Business in India India: Guide subsidaries in India correctly

Author / Editor: Johannes Wamser / Stéphane Itasse

The Indian subsidiary has the full responsibility for building and developing the business on the location. However it is not enough to assign responsibility. Clear specifications and resources are also necessary.

Signature of the cooperation contract regarding IEES-Industrial Supply INDIA, New Delhi
Signature of the cooperation contract regarding IEES-Industrial Supply INDIA, New Delhi
(Bild: Deutsche Messe)

At the beginning of the specifications is the creation of a business plan. Without a plan there can be no success in business and it also applies to India. However time and again there are companies that don’t do their homework and then wonder why their plans in India are failing. The most common mistake is that the companies have completely unrealistic assumptions, namely that the market potential is estimated to be too high and the expenses on the other hand too low.

The expenses not only include the expenditure in India but also the expenditure which is incurred indirectly in Germany. So most companies estimate costs for their Indian project by paying for the management services and special services and for the many trips from their “big pool” of funds instead of allocating it to the Indian project. For a 5 year period it can cost you 2 to 4 million Euros from such indirect costs in projects, it is definitely not peanuts any more.

Projects in India also require a lot of time

It would be thoughtless to restrict only to the capital and the technology when it comes to resources. Often the resource “Time for India” is lacking. The expense for managers and specialists for an Indian project must not be underestimated. Also, after the third, fourth or the fifth trip to India the enthusiasm for the country decreases within a short period and so does the support for the project. Hence a really extensive planning of all the necessary resources in advance is indispensable and the assumption that “We can manage from the available structures anyway” rarely works.

The Indian company is managed by the local management. Actually only the managing director is the main person responsible in the Indian company, no matter which title he has. Whether Managing Director, CEO or Country Head. All the functions in the hierarchy under him report directly only to him.

Don’t pull down the Indian managing directors

There is often the mistake of influencing the second hierarchy level from Germany or providing assistance past the managing director. Indian employees are very sensitive to such things and parallel structures are formed in this way that are impossible to get rid of. Naturally there has to be direct contact between the respective departments but only after consulting the local managing director. Even if it is about staffing the specialist positions in the second management level, the respective department must be involved in Germany but the last word should come from the Indian managing director. The company is managed as regards content through the goals of the company, essentially through the business plan. The managing director reports to the Board of Directors. He knows what is expected from him but how he does it is his concern.

In any case you must regularly interact with the managing director. A lack of communication is one of the main reasons for failure or negative developments. You have to make it a habit of communicating with the managing director about the goals of the company and the degree to which the goals are achieved. You should also be prepared to listen because all the demands and specifications given to the Indian company by the parent company may not be sensible.

German entrepreneurs should be able to trust the Indian management

Experience has shown that the willingness of many German companies to trust their local Indian management and to give responsibility is often lacking. Instead the German companies get involved and the result is that the really good Indian managers become discouraged and turn into yes-men or look for another job. The tendency of Job-Hopping which Indians are often accused of can be put into a perspective considering this background. And those who put up with this type of management without complaining certainly aren’t the best managers.

The Board of Directors: Firstly this body has the function of leading the company (Executive Board functions) as well as supervising it (supervision or advisory function). Normally the board belongs to the Managing Director, a responsible person from the parent company e.g. the Chairman. In addition shareholders can appoint other people who they trust.

The salary of the managing director is decided depending on the degree of the goals achieved. It is profitable for the managing director if the company does well and vice versa. This should be perceptible in his income.

Caution is recommended here. Good performances must be honoured with one-time payments which can be assigned for a defined period or a project. The basic salary must be adjusted only to balance the general increase in costs or if it becomes clear that the salary is different from that of the comparable positions in other big companies. You should leave it to the managing director how and to what extent he motivates his employees for such performance incentives.

A great deal of closeness is damaging

One last point: How do Indian employees really guide their German bosses? We experience it time and again that foreign managers are made dependent to a certain extent on their Indian employees. It starts harmlessly with invitations to family events or for a dinner at home. Then there are small gifts for the wife or the daughter. It is extremely friendly to send home a box of mangoes in the mango season unexpectedly by freight. No problem in all this but you have to be on guard: The small gifts start becoming more valuable and the relationships more closer. At some point becomes difficult to have an objective employee management. MM

* Dr. Johannes Wamser is managing director of Dr. Wamser + Batra GmbH in 44791 Bochum

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