HRD man: agers and personnel departmentsas HRD departments. Italso gave rise to the need for the measurement of HR perfor- ‘mance, and thus the concept of "HR audit” came into practice. As a result of this, several employers tke Aditya Birla, Apollo Indian Airlines, Indian Raitways, TCS (amongst ‘othets) asked all their companies to get their HR systems Period Development Status ‘Outlook Emphasis ‘status 19205-1930; Emerging Pragmatism of capitalists ‘Statutory, welfare, patemalism Clerical 1940s-1960; Establishing Technical tegatstic Introguetion of techniques Administrative 1970s 1980s pressing with Professional, legalistic, Regulatory conformance, Wanagerial sophistication Impersonal imposition of standards on father functions 1990s Promising Philosophical Human development, Executive productivity through people 2000. Rationalization and Strategic anc Organizational performance strategie and formalization Change Agent change partner ‘Veta Ratnam and Srivastava (1991), Bodhwar (2009), and authors’ own analyEmerging HR management trends in India and the way forward ‘audited by consultants. Further, the concept of the HRD scorecard was initiated as a device to measure the effec: tiveness of people-development activities The late 1990s and eatly 2000s witnessed observable ‘changes in the traditional Indian HR systern, especially in rmadern sectors lke the information-technolagy-enabled ser vices and business process outsourcing (BPO) that are pro- fessionally managed. Nevertheless, the proportion of such organizations is rather small. Due to these changes, HAM is now playing a noticeable rote in bringing about changes in Indian organizations, and most Indian organizations have created a separate HRM/HRD department. There has also been a significant increase In the level of training and development of employees, and there are further indications of a movement towards performance-related pay and pro- motions. Such developments have already matured in the modern industria sectors, such as the BPO and other pro- ‘essionaly run organizations. Overall, it would be appropri- ate to say that the HR function in ln sina phase of rapid transition The description ofthe terms personnel management, HRD and HRM helps to reveal the change in the nature of the Indian personnel/HR function over the decades. HR manage: iment in india is defined as a holistic concept, which is more {focused and proactive than Personnel Management (PM); it ‘integrates and incorporates both PI and HRD, and deals with satisfying and developing employees. HRD on the other hand ‘implies a long-term perspective for developing the potential and capabilities of HR for future organizational needs. Simi larly, PA is seen as more ofa policing typeof department, as it snow a secondary function, also called transactional HRM, This aspect of HRM Is concerned with the day-to-day activ ities of control, attendance, compliance with legislation, discipine aspects and industrial relations. For poticy makers, it is important to have a good under standing of the critical factors and variables that influence Hut in the Indian context, indeed, scholars have highlighted the importance of studying HRM in a given context. An analysis of the existing literature reveals the existence of both "culture-bound” (e.g., national culture and national institutions) and “culture-free” (e.g. age, size and nature of the firm) determinants of HRM in India. Broadly speaking, the ‘main determinants of HRM can be classified into three levels = the national factors, contingent variables, and organlza- tional strategies and poticies. Policy makers need to have a geod understanding of the various aspects and measures of Such factors and variables in order to better understand how these Impact their HRM functions. In this connection, Bud ‘war and associates have identified and developed a detailed list of such factors and variables and have empirically tested their applicability in the Indian context. Their analyses reveal the impact of national culture (aspects of the Ingian socio-cultural context and the "indian way’ of doing things), Institutions (such as the trade unions, legal framework, political setup}, and the dynamic business environment {marked by pressure to change, competing to survive and fourish, benchmarking against leading performers) on HRI policies and practices of firms operating in india. There is also a discernable distinction in the pattern of HRI systems, based on specific sectors (such as IT and 8PO, and services versus manufacturing) and ownership of frm (private, public and foreign) where HRA tends to be more formal, rationa- i 39 lized, and structure in forelgn firms in comparison to Indian firms. ‘THE FUTURE OF HR MANAGEMENT IN INDIA One of the most striking factors about India that make it so attractive as an investment and business destination, is its demographics over half the population is under the age of 25, and a thir of the population is under the age of 15. The ‘median age in India Is currently 24.8, compared with 30 in China, 38 