RESEARCH AND PRACTICE
IN HUMAN RESOURCE MANAGEMENT

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Chatterjee, S. R. (2007). Human Resource Management in India: ‘Where From’ and ‘Where To?’, Research and Practice in Human Resource Management, 15(2), 92-103.

Human Resource Management in India: ‘Where From’ and ‘Where To?’

Samir R. Chatterjee

Abstract

India is being widely recognised as one of the most exciting emerging economics in the world. Besides becoming a global hub of outsourcing, Indian firms are spreading their wings globally through mergers and acquisitions. During the first four months of 1997, Indian companies have bought 34 foreign companies for about U.S. $11 billion dollars. This impressive development has been due to a growth in inputs (capital and labour) as well as factor productivity. By the year 2020, India is expected to add about 250 million to its labour pool at the rate of about 18 million a year, which is more than the entire labour force of Germany. This so called ‘demographic dividend’ has drawn a new interest in the Human Resource concepts and practices in India. This paper traces notable evidence of economic organisations and managerial ideas from ancient Indian sources with enduring traditions and considers them in the context of contemporary challenges.

Introduction

Over many centuries India has absorbed managerial ideas and practices from around the world. Early records of trade, from 4500 B.C. to 300 B.C., not only indicate international economic and political links, but also the ideas of social and public administration. The world’s first management book, titled ‘Arlhãshastra’, written three millennium before Christ, codified many aspects of human resource practices in Ancient India. This treatise presented notions of the financial administration of the state, guiding principles for trade and commerce, as well as the management of people. These ideas were to be embedded in organisational thinking for centuries (Rangarajan 1992, Sihag 2004). Increasing trade, that included engagement with the Romans, led to widespread and systematic governance methods by 250 A.D. During the next 300 years, the first Indian empire, the Gupta Dynasty, encouraged the establishment of rules and regulations for managerial systems, and later from about 1000 A.D. Islam influenced many areas of trade and commerce. A further powerful effect on the managerial history of India was to be provided by the British system of corporate organisation for 200 years. Clearly, the socio cultural roots of Indian heritage are diverse and have been drawn from multiple sources including ideas brought from other parts of the old world. Interestingly, these ideas were essentially secular even when they originated from religious bases.

In the contemporary context, the Indian management mindscape continues to be influenced by the residual traces of ancient wisdom as it faces the complexities of global realities. One stream of holistic wisdom, identified as the Vedantic philosophy, pervades managerial behaviour at all levels of work organisations. This philosophical tradition has its roots in sacred texts from 2000 B.C. and it holds that human nature has a capacity for self transformation and attaining spiritual high ground while facing realities of day to day challenges (Lannoy 1971). Such cultural based tradition and heritage can have a substantial impact on current managerial mindsets in terms of family bonding and mutuality of obligations. The caste system, which was recorded in the writings of the Greek Ambassador Megasthenes in the third century B.C., is another significant feature of Indian social heritage that for centuries had impacted organisational architecture and managerial practices, and has now become the focus of critical attention in the social, political and legal agenda of the nation.

One of the most significant areas of values and cultural practices has been the caste system. Traditionally, the caste system maintained social or organisational balance. Brahmins (priests and teachers) were at the apex, Kshatriya (rulers and warriors), Vaishya (merchants and managers) and Shwdra (artisans and workers) occupied the lower levels. Those outside the caste hierarchy were called ‘untouchables’. Even decades ago, a typical public enterprise department could be dominated by people belonging to a particular caste. Feelings associated with caste affairs influenced managers in areas like recruitment, promotion and work allocation (Venkatranam & Chandra 1996). Indian institutions codified a list of lower castes and tribal communities called ‘scheduled castes and scheduled tribes’. A strict quota system called, ‘reservation’ in achieving affirmative equity of castes, has been the eye of political storm in India in recent years. The central government has decreed 15 per cent of recruitment is to be reserved for scheduled castes, and a further seven and half per cent for scheduled tribes. In addition, a further 27 per cent has been decreed for other backward castes. However, the liberalisation of markets and global linkages have created transformation of attitudes towards human resource (HR) policies and practices (Khalilzadeh-Shirazi & Zagha 1994, Gopalan & Rivera 1997). Faced with the challenge of responding to the rationale of Western ideas of organisation in the changing social and economic scenario of Indian organisation, practitioners are increasingly taking a broader and reflective perspective of human resource management (HRM) in India.

