When India started liberalizing in 1991, many expected it to follow the path of export-oriented low-wage manufacture charted by other Asian countries. This proved impossible since Indian politicians would not liberalize labour laws, which made labour artificially expensive. But, to everybody’s surprise, India leapfrogged this area and achieved huge success in high-tech areas, ranging from computer software to R&D.
How so? There were many reasons. But one that escaped attention earlier was highlighted by Vivek Wadhwa in 2008 in the Harvard Business Review. In an article titled “A disciple becomes a guru,” he showed how Indian companies had innovated skill training to the point where they now had much to teach the US.
Back in 2002, India claimed to produce 350,000 engineers per year. But this included “diploma engineers” who were not true engineers at all. India actually had only 102,000 real engineering graduates in 2002. This went up to 222,000 in 2006 and may be double that in 2011. India does have some excellent engineering schools, but McKinsey estimates that only 25% of Indian engineering graduates are good enough to work for multinationals (and only 15% of finance graduates and 10% of those with degrees of any kind).
Yet in 2007, India’s five largest IT services companies added 120,000 engineering jobs, and IBM and Accenture added another 14,000. Pharma R&D companies boomed. And foreign car companies made India an export and R&D hub to capitalize on its engineering skills.
Where did so many quality engineers come from? Wadhwa sent a research team from Harvard and Duke Universities to find out. He discovered that Indian companies were first disciples, learning from the best practices of Western companies in India (like IBM and Accenture). Then the Indians innovated and improved training and management systems much further, so that the disciples became gurus.
In recruitment, Indian companies stopped looking at resumes. Good resumes often reflect an ability to write good resumes, not real skills. Instead, Indian companies put applicants through psychometric tests and rigorous interviews to identify general abilities and aptitude, rather than specialized skills. Instead of hiring only from elite engineering colleges, companies like Infosys and TCS recruited from second- and third-tier colleges, and also from arts and science schools.
Multinationals preferred to recruit people with established skills. But Indian companies realized that recruits had to be trained from scratch. Many companies virtually became universities, employing hundreds of trainers.
The Infosys Global Education Centre at Mysore trains 13,500 people at a time. For arts and science recruits, TCS provides an additional three months of training. In all, many recruits get four to seven months of training before starting work.
This would be impossibly expensive in the West. It is economic in India. Thus, low-cost training has been transformed into an international advantage, giving India a competitive edge in high-tech exports.
Training is a continuous process, not just in technical issues but also in management skills, quality consciousness, communications, foreign language and personal-effectiveness skills. Companies commonly mandate one to four weeks of yearly training. The career development and salaries of staff are linked to skills acquired from training.
Mentorship by senior executives is another key Indian practice. Cadence India has a “leaders-as-teachers” program: every manager must spend one to two weeks teaching internal classes. Even the CEO is not exempt.
Managers are groomed through fast-track programs for the best-performing employees, who then get preference for promotion. Once, Indian companies desperately sought foreign-returned managers. Today, they can find better talent locally. Returnees from abroad can have a hard time getting a good job.
Employees get reviewed at the end of every project and are prescribed training if found to have weaknesses. Mechanisms such as 360-degree reviews (wherein you review your bosses and peers) and balanced scorecard reviews are widely used. Managers are evaluated on a variety of non-financial measures, including employee satisfaction, attrition rates and mentoring.
This constant skill upgradation has enabled India to move into higher realms of innovation and R&D. In aerospace, Indian companies are helping design everything from engines to in-flight entertainment systems. In pharmaceuticals, Indian companies are discovering drugs and doing clinical research for the largest multinationals. In autos, India has not just designed components for Detroit but also created the Nano. Over one lakh Indians are now in advanced R&D. General Electric has spent $50 million on making India its largest R&D base in the world.
The software industry complains of a high attrition rate — up to 30% employees leave every year. But this means that companies end up training people not just for themselves but for the whole industry. That is one more secret of India’s success.