in Europe and in Japan. This population profiles considered to be one of India's greatest resources, as it has contributed to India having one of the largest working-age populations in the world. As an added boon for the Indian ‘economy, this trond is projected to continue over the coming Years. Further, the World Factbook highlights that apart from the median age of Indian workforce, labor costs in India, in ccamparison to comparable countries like China, Brazil, Thai land and Poland, are significantly lower This cheap and large pool of working-age people has sparked the growth of many entrepreneurial firms in india, {and has been a major attraction for multinational corpora: tions (HNCs) that are establishing subsidiaries in India. As an example, numerous companies, such as General Electric, Nokia, British Petroleum, and Microsoft, are seeking out low-cost yet skilled software engineers, as wetl as English speaking workers, for business-processing services. indeed, India has seen vast improvements in literacy rates, a key development measure, particularly forthe 15~24 years age range. For example, 86.3 percent of males and 75.8 percent ‘of females in this age group are now literate. Literacy rates do decline, however, when studying the whole population lover the age of 15; 76.4 percent of males, but only 53.4 percent of females are literate. “Another distinguishing factor of the Indian population fs the fact that two-thirds of the population tives in rurat locations. However, the prospect of opportunities in urban areas has rested in an annual rate of change in urbentzation ‘of approximately 2.4 percent between 2005 and 2010, lead ing to over-crowding inthe cities, and contributing to wage escalation, This is clearly evident in metros tike Mumbai, Doin}, Bangalore, Chennal, Kolkata and Ahmadabad (Tier-1 cities), which are inundated with burgeoning investments in mest Sectors and have created immense congestion in realty structures. This has forced the respective governments and ‘any investment companies to seek out alternative smaller cities, leading to a demand for Tier and il cites (such as Indore, Jalpur, Kechi, Lucknow, Mohali, Pune, Visakhapat- nam, ete). Given the rapid and substantial changes in the Indian business environment, and on the potential workforce, i fs imperative for Indian organizations to continually medity and upgrade thoir practices and processes, in order to keep pace \with these changes. As we note above, the Indian RA function is facing several challenges, due to numerous contextual factors. Pethaps the mast important of these (she significant diversity ofthe Indian society, which is amixture of numerous cetinic, religious, tingutstc, caste and regional collectivities, further civided by historical and socio-cultural realities, Indeed, India has aften been described as a panorama, which has absorbed diverse languages, cultures, religions and people320 ‘of ifferent socal origins at different points timein thepast. Not surprisingly, these iversities are reflected in patterns of life, styles of living, land-tenure systems, eccupational pur sults, Inheritance and succession rules, and management sys tems}. Due to its complex socio-cultural configuration, the Incian business context is unique, and is often referred to asa "cultural island," different from every other nation. This makes it difficult to import and/or adopt practices from other countries, without appropriate adaptations. ‘As indicated above, socio-cultural, economic and political factors impact HRM activities in Indian organizations — call- ‘ng on HR practitioners to be mindful of these realities, as they work to develop polices and practices that are compa: ‘ible with the Indian ethos, yet in keeping with global standards, Without a doubt, this presents significant chal lenges for Indian HR practitioners, as several Hf-related practices are significantly influenced by local norms and ‘mares, and may be hard to modity. For example, selection, promations and transfers in Indian organ/zations are often based on ascribed status, and on social and pottical connec tions, rather than on pure merit. Similarly, Indlan society continues to be highly collectiviste, which means that family and group attainments take precedence over work outcomes. Overall, it i clear that the Indian business environment poses significant challenges to HR professionals in both Indian ‘and foreign firms operating in india. In order to succeed and thrive in this environment, and to keep pace with the tre rmendous growthof the econamy, HR professionals willhave to find ways toaddress the key challenges facing the function, so that they may be prepared for future challenges and oppor: tunities. In the following sections, we present and discuss the key challenges facing HRin india, as well as outline key foc! for the future, These lists have been compiled with information from several sources ~ (i) e-mail interviews with leading HR practitioners, (i) published media, (i) our own research, and {iv information we have learned through