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1. Azim Premji, Chairman, Wipro 2. Firdose Vandrevala, MD, Tata Power 3. G.V. Prasad, Executive VC & CEO, Dr. Reddy's Labs. 4. Nandan Nilekani, CEO, President & MD, Infosys 5. Brian Tempest, CEO, Ranbaxy 6. Aditya Puri, MD, HDFC Bank 7. A.M. Naik, CMD, L&T 8. S. Sandilya, Chairman, Eicher Motors 9. B. Ramalinga Raju, CEO, Satyam Computer 10. K.V. Kamath, CEO, ICICI Bank 11. B.S. Shantharaju, MD, Gujarat Gas 12. Rahul Singh, MD & CEO, e-Serve International 13. H.M. Bharuka, MD, Goodlass Nerolac

A company is not dissimilar from the average human body. An organisation is but a conglomeration of organs. Each has its individual role to play. And, should any one move out of sync, the whole organisation is affected, admittedly, by varying degrees.

In the course of conducting the Business Today-A.T. Kearney study on India's Best Managed Company (the most comprehensive of its kind, even if we say so ourselves; see How We Identified India's Best Managed Company on page 122), we realised that there are several common threads that run through India's best-managed companies. It is our belief that some of these practices distinguish the best managed from others.

Managing Assets That Go Home Every Evening

Human resource management is one of India's biggest challenges. Dynamic forces are altering the competitive landscape for companies. Throughout the world, companies are gaining the same access to technology and information about processes as their competitors. As access ceases to be a factor of competitive advantage, the quality of a company's workforce is all that differentiates it from its competitors. Ironically, as new technologies continue to change the face of the business, the last vestige of opportunity for a company in a competitive environment is its people.

Globally, companies that manage their people the best have undergone radical transformation over the last decade. The changes that they made have been focussed in five key areas: implementation of core values and leadership competencies; redefinition of the company's people philosophy; investment in the key hr productivity levers; realignment of the hr organisation with the needs of the business; and the development of a clear and consistent leadership and succession planning model.

India Inc. is likely to find that the joy of exponential growth is accompanied by the frustration of talent scarcity. Leadership and succession planning are a key human resource issue, not restricted to the top management, but a four-step process spanning an organisation's hierarchy.

Identifying talent through a robust performance appraisal system: India Inc. has traditionally relied on confidentiality report (CR) based performance appraisals. Organisations across the world are moving towards Key Result Area (KRA) based performance management systems. KRAs drive a positive culture of result-orientation. Further, being more objective in nature, they facilitate the process of identifying talent. We see an emerging trend among Indian companies to go the KRA route.

Identifying successors by matching available skills with job requirements: This involves matching skills sets to job requirements. The key lies not just in individualised documentation of skill sets, but more in really knowing the potential successors

Developing talent through adequate employee development and training processes: Typically, there exists a gap between a role-oriented skill set and that available in a candidate. For the candidate to play the desired role successfully, the gap should be bridged through training. Often, employees find it difficult to take time out of work to spend on training. Hence, such gaps go unaddressed. Globally, best-managed companies bridge such gaps by making training mandatory or by making subordinate development the supervisor's key performance criteria. Merely 30 per cent (see Best Practices Scorecard on page 110) of India's best have adopted this practice. Having said that, the importance of on-job training should not be ignored.

THE EQUAL OPPORTUNITY EMPLOYER: ICICI, which boasts a best-in-class succession planning system, is a true meritocracy. The number of women in senior positions, such as (L to R) ICICI Ventures' MD & CEO Renuka Ramnath, ICICI Bank ED Chanda Kochhar, ICICI Bank Joint MD Lalita Gupte and ICICI Bank Deputy MD Kalpana Morparia, is testimony to that

Top companies are using "study and learn as you go" approach. This hinges on employee empowerment. As Aditya Puri, CEO, HDFC Bank, puts it: "We only look for the right talent and attitude; the right experience is anyway not available. The Indian banking industry is undergoing some first time changes. Hence all of us need to learn and execute. We identify top performers and promote them quickly. In the process half fail. However, we have achieved our objective-we create a talent pool ready to take on new challenges."

