Work in progress

India is playing catch up to foreign multinationals when it comes to management capability, says a report prepared by KPMG for All India Management Association

Foreign multinationals seem to have adapted and evolved faster compared to other types of organisations to the changing environment, according to the Management Capability Index 2014, a report prepared by KPMG for AIMA. The report, used to measure and evaluate management capability across industries, involves over 500 respondents spanning senior and mid-management levels.

Effective leadership and organisational capabilities have assisted foreign multinationals surpass the MCI India 2014 across all parameters, while Indian multinationals have some ground to cover. Government establishments have a relatively larger scope for improvement with a score of 64 per cent. SMEs have scope for development in financial management systems, external relationships, and application of technology and knowledge.

Not surprisingly, the flourishing Indian IT industry (scoring 75 per cent overall on its management capabilities) has given itself a high rating on most aspects - ditto for ITES, media and telecommunications. The report attributes this to the organisations' relative strength in the dimensions of vision and strategy, people leadership, financial management and innovation in products and services. There are also focused efforts to develop and maintain global standards, as a major portion of revenue comes from their international operations. Retail and consumer goods, life sciences/pharmaceutical and healthcare industry, with a score of 63 per cent and 65 per cent respectively, have scope for further improvement.

Organisations with the largest revenue cap (more than Rs 50,000 crore) perform relatively better due to well-defined structured processes.

Developing a pipeline of future leaders and grooming of subordinates by respective managers was highlighted as a major improvement area in the survey. Succession planning has emerged as one of the biggest challenges faced by the C-suite. The corporate governance norms announced by the Securities and Exchange Board of India (Sebi) also mandate the need for succession planning across the boards of all organisations.

Interestingly, while leaders from the HR/CSR/ sustainability departments have given a higher rating to human resource planning identifying it as an integral part of the annual business planning process, leaders from other departments may have not done so. "The 'people' function is listed among the top three challenges for a CEO, across the world," says Richard Rekhy, CEO, KPMG India. "If this doesn't feature in your organisation's priority list, such a company will not benefit. Companies that bring HR to the main table prosper more." This highlights the growing need to integrate strategic HR planning with mainstream business planning processes.

The survey findings suggest that foreign multinationals, on account of their people-friendly policies, are observed to be leading in this dimension while Indian multinationals fare even lower than government establishments, signifying a scope of improvement for them, especially in developing and retaining key talent. Leaders from IT/ ITES, media and telecommunications industry are leading in maintaining growth and empowerment of its people. This could be attributed to the maturity of HR strategies and policies required for managing their large employee base. Leaders from the retail and consumer goods, as well as energy, oil and gas industries are relatively lagging behind in this dimension.

Leaders from the IT/ ITES, media and telecommunications industries believe that their organisations are faring better on the technology knowledge and adoption dimension as opposed to other industries. This could be due to their technology-intensive nature of work. Leaders from the retail/consumer foods and life sciences industry lag behind on this aspect. Primarily, the report throws light on three aspects where Indian companies have a huge scope for improvement: the application of technology, managing of external relations and a clear focus on organisational results and comparative performance.