our teaching, con sulting, and industry experience in India. KEY CHALLENGES FACING HR MANAGEMENT IN INDIA, ‘The Talent Conundrum Although its clear that India has a competitive advantage in termsof the sizeof its workforce, there are growing concerns regarding the skill and preparation levels of the avaliable talent. According to India’s economic survey, the country". is facinga shortage of skills technology, outsourcing sector, semi-skilled labor-intensive sectors such as manufacturing, and modern services Uke organized retal, civil aviation, construction and finance.” Indeed, numerous studies reveat that although the shortage is most prevalent at the middle- and upper management levels, Iti affecting the availablity Of skilled workers at all levels. These incluste programmers with common software skills, application developers and database engineers, workers with "specialized skis," work: ers with managerial skill, and researchers, architects and Visionaries. In this connection, a Mekinsey/Nasscom report released in December 2010 predicts "India wilt have a short- fall of 150,000 IT engineers and 350,000 BPO staff ever the next 5 years." a PS, Buchwar, A. Varma One ofthe primary causes ofthis shortfall of skilled workers {s the insuficent availability of higher education institutions to mect the needs of the growing population. In a 2006 statement, Prime Minister Manmohan Singh stated that only 8 percent of the eligible age group was enrolled in higher education. Furthermore, itis estimated that 1,500 new uni versities need tobe created and added tothe existingnetwork. (of 380 universities and 11,200 colleges in arder to meet the rowing demands ofthe young population. In terms of Master of Business Administration (WBA) degrees, one report esti- mates that the annual demand i approximately 10,000— 415,000 while the supply from India’s premier institutions (ce., schools such as the Indian Institutes of Management ‘and Kavier Labour Relations Institute, ete.) is a mere 2,000, per year. This issue has further intensified with the increase of ‘offshore subsidiaries in India, Frequently, MNCS state a pre ‘erence for workers with higher education qualifications in ‘order to attract a highly silled and talented workforce, one that is comparable to the standards in their home countries. Indeed, some companies have implemented strict and spe- cific entry-level requirements, such 2s a postgraduate study with a specialization in management. in tura, this trend has increased the demand for higher education among the uni versity-age population, who recognize the value of a post sraduate qualification to gain a competitive edge over their peers, This mismatch between supply and demand in the ‘education system has led many tobelieve there isan impend- ing "education crisis.” Consequently, the Indian government hhas started to take measures to address the education criss Progress to date has been hampered, however, by the freeze ‘on educational spending, which stands at 6 percent of GDP. In this connection, several recommendations were put forth to the National Knowledge Commission on measures that would attract private investment to fund education reform. How: fever these were rejected by the Central Advisory Board of Education, which perhaps feared that Involvement from the private sector could impact the quality of education in India. Indeed, their concems may be warranted. ‘Under permissions granted during India’s economic tberal ization, a number of private institutions have established ‘educational institutions offering MBA or equivalent programs. Asafflation to accredited institutions is not mandatory, many of these private educational institutions establish their own programs and operate according to their own standards, lead fing to a growing concern about the quality of the graduates that complete higher-education programs. The shortfall inthe sunber of graduates and the varyingdogrees of quality oftheir education has serious implications. For example, many MNCS are naw finding that the skill levels of the new university graduates are insufficient, and they are therefore finding it increasingly difficult to find workers for skilled positions In ‘their organizations. Cleary, HR departments need to be pre pared to train many of the individuals they hire, as these Indwviduals may come with the requisite qualifications, but may nck be prepared to hit the ground running. Recruitment and Retention ‘As one might expect, the employment market in India has become highly competitive, in part due to the growing young popatation, and the isues withthe education system leadingEmerging HR management trends in India and the way forward tothe sill shortage, With tunaverrates reportedly as high as 100 percent in some sectors (e.g, 8PO), firms are rapidly ‘adapting their recruitment and retention approaches inorder to find and attract the best workers. One approach being tried to overcome the lack of available and skilled workers is for MNCS to hire graduates from a variety of education ‘institutions, based