Companies such as ICICI Bank leverage online training effectively. At ICICI Bank, it is mandatory to complete specified courses in a defined timeframe. These courses are not just about reading at leisure, you need to take tests and 'pass' them. Best managed companies train employees to make the right decisions. Rather than choosing the first solution that presents itself, these professionals evaluate alternatives holistically.

Retaining Talent: In addition to providing exciting work, best-managed companies also create qualitatively superior support mechanisms for their employees. The question is: Is India Inc. sensitive to the needs of its workforce? The following facts are indicative of ground realities:

• 20 per cent of India's top companies don't have a clearly defined policy on sexual harassment

• Only one company has a stated policy for part-time employment for working mothers

• Paternity leave as a concept is alien to India Inc. Only 16 per cent of the participant companies provide any form of it

• The concept of priority leave (birthdays of spouse/children considered as restricted holidays) is as familiar to them as the average Martian may be to most humans.

This snapshot is based on a survey of India's top 50 companies. These percentages can only go southwards if we extend it to the rest of corporate India. However, all is not lost. Some of India's best are looking at innovative ways to create organisational support. e-Serve has a body called e-Serve Women's Council that seeks to help professional women overcome work related challenges and address work-life issues. And Wipro is considering setting up BPO offices in smaller towns so that commuting time of its employees is shorter, thereby allowing for more family time.

THE INNOVATION ENGINE: Ranbaxy, with CEO Brian Tempest (second from right) and Executive Director Malvinder Singh (fourth from right) at its helm, is an R&D driven pharmaceutical company that is addressing the challenge of linking its R&D efforts to business- and market-imperatives

It is clear that the initial decades of the new millennium will belong to India Inc. However, people will play a key role in the country's march to greatness. Companies need to empower people adequately to convert potential to reality; ICICI Bank, for instance, does. "Kamath believes in champions," says G. Raghuram, a professor at the Indian Institute of Management, Ahmedabad and a judge for the final stage of the BT-A.T. Kearney study (see Our Panel on page 126), referring to ICICI Bank CEO K.V. Kamath's efforts to empower his people and set in place an effective succession planning process (one sign of the fairness of both is the number of women in senior managerial positions at the bank; see Best Practice on page 88)

The Big Idea Just Got Bigger

Innovation is driving India Inc. faster forward. India Inc. has realized that cost arbitrage is not a sustainable model. As Nandan Nilekani, CEO, Infosys Technologies, says: "Cost arbitrage will go away because intellectual capital of the world will become fungible and the rupee will become stronger".

Ranbaxy and Dr. Reddy's are investing strategically in R&D; Eicher, in new product development; Gujarat Gas, in innovative alternative uses for gas; and Tata Power, in new avenues of delivery excellence.

To make the innovation process effective, best-managed companies follow three principles

Focus on Priorities: Innovation is most effective when it is a strategic priority. Leaders begin with an intimate understanding of what their brands communicate, what unarticulated needs they satisfy and what competitive niches they fulfil. Effective innovators investigate gaps in their portfolios and focus their efforts in plugging these holes. Leaders in product development have created formal processes for deciding which products should go to the market, what ideas should be developed and what areas are worthy of further exploration. They develop business cases to drive the innovation process.

PERFECT PLANNER: Infosys' Head of Corporate Planning Sanjay Purohit is the champion of a strategic planning process that spans four levels and three time horizons

Begin Collaboration Early: Creativity knows no bounds. Good ideas can come from anyone-employees, customers or suppliers. The key lies in being able to harvest these ideas. Satyam Computer has a process called "Idea Junction" where employees can submit their ideas. Satyam measures the effectiveness of the entire programme; it publishes statistics on number of ideas received versus those under screening versus those awarded. Employees at Satyam know that their ideas count.

