CAPPELLI_ET_AL_2010 - 6 Academy of Management Perspectives...

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EXCHANGE The India Way: Lessons for the U.S. by Peter Cappelli, Harbir Singh, Jitendra Singh, and Michael Useem Executive Overview We describe a distinctive approach to business associated with the major corporations in India and contrast it with practices in the United States. Specifically, the Indian approach eschews the explicit pursuit of shareholder value in favor of goals associated with a social mission. These companies make extraordinary investments in their employees and empower them in decision making. These practices combine with a distinctively Indian approach to problem solving to create a competitive advantage that has led to spectacular business growth, not just within India but in international markets as well. A particularly important lesson for the United States is that the major Indian companies are not succeeding despite the fact that they are pursuing a social mission and investing in their employees. They are succeeding precisely because they do so. T he contemporary U.S. model for business is in trouble. That model asserts that maximizing shareholder value is the primary goal of busi- ness—indeed, some would say the only goal of contemporary business. This model is fairly re- cent, however. Until the early 1980s, the domi- nant model in the United States was the “stake- holder” model, which asserts that business has many groups with an interest or stake in its oper- ations, and that the interests of these different stakeholders have to be balanced. This model was pushed aside by theoretical arguments emanating from the field of finance, which then played out in the sphere of public policy beginning in the 1980s (Epstein, 2005; Williamson, 1993). With respect to management practices, we be- lieve there are three additional elements at the heart of the contemporary U.S. model that are significantly different than practices elsewhere. The first concerns business strategy. The U.S. approach focuses attention outside the firm in the search for opportunities and, to a lesser extent, in a related search for competencies through mergers and acquisitions and joint ventures. The second element focuses on restructuring: When markets or strategies change, U.S. companies lay off em- ployees to cut costs and then hire new ones to redirect the business toward new markets or to meet new skill needs. The ability to restructure is seen as a key to competitiveness. Finally, in this model efforts to harness the motivation and abil- ities of employees tend to focus mainly at the top, with financial incentives (via equity) offered to This article is based on ideas put forth by the authors in their recent book, The India Way: How India’s Top Business Leaders Are Revolutionizing Management, Harvard Business School Publishing, 2010.
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This note was uploaded on 06/07/2011 for the course BMKT 856 taught by Professor Seshadri during the Spring '11 term at UNL.

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CAPPELLI_ET_AL_2010 - 6 Academy of Management Perspectives...

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