on their potential, rather than on their ‘current skill levels. Once these individuals are hired, the TNCs make large investments towards In-house training for the new recruits ta provide them with the skills they need for thelr neve positions. Other companies, meanwhile, are pla cing a greater emphasis on soft skills, reerviting and then training, younger, cheaper employees. With the inereasing use of recruitment consultants, at ‘mes the same candidate's profile comes to an organization from two oF three consultants, In such cases, it becomes: dificult. for the HR manager to figure out if there are differ- ent candidates or there isa single candidate. Similarly, when ‘it comes to campus interviews, many MNCs (which are not famous) are unable to get an early date for campus inter Views, Asa result, they end up with below average students, In this connection, HR managers also highight the need for ‘new tests to suit the Indian context (such as for customer sensitivity, service orientation, and tests arcund their core values}. ‘As indicated above, HRM i Indias strongly influenced by social relations, potiticalafliation, informal networks, and ‘one’s caste and religion, This s valid forthe staffing function ‘as wel, The challenge for the HR manager 1s to work within such a context and try to acquire the best talent. Emerging ‘evidence suggests that professionally run firms (ike the MNCS and many Tand BPO firms) are able to tackle these issues by Adopting a rationalized, formal, and structured approach to HRM, To some extent, ACs have used inhouse traning to align their organizational needs more closely with the new recruits’ needs, while granting their subsidiaries greater Control over the development of their workforces, From the employees’ perspective, this is a great opportunity to sain further educational training, become more accustomed to the culture of the company, and gain skills that ill Ultimately help further their careers. In addition, training and development are often used as retention tools to combat proactively the mast comman reasons for employees leaving ‘2 company. The fact that a well-structured training and development program can help address all of these isues further demonstrates the benefits for MNCS to invest In this approach, “Another retention strategy that firms have been employ ing is employee participation and empowerment schemes, designed to create favorable working environments that faster supportive working relations and help employees develop leadership stills. For example, Tata Consultancy Services has a relationship with the Indian Institute(s) of ‘Technology (73) to enhance its technical training programs, while Wipro uses Job rotation and training camps to develo well-roundedemaloyees, Other ITand BPO firmsuses variety of mechanisms of employee involvement as part of their motivation and retention strategies. These include indigen- (Us initiatives like the "town-hall" (where the CEO, along with top managers, meets the employees in open sessions), employee satisfaction committees (both formal and infor 2 rmal,), "skip" {where a manager sits witha team leader and an associate on a one-to-one basis to dfscuss any issue), and "allchands meet” (on a quarterly basis, senior management communieates company goals and objectives, future plans, performance and profitability, new processes, budgets, etc, to all the employees of the organization). Other similar initiatives include "open-house" and "open-hands” meets, worishops on stress, motivation capsules, business games, ‘rae voice on on-line, quarterly RAR (reward and recognition) functions, "fun-do-Friday,” scope survey (ona yearly basis to find out about the company, employees and jobs), and "post ‘and dea” (to encourage creative suggestions from associates Fegarding how to imprave work systems). However, such Initiatives are largely restricted to few sectors and IANCS. Further, given that india isa high power-distance society, tts, often a massive challenge to attract and promote genuine employee involvement and participation. Interestingly, a recent Gallup study of major countries found that only 7 percent of Indian employees are actually engaged. Arumber of reasons identified for this finding include indifferent man agers, low wages, caste discrimination, hierarchical rela tons, rule-centrcity, and misuse of managerial power. While some ofthese involvement and retention strategies hhave been working, the Fact remains that the aspirations of the young workforce, coupled with the continually increasing ‘opportunities avaitable, are forcing organizations to conti ually re-evaluate and re-toot their retention strategies. ‘Given that retention strategies and policies are clearly under the purview of the HR department, HR professionals will need to continue to try to find the ideal, although often short term, formulae, to hela their organizations stay optimally staffed, Workforce Expectations Despite the skils shortages discussed above, in comparison With older employees, younger workers in India is more