**INNOVATING ON THE EDGE FOSTERING ENTREPRENEURIAL
CULTURE IN INDIAN ORGANIZATIONS, AND THE ROLE OF HR
Yasmeen Rizvi
Amity Business School,
Amity University, India
[email protected]
Abstract
Corporate Entrepreneurship is defined as the effort to extend an organization’s competitive
advantage through innovations that significantly alter the balance of competition within an industry
or create entirely new industries .It has been variously defined as novelty or wholesale change in
patterns of resource deployment, action that strengthens innovation while allowing for increasingly
sophisticated management and pursuit of opportunities without regard to resources under current
control .The 2003 and 2004 Global Entrepreneurship Monitor report included a first-ever global
look at "entrepreneurial like" activity in existing firms - when businesses provide innovations, not
just replicate existing goods or services. A deep commitment to continuous innovation and self
renewal is the only assurance to long term sustainability and survival in the twenty first century.
This paper studies the existence of entrepreneurial culture in Indian organizations, HR initiatives
that are carried out to foster it, and the resulting focus on innovativeness and creativity.
Key Words: Innovation, Corporate Entrepreneurship, Creativity, Culture
Introduction
Peter Drucker, an authority in Management Theory, noted that although the term entrepreneur has
been used for 200 yrs, “there has been total confusion over the definition1”. There is no agreement
concerning the concept of entrepreneurship and entrepreneur. Richard Cantillons in 1734 defined
entrepreneurship as self-employment with an uncertain return 2. The next 200 years witnessed
considerable research investigating the entrepreneurial personality 3. The focus shifted to trait
theory-whether people were born with or without entrepreneurial traits. Recently there has been a
focus on defining an entrepreneur by entrepreneurial behavior and actions, referred to as the process
school of thought 4. As early as 1934, Joseph A. Schumpeter had described an entrepreneur as a
person who carries out new combinations that may take the form of new products, processes,
markets, organizational form, or sources of supply 5. This paper attempts to the study the existence
of entrepreneurial culture and resulting focus on innovativeness and creativity in Indian
organizations and the HR initiatives that are carried out to foster it. The research is exploratory in
nature and a sample of 26 medium and small organizations in the national capital region, India were
taken for the study. Primary data was collected from senior management through a survey using
questionnaire having close ended questions. Secondary data was also collected from books,
journals, magazines and electronic databases.
Entrepreneurial Behavior in India
Entrepreneurial activity in India has been on the incline since 2000. The main reason behind this
was the economic liberalization being carried out with renewed vigor, which played a very
important role in stimulating start-ups in India. This threw open new opportunities, leading to more
of opportunity- based entrepreneurship in 2002 than need- based. The top eight most
entrepreneurially active sectors in India are Computer Software-Services, Telecommunication
Services, Pharmaceuticals & Drugs, Automotive & Transport Equipment, Internet related, Food,
Beverage & Tobacco Processing, Education Services. The Global Entrepreneurship Monitor 2002
research studied the issue of cultural facilitation of entrepreneurship in India (Table1). India’s
average score was found to be lower than the GEM global average. The GEM report also suggests
that the economy of countries, where there is low facilitation of individual entrepreneurship, could
still get stimulated by collective/corporate entrepreneurship 6.
TABLE 1:
CULTURAL FACILITATION OF ENTREPRENEURIAL BEHAVIOR
Scale: 1-Completely false
5-Completely true
Culture is highly supportive of individual success achieved
through own personal efforts.
Culture emphasizes self-sufficiency, autonomy, and personal
initiative.
Culture encourages entrepreneurial risk-taking.
Culture encourages creativity and innovativeness.
Culture emphasizes the responsibility that the individual has in
managing her own life.
AVERAGE
Source: Global Entrepreneurship Monitor India Report,2002
India
2002
3.12
Average
GEM 2002
3.33
2.26
2.91
3.56
3.62
3.47
3.51
3.50
3.38
3.21
3.31
Corporate Entrepreneurship; the Competitive Advantage
Corporate Entrepreneurship is often defined as the effort to extend an organization’s competitive
advantage through innovations that significantly alter the balance of competition within an industry
or create entirely new industries 7.It has been variously defined as novelty or wholesale change in
patterns of resource deployment8, action that strengthens innovation while allowing for increasingly
sophisticated management 9 and pursuit of opportunities without regard to resources under current
control 10 .