Leading edge companies have used cross-functional teams to develop products for years. However, fewer companies have taken the next step in the process-involving external stakeholders, namely consumers and key suppliers. Companies that stretch defined boundaries are effective innovation-leaders. Goodlass Nerolac leverages the knowledge residing with its channel partners for product development and process improvement. It is the first company in the Indian paint industry to conduct a vendor conference for knowledge sharing. Here, the company's top 25 vendors make presentations on the latest developments in their respective industries. The company leverages this information to refine its products and processes.

There was a time when customer satisfaction was all that mattered. Now best in class companies think in terms of customer success. They identify unarticulated needs of their customers to ensure their success. Goodlass Nerolac's "value addition" folder provides a fitting example of how a company strives to achieve customer success. The "value addition" folder maps value addition processes and success rates for key customers. The process enables the company to explore options aimed at effectively growing value for its customers.

Support Enabling Processes: In large organisations, innovation is not an entrepreneurial activity. It is a process. And it requires enabling mechanisms like knowledge management to be effective. A significant proportion of companies in India (see Best Practices Scorecard on page 110) use knowledge management systems. But the effectiveness of these systems is in question. Many myths surround knowledge management

• Capturing all the knowledge of the firm is great-"just in case"

• By installing it systems, we will capture and disseminate knowledge-"build it and they will come"

• Knowledge management automatically leads to improved business performance

• People like to share knowledge

Knowledge management is much more than installing it systems. It is a paradigm change. It requires changes not only in processes but also in culture. The first step to effect cultural change is to motivate employees to share knowledge. Globally, organisations use hr interventions like recognising contribution to knowledge creation as a performance appraisal parameter.

The next step is to create a pull for the knowledge thus captured, to put quality checks on any document being submitted, to organise information in such a manner so that it can be easily retrieved. Lastly, the most difficult step is to use this knowledge for innovation!

Infosys has near perfected the art of knowledge management. It believes that it is important to build a knowledge sharing culture within the organisation. Innovation is extremely difficult to manage- and merely innovation in itself is not enough. The challenge is to not just generate fresh ideas but to make them commercially successful. That's the challenge facing pharma major Ranbaxy Laboratories (see Best Practice on page 104).

Think Global, Act Global

THE GOOD COMPANY: Azim Premji is seeking to make the education system 'creative' through a programme targeted at primary schools

Globalisation is high on the agenda of India Inc. Its global aspirations can be seen from the fact that a large proportion of companies surveyed (see Best Practices Scorecard on page 110) have clearly defined globalisation targets and a well-documented strategy to achieve the same.

Globalisation of systems and processes facilitates the management of global operations. To manage its global expansion, Ranbaxy is trying to build a "Human Bridge" across its operations in various countries. The objective is to ensure that its Indian workforce is tuned into global market needs.

Best in class companies believe globalisation of resources is the true measure of globalisation. Global resources help harness diverse perspectives within an organisation. India's top-tier it companies are truly global entities. Companies like Wipro and Infosys have built a global workforce that has been successfully integrated into the respective companies' culture and ethos. Forget companies in industries such as it services and pharmaceuticals, even those in areas such as engineering and construction such as L&T (see Building L&T Brick By Brick on page 64) are going global. Today, the environment enables India Inc. to embrace, partake, contribute and benefit from the proverbial 'global village'.