highty educated, These workers also appear to have entirely dif ferent needs, aspirations and value orfentations. Further, younger workers are not solely looking for a position that Will offer job security, better wages and working conditions; they are also focused! on aspects such as challenge, a mean Ingtl job, autonomy, and the ability to use one's own dis cretion on the job. Organizations need to recognize and understand the different factors that appear to motivate the younger population. Managers thus need to learn to manage employees with different needs. On the one hand, they need to address individual aspirations and needs, while ‘n the other hand, they need to create policies that are turiform for multiple generations in the workplace in order to be, and be seen as fair. It wil be critical for them to shape their recruitment practices to attract the right level of talent and enact retention strategies that reflect the changing ‘dynamics of the workforce. Im addition to expecting different rewards from their organizations, the new workforce is also looking to be pro: rmoted a s00n, and af often, as possible, As one HR leader roted, “Indian organizations are now subject to the tyranny of expectations from the workforce.” Another noted, "Almost every MBA we hire straight out of college is hoping to become the CEO within 5 years (or earller!), or wants to start their own business and become another Narayana32 wadhwar, A. Varma ‘Murthy (founder-chairmanof infosys)” Such misplacedexpec- tations create tremendous pressures on organizations, with the result that they are often forced to keep ineveasing their ‘compensation packages to attract the talent, The wat for talent is leading {0 a spiraling employee compensation bil, which iseasier for foreign MNCS to absorb, given theirbottom Lines, aswell as the fact that thelr wage bill in India‘sstill much lower than what it would be back in their home countries. However, as one might expect, smaller and domestic Indian lorgantzations are often unable to compete with MNCS on this issue, and are thus forced ta accept less qualified and/or suitable talent. Cleary, this is an untenable situation that cannot be sustained. Not surprisingly, HR departments are struggling to find alternative ways of attracting and retaining the required talent, while also ensuring that the realistic ‘expectations of the future workforce are met The Leadership Void ‘The last two decades have seen tremendous growth in indian businesses, with the result that Indian organizations have grown tremendously in terms of revenue, profitability, geo- graphic presence and workforce size. Thus, it isnot uncom ‘mon to find companies with revenues of mare than a billion USS. dollars, or companies with 10,000+ employees, and, of coutse, new and emerging Indian multinationals, that are sony but surely spreading around the globe. Clearly, this isa positive sign for the Indian economy, and should help the Country sustain the tremendous growth It has been experi- fencing. Wonically, the lack of talent has reached the top tier too, and most organizations are suffering from the lack of available leadership to sustain and continue their growth. As ‘one well-known consultant put I, "most organizations have drawn up ambitious plans to grow three-fold or four-fold in the next 5 years, but clearly admit that they don’t have the leaders to execute these plans.”” ‘One outcome of this void in leadership has been the Increasing mavement of expatriates to take over leadership roles in nian organizations, and foreign MNCS operating in India, However, this is nota sustainable model, fora number of reasons, Fifst, most expatriates lake quite a while to become comfortable inthe complex Indian business environ: ment, with some never really understanding it to the full extent, Next, many expatriates are looking for short-term ‘assignments to further their own careers back home. Newd- {ess to say, this short-term mentality does not lend itself to the type of committed leadership required by organizations attempting to establish themselves as front-runners. Clearly, tis isan issue that needs to be addressed by HR departments of Indian companies, and fast. They need to ‘develop homegrown leaders who can understand the Indian business environment, and yet operate with a global mindset HR needs to train its Leaders in competencies such as how to lead a global workforce and how to engage with a vorkforce that does not share a common cultural and institutional ming: set HR Competence AAs we note above, the current challenges being faced by Indian organizations require HR departments to become strategic partners inthe truest sense, by proactively adres: sing the needs of their organizations. Ironically, this happens to be an area where Indian organizations seem to be facing their biggest challenge — in other words, there is a tremen ous lack of strategic HR professionals. The growth of the Indian economy has ted to numerous challenges, and the kind (of HR talent required is in short supply While organizations