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Cover Story
Making sense of the rise in corner office outsourcing
As businesses become more complex and even more globally integrated, the demand for expatriate managers who can bring in leading-edge management know-how and experience of operating in diverse environments is on the rise
Issue Date - 02/02/2012
It is not uncommon these days to find an Indian heading an American corporation, or an Asian at the helm of a European multinational. The rise of global conglomerates and multinationals has spawned the emergence of international executives and a growing number of companies across the world, from airlines and hotels, to retail chains, consumer goods firms, pharmaceutical giants and finance majors are recruiting top executives from different countries. And while the trend may be more pronounced in the developed world, it is catching on in emerging markets like China, India, Brazil and the others. The recent years have seen many Indian companies hire an increasing number of expatriate managers to run their businesses. Promoters of many big Indian firms believe that foreign professionals and managers can add value to companies in their race to achieve global benchmarks.

At a time when Indian CEOs are storming the Bastille of the global corporate heartland and are helming an increasing number of powerful corporations around the world, even suggesting that expat CEOs perform better than their local peers is bound to raise a few eyebrows. Leaders like Victor Menezes, Ajay Banga, Rajat Gupta, Vikram Pandit, Indra Nooyi and Anshu Jain have shown that Indians are second to none when it comes to managing global corporations. An Indian, Ajit Jain, may yet end up as successor to the legendary investor Warren Buffett at Berkshire Hathaway. According to data compiled by Egon Zehnder (ranked as one of the top five executive search firms in the world), “S&P 500 companies have more Indian CEOs than any other nationality except American.” As per a research undertaken by professors from Wharton and China Europe International Business School, there were 13 Indian top management executives in the 2009 list of Fortune 500 companies.

Indian CEOs may be in greater demand the world over; what is equally true is that foreign-born expats are quite thick on the corporate terra firma in India. Take the automobile sector in India, which has seen expat CEOs one too many. Shinzo Nakanishi is Maruti Suzuki India’s Managing Director and CEO; Karl Slym was the driving force behind GM India till recently and has now been replaced by Lowell Paddock. Similarly, Carl-Peter Forster was MD and group CEO of Tata Motors till late last year, and Takashi Nagai was appointed President and CEO of Honda Siel Cars India last year. Expat CEOs are visible in other sectors and industries as well. In aviation, Neil Mills has been the CEO of SpiceJet for quite some time. In retail, too, expat CEOs abound. Brian Bade is the CEO for the digital format of Reliance Retail; Rob Cissell is CEO of Reliance Retail & Shawn Gray is the Chief Operating Officer. South Korean electronics majors LG and Samsung in recent years have had a string of expat CEOs as heads of their India offices.

But before we look at the home runs of expat CEOs in India, it would be better to find out how the Indian exported CEO has performed. At first, the rise of the Indian CEO comes across as a paradox. Despite being a country with a teeming population of 1.2 billion (where 26.1% of the people live below the poverty line as per 2005 World Bank estimates), corporate culture has been a late and slow bloomer in India where efficient management of business resources and commerce is still not deeply tattooed. Under the circumstances, it is a surprise that Indian CEOs have become the flavour of the global business community at all. But dig a little deeper and one finds that in the very crucible of challenging circumstances lies the Promethean spark that has kindled the careers of many bright CEOs from India.

Think about it. Despite the poverty and the penury, the country has large pockets of prosperity and enviable standards in many fields. Our universities and institutions may not rank in the top rungs of the global sweepstakes but they churn out some of the most brilliant minds and top-drawer talent. The country has a bulging middle class population of over 300 million, with a strong ethos of adapting to new challenges and innovating in the face of adversity. No surprise then that the country has proved to be the perfect breeding ground for the 21st century CEOs who can survive tough environments and manage business in uncertain times.

But the proof of the pudding is in the eating and the balance sheets of companies run by these Indian born CEOs speak for themselves. Take PepsiCo’s Indra Nooyi, for instance. She joined Pepsi in 1994 and rose to become its President and CFO seven years later. By 2006, the company had recorded revenue growth of 72% and net profits doubled to $5.6 billion. Citigroup’s Vikram Pandit was named CEO in December 2007. One can say that he has ended up destroying shareholder wealth. The day he took the corner office, Citigroup shares were trading at $348. Today, the scrip trades around $30. But then to lay the blame at Pandit’s door would be like barking up the wrong tree. His predecessors, thanks to their insatiable appetite for debt-based derivative products, had left Citi’s finances in a highly strung and leveraged state, which came undone once the sub-prime mortgage crisis reared its head. But to give credit to Pandit, he did not shirk from fulfilling his responsibilities. Pandit testified to the Congress, pledging that he will draw a salary of $1 till the company turns a profit. True to his word, he did not accept any compensation before delivering five consecutive quarterly profits.

In the case of expat CEOs running companies in India, their number seems to be on the rise. However there is a key difference between expats in India and their global counterparts - while the latter manage full-fledged organisations, the former usually manage SBUs of the MNC. Speaking to B&E, Swapnalekha Basak, former Head of Human Resources at SAS Institute Inc., says: “Publicly listed Indian companies are not yet comfortable with idea of handing over the reins to a foreigner. So you have a situation where an MNC plants its own guy in the Indian SBU.” According to Basak, such an expat head cannot necessarily be referred to as a CEO. Rather, she asserts that “he’s more of a project manager whose job is to set the momentum and ensure that the SBU does not lose sight of the company’s values and strategic focus.”

A look at the average expat CEO in India confirms this view. Except for a Antonio Helio Waszyk of Nestle India or a Neil Raymond Mills of Spicejet, everyone from Michael Boneham (President and Managing Director at Ford India) to Gwyn Sundhagul (CEO, Reliance Retail Ltd.) and most of the remaining lot are heading SBUs or a certain division of an Indian major. As such, it does become difficult externally to measure output in terms of financials. But expat CEOs, known for their “prove it” attitude are often passionate about chasing financial targets and bumping productivity. Where they have failed, in most cases, the reason has been their poor adaptability to Indian culture and diversity. But their utility is still non-negotiable considering that they carry the company’s core values and brand ethos and institutionalise them in the new market. After that, a sizeable number of them prefer to give way to local talent. And past experience proves that is the best way to go.
Amir Moin           

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