The Good Company

In a world where brand value and reputation are increasingly seen as a company's most valuable assets, Corporate Social Responsibility can build the loyalty and trust that ensure a bright sustainable future. Some of the other obvious benefits of Corporate Social Responsibility are good relations with the government and communities, and increased employee morale and pride. The true value of CSR initiatives can be derived only when there is a greater level of employee participation. To demonstrate management commitment towards social initiatives, the following can be done:

• Treat CSR as a business process. India's best companies have already started doing this

• Encourage employee participation. Recognise employees for participating in CSR initiatives

• Leverage skills residing within the organisation for social causes by looking seriously at the option of implementing 'Organic CSR' wherever possible, that is initiatives related to your own area of business

True enough, the CSR initiative of Wipro (see Best Practice on page 78), under the aegis of the Azim H. Premji Foundation is focussed on ensuring that "the education system in schools should foster creativity rather than role learning", a perfect match for a company that has made innovation one of its corporate themes.

The Governance Imperative

In the last couple of years, corporate India has witnessed action in the area of corporate governance. There has been a whole host of recommendations, reports and guidelines to strengthen corporate governance. Yet, as one CEO puts it, "We as a society don't hesitate in negotiating with our values. There is no corporate governance in India" Another one says, "Filling forms is of limited help."

In years to come companies will have no choice but to stringently follow corporate governance norms. As Azim Premji, CEO, Wipro puts it: "The stock market is dominated by large investors who are particular about corporate governance."

India Inc. should consider doing the following:

• Improve board structure and composition-separate CEO and Chair positions. Improve gender diversity.

• Establish a code of conduct for the board and monitor compliance

• Closely monitor board performance-with reward mechanisms for good corporate governance practices at individual and team levels

• Increase number of well informed independent directors and promote independent audit committees

• Establish a 'training/development' program for directors

• Include a separate section on corporate governance in the annual report with a detailed compliance disclosure

Regardless of the state of corporate governance in India, we strongly believe that more than anything else, investor activism and the need for transparency will entice Indian companies to comply with good corporate governance practices.

WHAT'S UNSEEN: Tata Power manages its operations efficiently through power distribution centres such as this one; what's not seen is the company's ability to negotiate the regulatory regime

Life In The Fast Lane

Managing growth is a wide area that covers almost all functional aspects of an organisation. And strategic management and the management of regulatory issues are critical aspects of it. An organisation without well-defined strategic orientation is like a ship at sea without a rudder. A strategic plan enables the organisation to move towards the proverbial shore.

The plan itself is an outcome of the strategic management processes. This includes the process of articulating strategy, defining required initiatives, allocating resources, determining targets and budgets, reviewing performance and finally taking corrective action. It is distinct from daily management processes. A good strategic planning process has four key components, plan, do, check and act. That sounds simple but the challenge is to apply these principles holistically. Infosys boasts a strategic planning process that spans three time horizons and four management levels (see Best Practice on page 60).

To manage structural change in several sectors, the government is taking initiatives to refine the regulatory framework. In such a scenario, India Inc. needs to adopt robust systems and processes to cope with the market and regulatory volatility. The regulatory framework in India is undergoing significant changes. Globally, best practice organisations follow four key principles to align themselves with the changing regulatory framework:

• They adopt a proactive regulatory strategy, that is they share their perspective with the regulators so as to create a better regulatory framework

• They walk together with other stakeholders. They represent the voice of their industry and not their own

• They create a dedicated group to look after regulatory issues

Closer home Tata Power has a regulations team that helps the utility company find its way through the highly regulated and complex industry where even today everything from tariff norms to transmission priorities are a direct function of government diktat (see Best Practice on page 96).

It is evident that some, or all of the factors enumerated above have a role to play in the sustained financial success of India's best-managed companies (they consistently outgrew their industry-peers both in terms of growth in revenues and market value, thereby becoming value building growers). Clearly, tangible results (growth, profit, market capitalisation etc.) can only be achieved when a 40-piece orchestra of intangible brilliance (culture, employee skills and motivation etc.) regularly performs the most brilliant concertos to perfection.

Kaustav Mukherjee is Principal, Anshuman Maheshwary is Associate, Mragank Jain and Bhavya Nand Kishore are Business Analysts, and Satyajit Lahiri is Marketing Manager, A.T. Kearney.