Characteristic patterns of how decisions are made in Indian corporate organizations


In every organization, anywhere in the world, decisions need to be made at various levels. However, in India, where several organizations are family owned, decisions taken have several characteristics and patterns. There are decisions taken in the Indian Multinational Companies, and the Indian arm of big multinational organizations as well. This article attempts to discuss how such decisions are made in the three types of organizations in India, in some detail.

Introduction

In any Indian organization, there are always decisions at the operating level that are taken within manufacturing units. There are decisions that are taken at the Regional Office level and those that are taken at the Corporate level. In this article, we will focus on a) decision-making in multinational organizations operating in India b) Decision-making in Indian multinational organizations and c) Decision-making in Indian family organizations with specific reference to i) Operating freedom and the demi-God culture ii) Total control of the family iii) Shop floor decisions and iv) Advent of professional managers.

Decision-making at Multinational organizations operating in India

Reliable information emanating from various sources indicate that most operating decisions are totally decentralized. Since there is a climate of transparency, debate, and discussion in most MNC companies, decisions are often taken on the merit of the suggestion or improvement given by any employee.

For instance, the decision to spend particular amounts on advertisement in local areas are taken by the middle-managers who are mandated to show results in terms of results in FMCG (Fast-moving consumer goods) companies. That is, the decisions are structured to the needs of any particular situation. This is reportedly more so in companies like P&G, Pepsico, Hindustan Unilever, and so on, that are MNCs having many good FMCG products.

However, in matters like long-term settlements with the recognized trade unions that have serious financial implications, the unit heads have limited roles and the HR heads, along with the unit-heads will be engaged in the process of convincing the local trade union representatives to accept variations of the X amount in terms of total increase, that is always kept a secret. The discussions between the unions and the Management takes place at some other location and all that the local unit does is to simply translate the Management stand into some sort of a serious communication exercise. The Top Management takes the final call. Every effort is taken to ensure that there is no strike or lock-out during the process of negotiation on the settlement, which normally takes even six months or more. During interactions with HR managers at various national conferences, this author learned that this is the practice even in the other two types of companies -- the Indian multinational and the Indian family-managed organizations, as far as labor settlements are concerned. none of the CEO's eccentricities were ever known to the Top Management.

As regards finance, there are Corporate guidelines and continuous emphasis on cost reduction across the board. The MNC companies are not known to be labor-friendly at all. Hence, the ruthless cutting down on welfare amenities or the yearly increments to employees across the board does take place at any point in time. Such decisions are taken by the local units by the Corporate office would review all such decisions and take appropriate actions. Major decisions like the total advertising budget, the new products and so on are always taken at the Top Management level.

Decision-making in Indian Multinational organizations

During his HR career spanning decades, this author had worked in a fabulous company called Larsen& Toubro. This is a true Indian multinational. The decisions are totally decentralized. Managers are given functional freedom and the authority manual is extremely clear on what decisions can be taken at what level. Even the junior level executives have the freedom to make operating decisions. There was this single incident that is still fresh in the author's mind. On a particular day, the sixty-odd participants in a particular training program wanted to have cool drinks. The Manager was away in another meeting. There was no way the boss could be contacted in those days over cell phones. However, when he rang up the canteen, the cool drinks were delivered in less than ten minutes. The next day when the manager came along, he simply said that this author was authorized to take such decisions!! There was no signature from the boss required at all.

There are clear cut guidelines to do serious cost-cutting, particularly at the shop floor level. Decisions are totally decentralized. The decision to fly a junior executive on an urgent official trip, when he or she is not eligible to travel by air, can be taken by the senior officer himself. As regards labor matters, the decisions regarding long-term labor settlements, as already mentioned, are centralized at the Corporate level. In matters of finance, the operating freedom to operate within specified budgets is much more than what is seen in many family-managed companies.

Decision-making in Indian family organizations

The Indian family-managed companies are quite complex. Some are companies where the promoter family has a huge chunk of the equity capital. These are closely held companies. The best examples are Madras Cements and MRF, a market-leader in tyres. The second type is the one where the family has a substantial amount of equity capital, but the rest is held by financial institutions and those with the family having a small share but still controlling the companies.

Decision-making in these three types of companies is complex and along with the complexities, also has some distinct characteristics, sought to be discussed with reference to some parameters in the following paragraphs.

Operating freedom and the demi-God culture

In several organizations manufacturing cement, paper, heavy chemicals, sugar and so on, where the manufacturing companies are situated in semi-urban or total rural environments, there is always one trusted leftenant of the CMD at the unit level. This person, normally a professional with a core degree and several years of work experience in a particular field is given total operational freedom. However, unhealthy practices like empire-building and having an army of "yes-men" would sway most operating decisions. In one particular factory manufacturing heavy chemicals, the wife of the unit CEO would walk into the township and even sort out family disputes or the most minor disagreements between any husband and wife!! Decisions regarding promoting a particular person were always taken based on feedback from the unit CEO and his wife would chip in with the feedback as to whether the person is "our person"!! In other words, the executive should be absolute loyalty to the CEO and sing peans of praise about his managerial qualities day in and day out.

Since the plant had advanced technology and a good reputation in the market, none of the CEO's eccentricities were ever known to the Top Management. This "demi-God" culture facilitates decision-making within a particular framework, but the CEO has total control.

Total control of the family

In private limited or organizations that are closely held, like several units of the TVS group, the owner-mangers, who are always professionally qualified, take all decisions and the unit CEO becomes a "doer". He has some power, for example, to decide when he wants a particular Manager of Quality Control to attend to a customer complaint abroad. However, the owner-managers keep breathing down the neck of the unit CEO. All other decisions are decided only by the ruling promoter family.

Shop floor decisions

Within specified limits, most of the operating decisions are taken even by junior executives. This includes shift management of workmen. As long as the cost is continuously kept to the bare minimum and the rejections are also nil or negligible, no questions are asked. The "kaizen" teams often total freedom to do any continuous improvement and those decisions involving any cost can be taken by the department manager himself. Regular reviews of all costs take place and the decision to promote individuals is highly result-oriented.

Advent of professional managers

In organizations like the Murugappa group of Chennai, Asian Paints, the Havels group and so on, the advent of professional managers who get to guide the family members on the financial viability of entire organizations, based on sound logic and effective strategies, has totally changed the decision-making landscape of such organizations. The mighty Tatas and the Aditya Birla group are also examples of this new phenomenon. The Mahindra&Mahindra group also stands out as an outstanding example.

Conclusion

Based on this author's personal career experience and information gathered from a large number of HR executives of various organizations, certain aspects of decision-making of the three types of Indian organizations has been discussed in some detail in the aforesaid paragraphs. The professionalism of decision-making is an ongoing process.


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