This manuscript has three main parts. In the first part is provided an overview of important historical events and activity that has influenced contemporary managerial tenets, the second part of the manuscript describes the emerging contemporary Indian HRM practices and indicates some interesting challenges. Much of the second part is also summarised on four informative Figures. The concluding section, the third part of the manuscript, succinctly integrates the two preceding parts.

Value of Context of HRM in India

The managerial ideologies in Indian dates back at least four centuries. Arthãshastra written by the celebrated Indian scholar-practitioner Chanakya had three key areas of exploration, 1) public policy, 2) administration and utilisation of people, and 3) taxation and accounting principles (Chatterjee 2006). Parallel to such pragmatic formulations, a deep rooted value system, drawn from the early Aryan thinking, called vedanta, deeply influenced the societal and institutional values in India. Overall, Indian collective culture had an interesting individualistic core while the civilisational values of duty to family, group and society was always very important while vedantic ideas nurtured an inner private sphere of individualism.

There has been considerable interest in the notion that managerial values are a function of the behaviours of managers. England, Dhingra and Agarwal (1974) were early scholars who contended that managerial values were critical forces that shape organisational architecture. The relevance of managerial values in shaping modern organisational life is reflected in scholarly literature linking them to corporate culture (Deal & Kennedy 1982), organisational commitment and job satisfaction (O’Reilly, Chatham & Caldwell 1991), as well as institutional governance (Mowday, Porter & Steers 1982). Thus, understanding the source of these values and in particular societal work values (which link the macro-micro relationships and in turn organisational practices) had become a popular line of enquiry, and a great deal of evidence has been presented to support the importance of national culture in shaping managerial values. One of the most widely read formulations of this literature is the seminal work of Hofstede (1980) who popularised the notion of clustering culture in generic dimensions such as power distribution, structuring, social orientation, and time horizons. In turn, these dimensions could be employed to explain relevant work attitudes, job incumbent behaviours and the working arrangements within organisational structures. Two of these dimensions were individualism and collectivism.

The traditional social ethos from the ancient roots, which was developed over centuries, underwent profound transformation during the British rule. Consequently, in the contemporary context multiple layers of values (core traditional values, individual managerial values, and situational values) have emerged (Chatterjee & Pearson 2000). Though the societal values largely remain very much anchored in the ancient traditions they are increasingly reflecting corporate priorities and values of global linkages. But in the arena of globalisation where priorities of consumerism, technological education, mass media, foreign investment and trade union culture predominate, newer tensions are becoming evident. For instance, contemporary Indian multi national companies and global firms in India have started shifting their emphasis to human resources with their knowledge and experience as the central area of attention in extending new performance boundaries (Khandekar & Sharma 2005). Considerable research evidence attests to this trend with particular relevance to greenfield organisations with little or no historical baggages in their organisational culture (Settt 2004, Roy 2006).

Within Indian traditions the choice of individualistic or collectivistic behaviour depends on a number of culturally defined variables. The dynamics of these variables are underpinned through three key elements guiding Indian managerial mindscapes. These three constructs are Desh (the location), Kaal (the timing), and Patra (the specific personalities involved). Sinha and Kunungo (1997) claim that the interaction of these three variables determines the guidelines for decisional cues. This managing or nurturing of the outer layer of collectivism in an inner private sphere of individualism is expressed in Figure 1 which demonstrates the behavioural anchors in Indian organisational life.

Figure 1
Behavioral Anchors in Indian Organisational Life
DECISIONAL
CUES
Desh
(place)
Kaal
(Timing)
Patra
(Actors)
SPIRITUAL
ORIENTATION
Sattava guna
(Virtue focus)
Tamas guna
(Negative focus)
Rajas guna
(Action focus)
INTERPERSONAL
RELATIONS
Sradha
(Upward respect / Loyalty)
Sneha
(Downward affection)
Bandhan
(Bonding)