When existing businesses provide new goods or services, adjustments in the national economic
structure occurs. If successful, such firms grow. Nokia is one such spectacular example. From
safety matches and rubber boots Nokia shifted product lines to become a world leader in
telecommunications 11. With the business environment becoming hypercompetitive by the day, any
competitive advantage would be short-lived. A deep commitment to continuous innovation and self
renewal, managed and fostered through entrepreneurship is the only assurance to long term
sustainability and survival in the twenty first century. With generations “X” and “Y” taking over the
workforce in the near future, companies would face the challenge of attracting and retaining these
talented but fiercely independent creative thinkers, who would not like to work in traditional
organizations. This generation shift would prove to be the catalysis for change towards an
organizational culture that would give importance to experimentation. This trend is already visible
in IT, design and other organizations and would permeate other sectors of the economy, making it
necessary for companies to adopt the entrepreneurial culture 12.
The Role of HR; Best Practices
Schuler13 and Morris and Jones14 have discussed the role of HRM practices that enable corporate
entrepreneurship. They have looked at all the functions of HRM, starting from staffing to training
and performance appraisal. HRM practices that are strategically oriented towards the long term, that
promote innovative thinking and proactiveness, support risk-taking behavior by tolerating failure,
that train employees for entrepreneurial behavior, and that are result-oriented and individualistic in
their performance appraisal have been shown to develop corporate entrepreneurship by developing
entrepreneurial traits15 . The best HR practices for inculcating this kind of behavior are extensive
skills training, promotion from within, results-oriented appraisals, incentive compensation,
employee participation, and employment security. All of the HR practices for innovation, which
have received empirical support, are also proposed as elements of High Performing Work Systems,
also known as Best HR Practices 16.
Fig.1 THE CORPORATE ENTREPRENEURSHIP MODEL
CORPORATE ENTREPRENEURSHIP
CULTURAL FOCUS ON
INNOVATIVENESS, RISK TAKING AND PROACTIVENESS
BEST HR
PRACTICES
TOP
MANAGEMENT
SUPPORT
ORGANIZATIONAL
STRUCTURE
&
PROCESSES
Best HR Practices of Companies in India; Fostering Entrepreneurial Culture
In India’s first ever great places to work survey by BusinessWorld-Grow Talent in 200317, the top
few winners were, Texas Instruments, Federal Express, Johnson & Johnson Consumer Products, Eli
Lilly & Co. India, Philips Software Centre, and Cadbury India. Texas Instruments has a culture of
innovativeness, what with having filed for 225 patents out of India. The compensation system is
designed to suit this kind of culture. People who innovate are rewarded hugely. Quality of Work
Life is given due importance. To allow for recharging of employees after deadlines are met
Cooperative councils have been formed, members of which are known as TEXINS. It is a learning
organization, where engineers keep passports in their pockets and travel to understand customer
needs.
At Federal Express India, risk taking is supported. If a person fails in his performance, he/she does
not get disciplined, but gets pulled into a constructive action plan, which also proves to be cost
effective. At Johnson &Johnson, when a HR climate and culture survey three years ago showed that
R&D division gave low rating on climate for innovativeness, innovation cells were formed because
of which ratings went up. Eli Lilly managers are expected to treat the human resources like their
children. Quality of work life is given importance. HR surveys which are conducted every couple of
years are called “Health of the Organization”. To help employee cope with balancing work and
family life, two Saturdays in a month were kept off. Taking fifteen days off out of a month of
privileged leave was compulsory. Paternity leave for a week was also granted. Job rotation was
done to develop the skills of employees and bring out best of hidden talents. Learning from
mistakes is encouraged. When four generic brands failed, the company sold them off to Nicholas
Piramal. There weren’t any scapegoats. Learning from mistakes was encouraged. Job Design was
given importance and movements were made cross functionally. If the move backfires, then
employee is shifted back. Employee Involvement is also an area of focus. For performance
appraisals, Talent Assessment Committees (TAC) of employees are formed which assess the
competencies of colleagues for promotion. Sales and Marketing is the responsibility of other
functions also as it is of sales and marketing department. Technical Competency Model, an
intervention is used for helping employees who want to progress in their specialized function. The
stock option plans are a big hit. Eli distributed 100 shares to all its employees worldwide free of
cost, which lead to employees making as much as Rs.14 lakhs after selling them off.
Philips Software Company promotes innovativeness by having a team of patent search engineers,
which encourages employees to come up with new ideas that can be patented. There is a reward
system also for new ideas. Every employee gets Rs.5000 for sending an idea to head office and
$750 when it is filed for patent.
Cadbury India did away with the hierarchical structure and empowered its employees. Increasing
involvement of employees led to the launch of several products like Chocki, Delite and Bites. It also
explored channels like Pantaloons and SMS-based vending machines. Godrej Consumer Products
promotes creativity and innovation by forming the Red Team and the Blue Team, which work on
the same goal, in order to get different views.
