Communications are Key to India Cross-Border Success

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By Mark Hannant

MUMBAI, Oct. 23 – Macro-economic trends currently favor Indian businesses looking to grow internationally and focusing on their communications is one area where they can improve their chances of success. Much ink is spilt writing about the difficulty of creating value through merger and acquisition (M&A) activity. Over half of deals fail to achieve their operational or financial goals according to PwC (M&A Integration Survey Report, 2008). The lack of success is often explained in terms of failed integrations and the reality that “buying is easy, owning is hard.” There is a growing understanding that those failures are in a large part due to the lack of post-merger integration planning and specifically a failure to deal with cultural issues.

Getting the deal done is instead made the focus. It’s usually well-resourced with a battalion of professional advisers giving strategic advice and doing legal and financial due-diligence. Often little resource is allocated to cultural or communications audits that look at the ‘soft issues’ which are ultimately critical success factors.

While domestic deals in any part of the world will typically feature some sort of business culture difference between companies, cross-border deals are inevitably more complex. The cultural issues are magnified and combine with the challenges of new legal and regulatory regimes and geo-political forces to make success even harder to achieve.

Despite the evidence of likely failure, boards persist in chasing the inorganic route to growth. And much of that global activity is currently driven by Asian acquirers doing cross-border deals. The global economic environment is creating new cross-border opportunities which favor Asian buyers. Businesses in the region, certainly those in the two major emerging economies of India and China, are in large part well-capitalized with strong balance sheets and the cash reserves required making acquisitions without the need for leverage. At the same time many target businesses in the west are distressed and therefore current, in historic terms low, valuations make them attractive to the overseas acquirer. The balance of power is shifting east.

Indian companies are finding an appetite for making acquisitions or building international businesses organically. While macro-economic factors play to their advantage it is worth considering some of the cultural impediments.

Western management structures are typically flatter, less hierarchical and there is an increasing focus on soft skills of leadership, communication and engagement. Indian managers have not, in many cases, been schooled in these arts. Few MBA courses in Asia have any significant soft skills component.

Prof. Nitin Pangarkar, academic director, National University of Singapore argues for a shift in focus in Indian business schools saying: “Students from these institutes are good at number crunching. But they lack soft skills like communication and the ability to listen. This is what distinguishes entrepreneurs from managers. Entrepreneurs have the ability to change and adapt to new environments and accordingly change business strategies. Business schools have to shape their students to ensure that they are sensitive to the needs of their customers while managing business abroad.”

There is also a difference in the way corporate communications is seen in India and the west. In India, businesses have historically taken an industrial relations approach to communicating with employees. In the west the notion of employee engagement – opening up internal decision making – is taking hold and replacing the old command and control model. Stakeholder communication – engaging regulators and local communities as well as shareholders, investors and customers – is becoming a well-developed and sophisticated practice. It goes well beyond the investor relations-focused PR which typifies what many Indian businesses thinks of as corporate communications.

The standard corporate communications practice among many Indian companies does not reflect the true capability of the enterprise. Poorly designed websites riddled with grammatical errors and spelling mistakes are often the public face of a high-tech, precision-oriented business looking to expand overseas. The problem is this is the public face of the enterprise to stakeholders in the target business. Winning hearts and minds through the unsettled times that always accompany an acquisition is difficult enough. Add into the mix – the prejudice that accompanies Indian acquisition of assets in the west, different management styles and business cultures – and a set of ill-conceived, inappropriately designed domestically-styled communications collateral and the challenge is made even greater.

There is evidence of a changing mindset and of corporate communications being seen by some Indian enterprises as a strategic practice which can make the difference between success and failure.
Sujit Patil, head of corporate communications at TATA Chemicals has plenty of first-hand experience and represents a new breed of communications professional. TATA Chemicals has increased its revenues significantly in the past five years. That growth has mainly been inorganic. In 2006 TATA Chemicals acquired Brunner Mond with operations in the United Kingdom, the Netherlands and Kenya. Two years later it acquired General Chemical Industrial Products (GCIP) in the United States to become the world’s largest producer of soda ash.