Figure 1 also presents another powerful insight of the Indian tradition of the notion of ‘Guna’ dynamics. According to Sharma (1996), this culture based framework, which has three types of gunas (attraction), is being increasingly used in employee assessment and organisational team building strategies. The contention is that each guna is a separate contribution to the core of human personalities. The Sattava (or truth orientation) is the sentiment of exalted values in people, organisations or society. Alternatively, the Tamasik guna depicts a negative orientation which can be expressed behaviourally as ignorance, greed or corruption. Those individuals with a Rajasik guna are inherently driven by a desire to make a worthwhile contribution to their surroundings. Collectively, these spiritual orientations, which manifest as Sattava, Tamas or Rajas gunas, articulate as positive or negative HRM functions such as leadership, motivation or other institutional behavioural activity. The third row of Figure 1 highlights the linking of HRM trends to socio cultural roots. The culture of Sradha (upward loyalty) and Sneha (mentoring with affection) outline the behavioural anchors derived from the civilisational roots. The acceptance of ‘Sradha’ by youngers and the display of ‘Sneha’ by the seniors have been the root of sustainability of all types of Indian oragnisations. This has a striking similarity to the concepts of ‘oyabun’ and ‘kobun’ in the Japanese cultural context.

Contemporary India

In a recent survey of Indian CEO’s, it was suggested that Indian managerial leaders were less dependent on their personal charisma, but they emphasised logical and step by step implementation processes. Indian leaders focused on empowerment and accountability in cases of critical turnaround challenges, innovative challenges, innovative technology, product planning and marketing or when other similar challenges were encountered (Spencer, Rajah, Narayan, Mohan & Latiri 2007). These social scientists contend.

Leaders in other countries often tell about why they chose a peculiar person for a certain role per task, detailing the personal characteristics that made that person right for that situation. They may also consider, in detail, how an assignment would help someone grow and develop their abilities. In general, Indian leaders simply did not discuss how they matched particular people to certain roles or tasks, nor did they usually consider in detail how the personal characteristics of individuals might shape or inform the best way to influence that person. (Spencer, et al 2007:90).

Indian HRM in Transition

One of the noteworthy features of the Indian workplace is demographic uniqueness. It is estimated that both China and India will have a population of 1.45 billion people by 2030, however, India will have a larger workforce than China. Indeed, it is likely India will have 986 million people of working age in 2030, which well probably be about 300 million more than in 2007. And by 2050, it is expected India will have 230 million more workers than China and about 500 million more than the United States of America (U.S.). It may be noted that half of India’s current population of 1.1 billion people are under of 25 years of age (Chatterjee 2006). While this fact is a demographic dividend for the economy, it is also a danger sign for the country’s ability to create new jobs at an unprecedented rate. As has been pointed out by Meredith (2007).

When India’s young demographic bubble begins to reach working age, India will need far more jobs than currently exist to keep living standards from declining. India today doesn’t have enough good jobs for its existing workers, much less for millions of new ones. If it cannot better educate its children and create jobs for then once they reach working age, India faces a population time bomb: The nation will grow poorer and not richer, with hundred of millions of people stuck in poverty. (p.133).

With the retirement age being 55 to 58 years of age in most public sector organisations, Indian workplaces are dominated by youth. Increasing the retirement age in critical areas like universities, schools, hospitals, research institutions and public service is a topic of considerable current debate and agenda of political parties.

The divergent view, that each society has an unique set of national nuances, which guide particular managerial beliefs and actions, is being challenged in Indian society. An emerging dominant perspective is the influence of globalisation on technological advancements, business management, education and communication infrastructures is leading to a converging effect on managerial mindsets and business behaviours. And when India embraced liberalisation and economic reform in the early 1990s, dramatic changes were set in motion in terms of corporate mindsets and HRM practices as a result of global imperatives and accompanying changes in societal priorities. Indeed, the onset of a burgeoning competitive service sector compelled a demographic shift in worker educational status and heightened the demand for job relevant skills as well as regional diversity. Expectedly, there has been a marked shift towards valuing human resources (HR) in Indian organisations as they become increasingly strategy driven as opposed to the culture of the status quo. Accordingly, competitive advantage in industries like software services, pharmaceuticals, and biotechnology (where India is seeking to assert global dominance), the significance of HRs is being emphasised. These relativities were demonstrated in a recent study of three global Indian companies with (235 managers) when evidence was presented that positively linked the HRM practices with organisational performance (Khandekar & Sharma 2005). In spite of this trend of convergence, a deep sense of locality exists creating more robust ‘cross vergence’ in the conceptual as well as practical domain.

