India Rates Best, Worst in Management Study

NEWS

Carol Pinchefsky

A study finds that India's multinational companies have the best management practices.

Companies in India display some of the best and the worst management practices, according to a joint report from strategic consultants McKinsey and Co. and the London School of Economics.

Management practices in multinational companies in India are second only to management in the United States. While the management of local Indian companies fares poorly, landing at the bottom of the study.

Stephen Dorgan of McKinsey and Co., one of the four authors of the study "Management Practice & Productivity," says "I can't give a reason for why India is at the lower end and the higher end. India is where it is."

However, he pointed out one particular result: 75 percent of U.S. firms are worse managed than the top 10 percent of Indian firms.

One theory as to India's strong multinational performance is that, as one of the world's fastest-developing economies, it's open to foreign ownership and the practices that multinational companies bring. India has a good deal of opportunity to learn from multinational companies, as businesses such as American Express and General Electric have established branches there.

Click here to read why U.S. IT firms are starting operations in Canada.

The study revealed that multinational companies are more successful than government-run organizations and family firms. More importantly, they're even more successful than local companies, which have a home-turf advantage. And as the study attributes the increased performance of a company to a manager's good practices, this means multinational companies have better managers than any other workplace.

Why is this? Dorgan says, "When, say, Starbucks opens a branch in the UK, it doesn't transfer people, it transfers management practice." In other words, multinational companies propagate the best techniques in their new frontier, while leaving the unsuccessful methods out in the cold.

Like the United States and the United Kingdom, Indian firms tend to manage people better; Indian firms are more likely to reward outstanding performance and give promotions based on merit. Countries like Japan, Germany, and Sweden excel at operations management.

Unfortunately, good management cannot be quantified in simple commandments, such as "thou shalt give bonuses when reaching this goal." The techniques to best align a firm's strategies with its resources can be easily researched, though.

Read more here about why India will soon by eclipsed as the world's biggest offshoring center.

The study noticed that good management is helped by flexible labor markets, competition within a given market, and educated employees. (84 percent of managers tend to be better educated than their employees by a degree level or higher.)

The project reviewed more than 4,000 medium-sized manufacturers in the United States, Europe and Asia and took five years to complete.

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