Companies have strong plans for growth but are concentrating on building the capability to execute them, says Smita Anand, Asia Pacific Regional Director, Hewitt Associates

How should Indian companies approach the issue of managing growth from an organizational stand-point? What are the aspects they will need to focus on in the coming years?

Interestingly it’s a trend that we are seeing all across Asia. Most companies have seen 2009 as a sort of breathing space after some very high growth period in the not-so-distant-past, a time when things were not managed as efficiently as they would have liked to, but you know the idea was one of bullish growth. I think the impact that 2009 had on those organizations was one of consolidation before they get into the next level of growth. There are some really strong players talking about efficiencies, consolidating the base, covering their various businesses, optimizing profitability, so that the next phase of growth is built on the base of a stronger organization. That I think is the predominant trend.

Companies have strong plans for growth but are concentrating on building the capability to execute them. Focusing on employee efficiencies, productivity, getting more out of the quantity or quality of people within the organization and then looking at the return on investment.

The last thing, which I think is worth talking about, is that companies will not go ahead with a primary strategy of acquisitions for growth. They would probably look for better leverage out of their business processes. So effectiveness of selling for growth - whether its sales network or channels or better leverage of those channels or even selling capabilities, skills and efficiencies - would become a key part for company strategy.

Can we say that there has been a busy period of growth and some excesses, followed by maturity and consolidation?

Obviously there has been a lot of reflection in the past year. Initially it caught a lot of companies by surprise. One of the things we saw in India during the last year was the continued confidence that ‘this too shall pass’ and that we will use this year as an opportunity. What we didn’t see was wild reactions in the way of freezes - there were pay cuts, there was consolidation, there was bonus deferrals - but it was not as dramatic as it was in certain other parts of the world and this speaks volumes for the India Inc’s confidence…to say we will use this year as an opportunity to reflect, regroup and continue.

Do you think they actually have taken advantage of 2009 as they could have. Because a lot of people have talked about it but when you go into the details like which processes have you been able to turnaround or which systems have you been able to implement what is it that really comes out... in the long term, do you really believe that companies have been able to create that fundamental base?

You know that’s a great question and if you are asking that for India I would say its too early to analyze how much more effective companies become in 1 year. But I would say that the biggest achievement would have been more in terms of industry’s awareness, reflection, maturity of perspective, desire and intent to lock in the value of their businesses in terms of cost effectiveness and optimizing in 2009. Did they completely change in one year? I would agree with you here – and I don’t even think its even fair to expect that. So the year achieved the much needed maturity and prioritization in a market that is going to grow for many years.

You know last year also provided level playing fields in some senses between competitors whether it is competing markets or competing organizations, so everybody had a chance to do a little bit of reflection and consolidation. The next stage will tell how much consolidation happened and exactly how well have they been able to implement the things that they clearly wanted to do.

Many entrepreneurs and senior managers in India claim that raising funds is easier than finding the people to manage and effectively utilize those funds. What is your opinion on this?

As I travel more, Indian talent is the one thing I am increasingly proud of, at least from the point of view of people outside of the market. We Indians tend to be very self critical but the one positive thing about our country as a brand is its talent and quality of talent. So you know obviously there is a lot going around. Your question is pertinent in growth aspirations that we have across the region and most parts of the world because of various factors - be it ageing of population or insufficient resources for the next generation coming up or a general talent shortage that the world is constantly trying to deal with. It’s no different in high growth markets like China and India though it plays out in very specific ways.

In India, for instance, attracting intelligentsia from outside the country, making this an attractive destination for more and more Indians to come back, work here and finding a rewarding career is a big challenge. At organizational level it’s a challenge because competitiveness has increased.

Companies are buying out very specific skills and capabilities that they need. Hence retention is an issue, it’s an issue whether you are a great employer or not. But generally there is skill shortage. Reskilling for a different environment, more global environment, more competitive - this is going to be a challenge and there is definitely a shortage in that sense, though not to the extent that some other Asian countries may grapple with.

Can you elaborate on the role of Mergers and Acquisitions for Indian corporate growth?

We recently did this study of some of the best employers across Asia.
We spoke to the CEOs of best employers about their priorities and interestingly, at least among that lot, acquisitions come up as their last priority. It is among the top 10-12 priorities all right, but they are looking more at profitability, employee efficiency, productivity and execution of existing strategy that we were previously talking about. One possibility could be that the first round of growth will look at organic growth and better leveraging off the current client base and market opportunities.

We would be looking at the first half of 2010 but M&A may pick up dramatically thereafter. World Bank projections indicate over 900 deals for over USD 90 billion in Asia-Pac. Despite the slowdown, we understand that there is a deal pipeline of almost USD 15 billion in India and 5-6 of them are for more than USD 1 billion. If you look at China’s statistics, they already have a pipeline of over USD 130 billion and more than 15 deals of those are greater than USD 1 billion.
The point being that there is definitely activity picking up in these markets. There will be a mix of organic growth and consolidation - productivity, better leverage, effectiveness and so on. And further into the year, inorganic growth activity is expected to pick up. From an industry standpoint, the highest M&A activity in India is likely to be in industrial materials, consumer discretionary and consumer staples. Similarly in China, energy, material, financial services, consumer discretionary are the sectors where maximum M&A activity is anticipated.

Smita Anand, Hewitt’s Asia-Pacific Consulting Leader, is responsible for managing the company’s market groups and consulting business in the Asia-Pacific region.