Figure 2
Drivers of Contemporary Indian HRM Trends
Drivers of Contemporary Indian HRM Trends

Figure 2 presents the key drivers for contemporary Indian HRM trends. In Figure 2 there are four external spheres of intervention for HRM professionals and these spheres are integrated in a complex array within organisational settings. The intellectual sphere, which emphasises the mindset transaction in work organisations, has been significantly impacted by the forces of globalisation. Indeed, Chatterjee and Pearson (2000) argued, with supporting empirical evidence from 421 senior level Indian managers, that many of the traditional Indian values (respect for seniority, status and group affiliation) have been complemented by newer areas of attention that are more usually linked to globalisation, such as work quality, customer service and innovation. The most important work related attribute of the study was the opportunity to learn new things at work. Such cross verging trends need to be understood more widely as practitioners face a new reality of human resource development of post industrial economic organisations.

The other three spheres, of Figure 2, namely the emotional, the socio cultural and the managerial domains are undergoing, similar profound changes. For instance, the socio cultural sphere confronts the dialects of the national macro level reform agenda as well as the challenge of innovating by addressing the hygiene and motivational features of the work place. Consequently, this sphere, which is underpinned by the anchors of Sradha and Sneha, has the opportunity to leverage work setting creativity in dimensions of autonomy, empowerment, multiskilling and various types of job design. And the emotional sphere, which focuses on creativity and innovation to encapsulate the notions of workplace commitment and collaboration as well as favourable teamwork, brings desirable behavioural elements of transparency and integrity into organisational procedures and practices. The managerial sphere provides the mechanisms for shifting mindsets, for in Indian organisations HRM is viewed to be closely aligned with managerial technical competency. Thus, understanding of the relativity of HRM to strategic intended organisational performance is less well articulated in Indian firms. The current emphasis of reconfiguring cadres (voluntary and nonvoluntary redundancy schemes), downsizing, delayering and similar arrangements will become less relevant as holistic perspectives gain ground. A hallmark of future Indian workplaces is likely to be a dominant emphasis on managerial training, structural redesign and reframing of institutional architectures to achieve enterprise excellence. Thus, a primary role of Indian managers will be to forge new employment and industrial relationships through purposeful HRM policies and practices. In Figure 3 is presented a variety of HRM practices that are being employed in Indian organisations.

Figure 3
Key HRM Practices in Indian Organisations
HRM Practice Observable Features
Job Description Percentage of employees with formally defined work roles is very high in the public sector.
Recruitment Strong dependence on formal labour market. Direct recruitment from institutions of higher learning is very common amongst management, engineering and similar professional cadres. Amongst other vehicles, placement agencies, internet and print media are the most popular medium for recruitment.
Compensation Strong emphasis on security and lifetime employment in public sector including a range of facilities like, healthcare, housing and schooling for children.
Training and Development Poorly institutionalised in Indian organisations. Popularity of training programmes and their effect in skill and value development undeveloped.
Performance Appraisal A very low coverage of employees under formal performance appraisal and rewards or organisational goals
Promotion and Reward Moderately variable across industries. Seniority systems still dominate the public sector enterprises. Use of merit and performance limited mostly to globally orientated industries.
Career Planning Limited in scope. The seniority based escalator system in the public sector provides stability and progression in career. Widespread use of voluntary retirement scheme in public sector by high performing staff. Cross functional career paths uncommon.
Gender Equity Driven by proactive court rulings, ILO guidelines and legislature provisions. Lack of strategic and inclusion vision spread.
Reservation System The central government has fixed 15 per cent reservations for scheduled castes, 7.5 per cent for scheduled tribes and 27 per cent for backward communities. States vary in their reservation systems.

IR Challenge

The Indian IR system has two main features. First, is the absence of the provision to recognise a union as a representative or agent for collective bargaining. Second, is the total dominance of government in regulating the industrial relations (IR) domain. Though it is relatively easy for members of a work organisation to be registered as a union under the law, it does not lead to the legal recognition by the employer in dispute resolution or bargaining process. This contention was made by Kuruvilla (1996) over a decade ago.