need HR professionals to operate at strategic levels, most seem to have responded by overly relying on techrology. n many cases, they have responded to the growth in employee numbers and scope of responsi bilities by mechanizing the processes. Indeed, it is our ‘observation that many HR professionals have misunderstood the call for them to be business partners as meaning that tney ‘need not bein the business of people anymore. While there is no doubt that HR professionals need to understand the business of the organization to serve It well, their primary responsailit stil remains ensuring that employees are able to operate at optimal levels. Instead, many seem to have become “hi-tech, Sut tow-touch," often literally out of touch with the expectations and sentiments of the work: force. Several leaders we spoke to pointed out the need for HR. professionals to upgrade thelr competencies in several areas, such as |, the ability to mine data and generate insights, which are a critical component of strategic decisions; 1, to be comfortable with using technology in their work, and the need to develop their aaita literacy; il, tounderstand the financial implications of their choices, and the ability to calculate simple metrics, such asthe het present value of their proposals; fy, to juggle the needs of the Various generations in the: workforce, by understanding each group and reacting appropriately: vs finally, to build @ better understanding of legal frame. works, not just from the perspective of laws related to their core field such as employment, but also about corporate governance, taxes, and sustainability, which are often left to others in the organtzation. ‘Managing Contract Labor In order to cut costs and stay competitive, anumber of Indian ‘companies and MNCS employ contract labor, In spite of the Festrictions imposed by the Contract Labor (Regulation & Abolition) Act of 1970. In many cases, these companies assign the same, o similar, jobs to contract tabor, as they do regular workers, often vielating relevant provisions of the law AS might be expected, contract labor is often paid ata signif cantly loner rate than core workers, thus creating situations of inequity in the workplace, which can lead to dissatisfac: tion and frustration for the contract labor, especially in situations where the two groups of employees work side: Dyeside. AS the thrust to stay competitive and control costs grows, HR departments will have to seek innovative solutions to manage such situations, while also ensuring that they are incomaliance with relevant legislation, As Prof. Debi Saini of [NDI (Gurgaon) noted, "this an issue that wil come to haunt ‘companies in the future, unless they find appropriate ways to handle both regular and contract labor.”Emerging HR management trends in india and the way forward 33 FUTURE FOCI Given the importance of the HR function tothe successful and continued growth of the Indian economy, it is vital that HR professionals address the areas we list above, and find ways to correct course, so that they may truly become strategic partners. This is especially critical in a society tike India, where indviguals’ lives and work are intertwined in complex \ways, and where socio-cultural norms often drive business and personnel decisions much more than business needs. In this section, we list the critical areas where HR will need to {focus for the foreseeable future ifindian businesses are truly tobe able to capitalize on the tremendous opportunities that are available to them due to the growth of the economy. Re-inventing HR For too long, HR in India has focused on processes, policies, and practices. Indeed, HR professionals have often tried to ‘operate counter-Intultvely, by going against the grain of societal norms — perhaps because they have wanted to appear as being more evolved, or in their attempts simply to-adopt foreign practices, especialy in NCS. So, for exam ple, they have treated indian cultural traditions as anathema ‘to what they believed to be progressive, professional, prac: tices, Instead, they need to co-opt indian cultural traditions into their policlesand practices, so that employees feel more "at hame” in their workplaces. In this connection, a recent analysis the "India Way" has proven that following such an approach can lead to tremendous benefits for organizations Next, Indian HR professionals need to move from tradi tional transactional HR to strategic HR, by emphasizing results over procestes, While technology can be a tremen ‘dous asset in the execution of organizational policies, it should not become an altemative to the humane side of human resources. Employee Engagement As the Incian economy continues to grow, and organizations get larger and spread their wings globaly, employees often feel lost and disconnected from their organizations. This, coupled with high turnover rates, and generation gaps between managers and junior employees, means that orga- rizatlrs will need to come up with creative ways tokeep the workforce engaged, and feeting like they