FT : McKinsey & LSE : India MNC Managers Second Only To US

Thursday, July 12, 2007

Multinational manufacturers in India have a management capability second only to equivalent companies operating in the US, according to a survey published on Wednesday by McKinsey, the strategy consultants, and the London School of Economics.  The findings appear to reflect the level of resources directed towards India by many global manufacturers attracted by good economic prospects, as well as their success in hiring highly skilled local workers.  The high score for the management standing of multinationals is in stark contrast to India’s low status in terms of operational practices of all India-based manufacturers, including locally owned businesses.  In the study of 4,000 ­medium-sized manufacturing businesses across 12 countries, India comes bottom in terms of the management performance of all companies…..Anand Sharma, chief executive of TBM Consulting, a US-based manufacturing consultancy that has an office in India, said he thought one reason for the good score for multinationals was willingness by many talented young Indians to work for them.  “If you are one of the brightest and best in India, you will be attracted by a company with a good global reputation,” he said.  India’s poor position in the overall league table of management skills of all companies may be related to the country’s historically weak economic performance and restrictive government rules that have been eased only in the past decade.

India MNC Management TN

The study was based on quizzing plant managers in medium-sized companies about their approach to 18 areas of manufacturing management, including ways to reduce defects and ensuring employees meet targets.  The 4,000 businesses in the survey included some multinational subsidiaries, as well as independent businesses.  The average annual sales of all the companies is $44m (€32m, £22m), while their average number of employees is 250.  The US scored most highly for management capabilities of all manufacturers, followed closely by Sweden, Japan, Germany and, after a relatively large gap, the UK.  According to John Van Reenan, director of the centre for economic performance at the LSE, the US’s good standing stems from the country’s high degree of worker flexibility and tough competition.  “In the US you see a relatively small proportion of badly managed firms [out of the total sample], which is I think due to a competitive process of the ‘weeding out’ of the poor ones,” said Prof Van Reenan.

Reference : http://www.ft.com/cms/s/e1e0751c-2fc6-11dc-a68f-0000779fd2ac.html

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