In terms of collective bargaining, industry wide bargaining occurs in certain industries where the employers are organized, but bargaining otherwise is decentralised to enterprise level. Although there are no restrictions on the subjects of bargaining, the Industrial Disputes Act of 1947 restricts the ability of employers to lay off or retrench employees or to close business. (p.635).

Indian industrial relations have evolved from political roots and labour market demands. An unique feature of Indian IR has been the dominance of political parties sponsoring unions. Union membership has been the most popular breeding ground for politicians, and political leaders have enjoyed the use of union platforms. Such politicisation has generated conflicts and rivalry creating mayhem and the hurting of labour interest. Nevertheless, in spite of wage determination by central government boards, and ad hoc industrial awards, enterprise level bargaining has yielded positive outcomes. Interestingly, during the 1970s in a period of the highest number of strikes, the registered number of unions grew fivefold. But a decade later profound economic and political reform movement saw a new direction in the trade union movement. A section of scholarly trade union leaders began to incorporate new global thinking in the union outlook.

Since the 1980s, the Indian industrial relations culture has been considerably impacted by the intensification of globalised markets. During this time and beyond, there has been a clear departure from traditional personnel management. The shift has not only been in the general tone, but in the substantive visions. Adjustment to the global imperatives of an emerging service sector, sunrise industries, and demographic shifts in competencies has given rise to new thinking. In spite of most of the Indian labour laws being entrenched in a world view that is very different to the current realities, and the obvious urgency for them to be updated to incorporate more flexible, competitive work systems, the built in rigidities are still proving a formidable obstacle.

The most alarming issue in the HR and IR context is the lack of job opportunities outside urban areas where more than 70 per cent of the population lives. As has been pointed out by Meredith (2007).

While Indian university graduates line up for jobs that can propel them into newly vibrant middle class, per India’s rural and urban poor, change has been interminably delayed. Expectations, like incomes, are rising across India, and not just for those working in call centres. Even as the New India cohort thrives, much of the rest of India is making much slower gains or even being left behind, creating social and political tensions that cloud India’s impressive strides forward. The lowest paid workers in the off shoring industry those working in the call centres earn median wages of $275 a month. But most Indians still earn less than $60 a month or just $2 a day. (p.125).

Technical Services Recruitment and Retention

There has been a dramatic shift in the expectations of employees in the organised and globally linked sectors of the economy. An unprecedented rise in the disposable income coupled with a declining dependency ratio, has led to young professionals becoming extremely mobile. The problem is critically evident in the off shoring industry where the average retention period of an employee is considered to be around six to eight months. And the retention of senior level executives is an additional challenge. The attrition rates are highest in information technology (IT) (30-35%), business process outsourcing (BPO) (35-40%), insurance (35-40%), retail and fast moving consumer goods (FMCG) (20-30%), and manufacturing and engineering (10-15%) (Chatterjee 2006).

Over the past decade, there has been a sea change in the area of Indian technical services and the associated HRM practices of recruitment and retention. While the higher education system in the country has remained overwhelming poor in infrastructure and weak in becoming revitalised to grapple with the global imperatives, there has been a mushrooming of private educational institutions. The recruitment problem is further deepened by the emergence of a new culture of ‘job hopping’ amongst employers who can demonstrate their world class competencies. This phenomenon of turnover has seen a chain reaction in entry level salaries, and an increase in graduates has created significant social and economic disruption to the Indian labour market. A likely scenario from this rampant activity is that the Indian HR scene will be negatively impacted in the next decade unless the deregulation and autonomy of the higher education sectors is initiated somewhat immediately. An example of this widening gap between the university system and market need has become a serious impediment in several new industries in India. For an example, it has been reported in the popular press (Time 2007), “…out of 13 million people who applied to work at IT company Infosys last year, just 2% were qualified indicating a sign of stress in the university system that graduates 2.5 million a year.” (p.33).

One of the most concerning issues for HR managers in India is the high staff turnover. In industries like call centres, staff attrition is the single biggest issue. The industry has grown from zero employment to an employer of quarter of a million young English speaking, well educated and ambitious people. The point is well made by Slater (2007), who wrote.

