Why it makes sense to involve external help in strategically important and critical phases of an engagement with India. An analysis by WB turnaround management®, a specialist department of the Indian management consultancy Dr. Wamser + Batra GmbH.
It is not uncommon for German companies to start their Indian adventure optimistically, but quite unprepared. Often in the form of establishing a new joint venture together with former sales partners, by investing in a partner who is active in the market with the corresponding product range, or even through the targeted acquisition of an Indian company.
Seemingly endless market potential...
Everything initially starts with a certain euphoria. The market assessment, influenced by the enormous size of the potential market – measured in terms of population – is positive. The expectations are accordingly high, if not too high.
The undisputed fact that we have in mind is the high demand for imported capital goods “Made in Germany”. In order to establish your product on the Indian market beyond export and gain a foothold locally, local production is often essential. The decision for local production is motivated by the objective of being able to offer technology “Made in Germany” competitively at lower costs - both in India and for export to other Asian or African countries. This is often accompanied by the hope of achieving further cost advantages (e.g. in terms of wages) for the company's entire value chain, for example in the form of the production of components for European production.
Disillusionment sets in
Nevertheless, there is competition that should not be underestimated, often from former employees who set up their own business in the same market. Their lower overheads and downwardly revised quality requirements can eat up the initial lead that was taken into account.
It should also not be underestimated that the Indian leadership culture differs greatly from that of Germany and Europe. Flat hierarchies are the exception and, especially in older companies, there is a strong hierarchical mindset. It is guided from top to bottom. Seniority also plays a significant role in this ranking. It can happen to a young manager who is successful in Germany but inexperienced in India that he does not find acceptance as an authority and has to earn it slowly and with great sensitivity. In these cases, it is advisable to examine the resilience of the organization.
The combination of shared responsibility with organizational processes that span continents is unusual and requires comprehensive communication and careful monitoring in the process of integration. On both sides, cultural differences, different work mentalities and conflicting priorities can create potential for frustration. For example, on the Indian side there is frustration about the often strong intellectual pressure from Germany, while here there is frustration about the misunderstood management tools of their Indian colleagues, which are so “self-evident”.
In this breeding ground, disappointments can give way to initial euphoria and hope, which are then initially tolerated and kept secret, but ultimately lead to a dilemma for both sides.
Many case studies prove that budget planning is usually too optimistic. It is based less on facts, market analyses, etc. and more on assumptions. Another reason why a foreign company stumbles is often that local management overestimates the market opportunities. Here too, the market assessment is dominated more by the hope for growth than by a well-founded analysis of market opportunities based on application, market growth and competition. Failure to meet sales and earnings expectations initially leads to the local management setting the goals even higher next year and wanting to achieve them, but there is a lack of precise analysis as to why sales/earnings were not achieved. In response to this, the German parent company will initiate cost-saving measures in the year after next in order to at least improve the earnings situation. The focus is more on the head count “reduction” than on a clear analysis of the causes of why expectations are not being met.
Why Interim Manager in India
In such circumstances, experienced Interim manager with many years of experience in India Act in responsible P&L positions as an intermediary between the parent company and the local organization. The interim manager, who can take targeted measures (related to employees, employee qualifications, product range design, productivity and quality) replaces the conceptual problem analysis and the proposed implementation, in which the company is often left alone and the implementation is only half-hearted or incomplete.
The prerequisite for the interim manager is, after a short-term analysis, to create a basis of trust in the company so that employees and local management open up, do not cover up mistakes, but rather talk specifically about possible potential for improvement. The interim manager's actions aim to create a culture in which mistakes made are acknowledged once in order to eliminate the causes through open communication. This openness is much more likely to be shown to him as an external person, as the inhibition threshold for admitting mistakes is lower.
“In this process of reorganization that the interim manager initiates, it is essential that learning takes place on both sides. Employees and management must be encouraged to address grievances. The German parent company needs an open ear for this feedback in order to then analyze to what extent this provides information about the company's weak points and, together with employees and management, to take steps to eliminate them." says Ralph Tobergte, who has been working on successful interim management projects for several years WB turnaround management® has directed.
WB turnaround management® – the experts from Dr. Wamser + Batra group of companies for restructuring and restructuring projects in India. [find out more]