all Belong and can Contribute. AE if obvious, “one-sizesftsall” Interventions are not Ukely to succeed. Furthermore, there will be an Increasing need to address health and wellbeing issues for all employees, but especially younger employees, who are foften prone to working harder and faster in order to achieve their personal ambitions. Finally, the “millennial” genera- tion will need unique and creative interventions to be kept ‘engaged, as their expectations and ambitions might be at loagereads with those of the leaders. Pro-active Partnerships HR professfonals will need to engage proactively with govern- imental agencies, professional. bodies like NHRON, NPM, trade and industry bodies ike Cll, MASSCOM and FICCI (please Table 3 Key Gavernment/Professional Bodtes tn India, NHRD National Human Resource Development Network wp National Institute of Personnt Management cu Confederation of Indian Industries NASSCOM National Association of Software and Services Companies ect Federation of Indian Chambers of Commerce see Table 3 for the complete names of these associations), and professional schools, to ensure that appropriate talent is being channeled through the various outlets. Ik is only through proactively partnering with these bodies, that HR. can ensure that sufficient and appropriate talent is available in the future, to fulfil organizational requirements, Inaddition, HR professionals vill need to ensure that their ‘organizations are truly entrenched in the societies where they operate, as this is where the future workforce resides. From sponsoring local events, and offering scholarships to needy and meritorious students, to working towards asus tainable planet, organizations need to ensure that they ave back to the sacieties where they make thelr profit. There is perhaps no better HR strategy for recruitment and retention than tobe an organization that cares forthe society where its ‘employees live HR in a Global Environment {As we note above, one of the Logical outcomes of the growth | of the Indian ecanomy has been the influx of MNCS from countries around the world into the Indian business-space, ‘accompanied by the foray of indian companies into countries, around the world. This movement continues to pick up speed, and is Uikely to continue for the foreseeable future, and beyond, Clearly, this necessitates a new way of thinking — It snot going to be enough for Indian managers to visit a few ‘countries and start to believe that they are “international.” Instead, a fundamental change in the way managers think is ‘called for, since the old ways of doing business are not likely to succeed. Managers will have to understand the subtle ruances of the new cultures they encounter — among foreign ‘employees in India, and host country nationals tn countries where Indian companies now do business. In addition, in ‘many locations, Indian companies are going to be required to work with host country nationals as well as third-country nationals. In order to successfully deal with this new reality, HR managers will have to develop a global mind-set that is attuned to accepting and respecting differing viewpoints, attitudes, and beliefs. ‘Managing a Multi-generational Workforce One of the outcomes of the exaonentiat growth of the indian ‘economy has been the creation of new types of jabs for nontraditional employees. Asan example, some two decades ago, the norm vas for individuals to find their first job after graduating from college, atthe earliest, However, the advent OF BPOs and call-centers has created a new type of worker — the college student, who often works through the night (to324 EE service cients in the west} and goes to university during the dy. Thus, we now have the situation where individuals of different generations (ie, the so-called baby boomers, Gen X, Gen Y, and so on) are working together, This creates numerous challenges for HR departments, as each of these ‘groups are motivated by different factors and It can prove to be rather tricky to find the right mix of stimuli to keep al the ‘groups motivated. Further, the interactions between these different groups can also prove to be challenging, as often the two groups have very different perspectives on life and wark, and de not share cognitive schema, In such a situation, itis imperative for HR departments to find ways to manage interactions and performance, so that the organization can ‘continue to operate efficiently and effectively Paradigm Shift As the traditional employment systems are changing rapidly, this is creating challenges for HR professionals in the form of eating with issues ike mesting individual aspirations, stress, ectining job security — as a result of downsizing. In such ‘dynamic times, employees still expect to be treated fairly, rewarded equitably, and given fairand constructive feedback on their performance, Thus, the emphasis of HR managers needs to be on dealing with the outcome of employees’ responses to the perceived violation of the psychological PS. Budhwar, A. Varma contract — such as reduced effort