Attrition is highest in traditional customer service jobs, where young people find themselves having to spend all night on the phone, often with irate callers. In other areas such as claims processing or accounting, the turnover rate is much lower. More worrying for many companies is the ‘merry go round’ in supervising and management jobs, as new centers are only too willing to pay higher salaries to hijack experienced staff. (p.34).

The issue of retention is much more critical in the high value adding BPO sector such as R&D activities. This $40 billion industry has one of the highest attrition rates of around 20 to 25 per cent. The service laden BPO and Hord industry have the highest attrition rates. Many companies are developing innovative incentive packages in countering this job hopping phenomenon. Figure 4 illustrates some of these initiative by leading companies in India.

Figure 4
Examples of Retention Strategies for young Professionals in India’s BPO and Services Sectors
Name of the Company Retention Strategy Impact
Tata Consulting Services(TCS)
  • A choice of working in over 170 offices across 40 countries in a variety of areas.
  • Paternity leave for adoption of a girl child
  • Discounts on group parties
  • Significant impact on job hopping achieved
ICICI Bank
  • Identification of potential talented staff
  • Alternative stock options
  • Quicker promotion
  • Have been able to achieve higher retention rate
WIPRO
  • ‘Wings Within’ programme where existing employees get a chance to quit their current job role and join a different firm within WIPRO
  • Has led to a higher retention rate
INFOSYS
  • Fostering a sense of belongingness, creative artistic and social activities for the employees and their families.
  • Initiating one of the best ‘corporate universities’ in the world
  • Moderate Retentions rate increase achieved
Microsoft-India
  • Excellent sporting and wellness facilities
  • Employees allowed to choose flexible working schedule
  • Moving people across functions and sections in assisting employees find their area of interest
  • Struggling to minimise job hopping
Mahindra & Co
  • Culture change valuing innovation and talent over age and experience
  • Institutionalising a practice called ‘reverse mentoring’ where young people are given opportunities of mentoring their seniors
  • Stabilised job hopping significantly

A dramatic shift in recruitment practices has been taking place as globally pretend Indian companies as well as global technical services rivals have made India a battlefield of recruitment for the best workers. For example, IBM’s workforce in India has more than doubled in two years to a cadre of 53,000. This outcome has come with the elimination of 20,000 jobs in high cost markets like the U.S., Europe and Japan. The R&D centre of IBM is staffed by 3,000 world class engineers and is being recognised for its ability to innovate on all areas from simple processes, softwares, semiconductors as well as supercomputers. It is interesting to note that IBM has dominated the recruitment market in technical services in India during 2006. This leading company recruited 10,000 employees out of a total of 25,000 people who were recruited to the technical services industry. The prominence of IBM as an employer of technically qualified personnel has been acknowledged in the popular press (Business Week 2007).

In Pune, a rapidly developing IT centre near Mumbai, the company has been dispatching vans with signs saying, ‘IBM is hiring’, to the gates of the rivals at lunch time. Their hit rate is pretty good laments a manager at a tech firm that has lost employees to IBM.

Conclusion

The World Competitiveness Report rated India’s human resource capabilities as being comparatively weaker than most Asian nations. The recognition of world class human resource capability as being pivotal to global success has changed Indian HRM cultures in recent years. While the historical and traditional roots remain deeply embedded in the subjective world of managers, emphasis on objective global concepts and practices are becoming more common. Three very different perspectives in HRM are evident. Firstly, Indian firms with a global outlook; secondly, global firms seeking to adapt to the Indian context; and thirdly, the HRM practice in public sectors undertakings (PSV’S). As the Indian economy becomes more globally linked, all three perspectives will move increasingly towards a cross verging strengthening. Interestingly, within the national context, India itself is not a homogenous entity. Regional variations in terms of industry size, provincial business culture, and political issues play very relevant roles. The nature of hierarchy, status, authority, responsibility and similar other concepts vary widely across the nations synerging system maintenance. Indeed, organisational performance and personal success are critical in the new era.

Author

Samir Chatterjee is professor of International Management at Curtin University of Technology in Australia. He has been involved in university teaching, research, corporate consulting and advisory role with UN, ADB and many other scholarly activities in the Asian region for over 35 years. He has authored and co-authored eight books, 22 book chapters and over 150 refereed journal and conference papers. He is currently the President of the Society for Global Business and Economic Development.

Email: samir.chatterjee@cbs.curtin.edu.au

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