“The business saw the need to invest in communications as a strategic discipline” says Patil. “Internal communications has played a significant role, first in preparing a global mindset among the Indian employees and then in integrating employees across geographies. As we embarked on our global journey the first clear mandate for internal communication was to shape and change mindsets. Creating a global mindset for Indian employees was imperative. Interventions using traditional and non-traditional modes of communications (theater, for example) were employed to create cultural sensitivity and to understand what employees thought about globalization. ”

“The strategy of the communication team was to ensure consistent experiences for employees,’’ he continues.“Post-integration, the approach is to ensure that there are effective mechanisms to enable communication across levels and across geographies so that all employees are aware of key organizational decisions.”

An active member of an international professional association, Patil has built alliances with fellow communications professionals across the globe, seen the communications practice accomplished elsewhere and implemented best-practice in his own organization. The communications work being done in TATA Chemicals now stands out in an Indian context and supports the business strategy of internationalizing the business.

Adds Patil: “My advice to others would be: get local leadership involvement and support from the beginning. Involve cross-functional, cross-geographical teams and focus on participation.’’
While much media attention focuses on the high profile acquisitions that make good newspaper copy – TATA Motors’ ‘two fingers to the old colonial power’ acquisition of Jaguar Land Rover is the classic example – there are hundreds of other lower profile, but significant deals taking place.

United Phosphorus Limited is a case in point. It has been a highly aggressive acquirer completing 26 acquisitions in the past 15 years. Sixteen of those deals have been in the past five and the values are increasing. Profits have increased almost seven times in the five years as it has created a footprint across Asia, Europe, the United States and South America, Australia and southern Africa and become a leading global player in the agri-chemicals and seeds sector.

“Integrating is as challenging as acquiring companies and we have a dedicated in-house team to ensure that we achieve our integration goals within three years”, says executive director Vikram Schroff. “People assume we’re going to reduce head count and move jobs to India. That hasn’t been the case. We invest in and grow the business we acquire and we’re getting better at telling that story to the people who become part of UPL,” he adds.

Other Indian businesses with international aspirations choose organic growth. Pantheon a privately owned Indian company with significant overseas operations is one. In the past eight years it has quietly built a global enterprise and in doing so become both the world’s largest distributor of Iodine and the biggest importer of apples into India. Founder Kalpesh Kinariwala puts his success down to his ability to be chameleon-like in his dealings with international clients and to communicate effectively.

He says: “You have to be sensitive to other cultures. You can’t just take your own Indian ways with you and expect to be a success. It doesn’t work. Indians are formal and direct and when it comes to meetings it’s just about the business. Europeans take a more informal approach. Indian’s are typically not adaptable. The key is to be able to adapt to the cultural expectations of each continent or country. South Americans are much like Indians. Very family orientated. But in Europe, the United States and other parts of Asia you need to communicate differently.”

“We did huge amounts of travel in the early days. We spent three years visiting Japan every three months just keeping contact with people, getting to know them. It requires patience but it paid off.”

Building on his international success Kinariwala is launching a hedge fund CapVeda Emerging India Fund. “That business will have all the hallmarks of an international business and will communicate its message effectively to a group of sophisticated investors,” he says.

Given its recent arrival as an international acquirer, India Inc. has limited experience and access to a small pool of management talent with relevant skills. There are perceptions of India – third world, poverty, corruption – which while only a partial image, have a bearing on the way Indian companies operating in the international arena are perceived. This means there are other communications issues which Indian firms have to contend with as they seek to extend their footprint.

A well-planned communications strategy which identifies key stakeholder groups, understands and addresses the issues which are important to those groups may well prove to be one of the most useful tools for a new generation of Indian managers as they plot their course for global growth.

This piece was first published in Smart Manager magazine. Mark Hannant is a partner in veri, a firm providing strategic communications support to businesses operating in and from India. Prior to launching veri in India he was a founder of the Engage Group, the UK’s leading stakeholder communications consultancy. Mark has worked extensively helping multinational clients deliver world-class communications into, and out of India. He lives in Mumbai. Email him at mark@veribydesign.com.