HR Challenges for US Companies Growing in India

U.S. companies are increasingly setting up shop or expanding their presence in India, as they seek to benefit from the country’s vast talent pool, especially in technology, artificial intelligence, and related skills. 

“Talent is in abundance here, especially tech talent,” said Meenakshi Chhillar, HR country leader at the India unit of Modernizing Medicine (ModMed), a medical software provider based in Boca Raton, Fla. 

While large technology companies—including Microsoft, Google’s Alphabet, Meta, and Adobe—have long had a presence in India, many nontechnical companies have also opened offices there in the last five years. These include U.S. retailers Best Buy and Neiman Marcus Group, food company Kraft Heinz, U.S. grocery chain Giant Eagle, health care services provider Cardinal Health, and Minnesota-based light industrial equipment manufacturer Northern Tool + Equipment.

Global Capability Centers

Many of these companies have set up so-called “global capability centers” in India, where the staff develops technologies to be used by the U.S. parent for its core functions. For instance, a clothes retailer may use an application to keep track of the stock available in each of its branches, and that application would be built and managed in India. 

This is a far cry from the outsourced work being done in India, where local workers are, for example, attending U.S. customer calls and managing information technology issues. Such outsourcing, which has also increased, is largely a way to save on costs thanks to the lower salaries for Indian workers. 

But the recent spate of expansion—with core business functions now being done outside the U.S.—represents a shift. 

“From cost arbitrage, it started to become an integrative strategy,” said Lokendra Sethi, India HR lead at DXC Technology, a U.S. technology services company. “A lot of innovation is being driven from here, a lot of product development is being done here,” he said. 

DXC’s India unit provides technology services to both its parent and other clients, whereas a global capability center works only for its parent. 

The number of global capability centers in India has increased by 32% in the last five years—bringing the current number to 1,700—according to a report by IT industry trade bodies Nasscom and Zinnov. The report estimates that another 30% of such firms could be launched by 2030, which would mean the hiring of around 1 million additional people. 

In this article, experts share the HR challenges that confront companies setting up shop in India. 

Hiring Right

One of the first challenges is to hire right. “Sometimes, they have very aggressive plans,” said Vinu Nair, Chennai-based managing partner at Antal International, a global executive search firm. The company may be under pressure to prove to management that the India team can deliver and end up hiring in a hurry. But this could affect the quality of hires, he said.

“My advice is: In the first one year, go for only 20% of the hires,” Nair said.

Chhillar said that ModMed, which started its global capability center in the southern city of Hyderabad in 2023 and has since doubled the team to 200 people, has built the team slowly. It’s done a benchmarking analysis against competitors, designed its benefits to suit different generations of employees, and has also thought through the career progression for its new employees. “Getting people in the door is easy; helping them sustain in the organization is equally difficult,” Chhillar said. 

She said one strategy that has helped ModMed attract talent is its lucrative employee referral program. “People who are in the system, they know how unique we are,” Chhillar said. 

Understanding Worker Motivations

To make themselves attractive, many of the global capability centers offer salaries that are two to four times what a local Indian IT services company pays, and they offer cutting-edge work. In addition to wanting to earn more, “young people want to work on latest technologies,” Nair said. 

Still, there is high attrition and movement among workers, which foreign companies are not always prepared for. 

“They expect one person will be in the same role for five years,” Sethi said. Being unprepared for high attrition can lead to issues. “A fair amount of companies have struggled,” he said. 

Adding Local Nuances

It’s key to inculcate the foreign parent’s culture among local workers while also being sensitive to the local culture and needs of the local staff. 

For example, Chhillar said that ModMed’s India unit has a high level of engagement activities because Indian employees appreciate a lot of events, festivals, and celebrations.

“While there are initiatives aimed at integrating global corporate culture across all modernizers, there is also a strong emphasis on fostering a local office culture within that broader framework,” she said.

Local Leadership

One reason foreign companies sometimes struggle in India, experts said, is that they don’t build local leadership. 

“For any location, for things to work, you have to have leaders from there who understand the landscape, who understand the people’s psyche, who understand what works locally,” Sethi said. 

While some companies may initially bring in leaders from the parent organization who understand the business and culture, for the long run, they need leaders who understand the local business.

“Sitting from there, managing it here, without having empowered local leadership will eventually have its own issues,” Sethi said.

Shefali Anand is a New Delhi-based journalist and former correspondent for The Wall Street Journal.