on the job or output, {and reduced contributions in the form of lower loyalty and commitment. Further, given the significant infivence of trade unions on HR policies and practices in India, dealing with the unions will continue to be a major challenge for HR managers. Also, in the rapidly changing business context, an important empha- sis of HR needs ta be on amending the traditional and well established internal labor markets (IUAs) systems of India, viicn have been based on social relations, political affla ons, political contacts, caste, religion and economic power. “There are indications in certain secters, suchas in the BPOS ‘and NNCS, that ILIs are being successfully developed and practiced based on performance and transparent systems. The positive news at a macfo level within the Indian context is that the usefulness ofthe HR function in improving ‘organizational performance Is now increasingly acknowl ‘edged, and despite the massive challenges involved in bring- ing about transformational change, the opportunities available to do so, along with emerging support systems, are clearly emerging, with very encouraging signs. To order reprints of this article, please e-mail reprints@elsevier comEmerging HR management trends in India and the way forward ie Selected bibliography For more about India’s business environment and the chal- lenges and opportunities it offers to foreign investors see P. Budhwar and A. Varma, Doing Business In Inga (London Routledge, 2011) and UNCTAD, World Investment Report, 2011, http://wrwraunctad. org For more on HR-related iss inthe new Indian ecanom ‘environment see. Budhwar and J. Bhatnagar (Eds), Changing Face of People Management in india (Landon: Routledge, 2008), and P. Budhwar and A, Varma, "Guest Editors’ Intro ‘duction: Emerging Patterns of HRM in the New Indian Economic Environment,” Human Resource Management, 2010, 49(3), 348-351 For details of historical devetopments in indian HAM see P. Budhvar, “Managing Human Resources in Inia,” inJ. Storey, P. Wright, and D. Ulrich (Eds.), The Routledge Companion to ‘Strategic HRM (London: Routledge, 2009, 435-446); and D, Saini and P Budhwar, "Human Resource Management in nda, in. Schuler ands. Jackson (Eds.), Strategic Human Resource ‘Management (Oxford: Blackwell Publishing, 2007, 287-312), For more information on factors determining HRM in a cross-national context see P. Budhwar and .R. Sparrow, "An Integrative Framework for Determining Cross-National Human Resource Management Practices," Human Resource ‘Management Review, 2002, 12(3), 377-403, and for empir cal evidence on factors influencing Indian HRM, see P. Budh- ‘Acknowledgements The authors would like to thank al the senior HR managers in Ingia who provided useful information for this research and also the guest editors for their constructive comments en an earlier version of this paper. ‘war and P. R. Sparrow, “Factors Determining Cross-National Human Resource Management Practices: Study of Iida and Britain,” Management international Review, 1998, 38{Spacial Issue 2}, 105-121; and P.Sudhwar and PR, Sparrow, "Eval- ating Levels of Strategic Integration and Devolvement of Human Resource Management in India,” The International Journal of Human Resource Management, 1997, 8(4), 476~ 494 For more on the unique socio-cultural characteristics of India, see PR. Sparrow and P. Budhwar, "Competition and Change: Mapping the Indian HRM Recipe against Worldwide Patterns," Journal of World Business, 1997, 32, 224-242. ‘Also, see contributions ofS. Sahay and G. Walsham, "Social Structure and Managerial Agency in India,” Organization Studies, 1997, 18, 415~444; J. B, Sinha and R. Kanungo, "Context Sensitivity and Balancing in Indlan Organization Behavior," Internationat Journal of Psychology, 1997, 32, 93-108; and P. Capelli, H, Singh, J. Singh, and M, Useem, The Inala Way (Harvard Business Press, 2010). For detalls on the Indian economy, and various. demo: graphic and industrial output data see R. Datt and K. P.M, Sundaram, The Indian Economy (New Delhi: S. Chand @ Company Ltd., 2008), Pawan Budhwar isa professor of ternational HRM and Associate Dean for research at Aston Business School Hes rector of the Aston India Research Foundation, Pavan has published a large number of articles on people ‘management-elated tops within the nan contort. He has also wrftten and co-eeted nine hocks, Pawan isan advisor tothe Cammaniweatth Commision, 2 Fellow ofthe ‘the CIPD (a Hisher Education Academy and achartered member of ‘44121 2082085; fax: +44 121 2048327; mal: ps budhwarsaston aes. Arup Varma is a professor of Human Rsource Management a the School of Busines, Leyla Uniertty Chicago. He rescarch interests include performance appatal, expatriate fue, and HRN n Inca Hes pubisned 37 refereed Dapersineading jouralssuch asthe Academy of Management Jcurral the Journal of AppledPycholoy, Persie! Pshetogy and the incernatinal Journal af Haran Resource Managemen fe has ale pubines t6bock chapters ad coded 2 books (Tes +1 312 915 Geet fax: +f 3129954231; e-mal:evarrnaale ec},