According to the BusinessWorld-Grow Talent 2004 Survey18, the top few companies were FedEx
Corporation, Texas Instruments, National Thermal Power Corporation, Computer Sciences
Corporation, MindTree Consulting and Sasken Communication Technologies. At NTPC, which
calls it self a “company powered by people”, there is a culture of execution which fixes targets on
everything - be it safety or manpower utilization. This culture has been running the company. Every
year, the general managers for each of the NTPC power plants come to the head office to discuss
their targets. To set these, all NTPC plants are benchmarked internally (with the best-performing
NTPC plants) and externally (with better-performing plants in India and elsewhere). Based on that,
the targets are clearly spelt out. These are physical and financial. Then, these targets ripple down
through the entire organization, translating into individual targets. There is hardly any lateral hiring.
Nearly all the recruitment is done at the entry level. The company hires 22-23-year olds as engineer
trainees, and then instructs them in its culture. The benchmarking ensures that NTPC doesn't
become inward looking. Then, employees are sent for training, sometimes for courses; at other
times, on deputation to other companies. For instance, some engineers have been sent to state
electricity boards, because the company is getting into distribution. This is being done because the
company is unwilling to staff the new business with outsiders unfamiliar with the NTPC work ethic.
Promotions are not seniority-linked. They are linked to performance instead. That is the pillar of the
performance ethic. NTPC has recently adopted the diversification strategy to innovate and has been
renamed as NTPC Limited. It brings in its folds major challenges for HR to play a strategic role in
leading the organization towards its goals and objectives.
Survey Conducted in the National Capital Region
Thirty Senior Executives of twenty six companies (Appendix 1) in the NCR were asked how they
foster entrepreneurial behavior in organizations. Random sampling was done and a Questionnaire
based survey was conducted. Analysis was done to find out which methods are most preferred and
which ones, least.
FINDINGS :
TABLE 2: HOW SENIOR EXECUTIVES SAY THEY FOSTER ENTREPRENEURIAL
BEHAVIOR
Method
Percentage
Select creative and innovative employees
80
Give decision making rights to employees
67
Encourage radical ideas and risk taking in employees
80
Share knowledge and information with employees
73
Accept less than optimum results
10
Tolerate mistakes and failures of employees
70
Evaluating performance on the basis of results achieved
47
Train employees in creativity and innovation skills
63
Conclusion
The findings of the survey (Table 2) bring to focus a need to move away from entrepreneurial
utopianism to entrepreneurial pragmatism. Though a desire to foster corporate entrepreneurship is
revealed, with senior executives selecting creative and innovative employees, encouraging radical
ideas and risk taking and sharing information and knowledge with employees, yet the support
system which would actually lead to corporate entrepreneurship is found to be missing. As
managers, there is a need therefore to manage change and innovation. Besides performing the
necessary functions of planning, organizing, leading, staffing and controlling, every manager would
need to develop certain qualities in him/her such as, a willingness to accept risk, an ability to work
with half baked ideas, a willingness to bend rules, an ability to respond quickly, and personal
enthusiasm 19. Organizations can be characterized by their Entrepreneurial Intensity (EI)-degree of
entrepreneurship,” or the extent to which their activities are risky, innovative, and proactive, and
“amount of entrepreneurship,” or the frequency with which entrepreneurial events occur. At the
organizational level, there is need to measure and benchmark entrepreneurial performance, allow
for comparisons, and establish goals and strategies 20.The main limitation of the study was the
unwillingness of mangers of several companies to participate in the survey and share information.
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APPENDIX 1
COMPANY NAME
1. KANODIA TECHNOPLAST PVT LTD
2. TELECOM REGULATORY AUTHORITY OF INDIA
3. BHUSHAN LIMITED
4. HAVELLS INDIA LTD
5. THOMSAN PRESS
6. LG ELECTRONICS
7. HCL INFOSYSTEM LTD
8. FLEX INDUSTRIES LTD
9. COLWELL & SALMON
10. BHUSHAN STEEL & STRIPS
11. SONA KOYO STEERING SYSTEM LTD
12. JUBILANT CHEMICALS SYSTEM
13. WIPRO SPECTRANET
14. FLEXTRONICS SOFTWARE SYSTEM
15. FLEX ENGINEERING LTD
16. ALLIED NIPPON LTD
17. GE COUNTRY WIDE
18. INFRAHEALTH INDIA PRIVATE LTD
19. ANJAL FASHION
20. HAND RUBBER & SPORTS LTD
21. HCL TECHNOLOGIES
22. SHRIRAM PISTON & RINGS LTD
23. LARSEN&TOUBRO
24. SPS INTERNATIONAL LTD
25. TECHSPAN INDIA LTD
26. VIJAYA BANK