Over the years I’ve been involved in a number of major projects where U.S. or European companies have looked to transition work from their home countries to outsourced facilities in India. The drivers behind these projects have been many and varied, but I suppose that cost reduction is always a major component of any such decision. Personally, I’ve always thought there are a number of advantages above and beyond cost arbitrage but for many clients that’s their starting point.
If your main motivation for going through the transition process is cost then it stands to reason that you have to make the transition work efficiently or any imagined cost savings can be quickly eroded through well-documented problems such as high attrition rates and client dissatisfaction. Cultural issues play a huge role in creating disconnects between the home teams and the India-based teams – but cultural issues are not the only challenge.
Another area which is fraught with difficulty is in the partner selection process. Lots of clients have got a year or two down the line only to question their original choice of partner but are then loath to jump ship and go through the pain of transition for a second time – better the devil you know etc.
Based on our experience at Global Business Culture here are five issues you need to consider when selecting an outsourced partner in India. The list is not exhaustive but it’s a good starting point:
The Tender Process: A western-led tender process will only get you so far in India. I’ve seen situations where the responses to tender have led clients to the wrong supplier, in the wrong location, staffed by the wrong people. ‘Do you have experience of the banking/insurance/automotive/pharma sectors?’ The answer will be ‘yes’. People move company and position all the time in India and employees pick up experience across a wide range of sectors – but that knowledge can be quite superficial.
You need to effectively pre-qualify your tender short-list and the best way to do that is on the ground. Start with a long list and whittle this down until you have three or four bona fide contenders and then, and only then, get on a plane and spend time with each of the candidates. It should be as much about chemistry as it is about commercials.
Management Capability: I cannot stress how it is important to assess the management capabilities of an outsource partner. The India offshore business has grown exponentially over the past decade or so but management capability has not necessarily been able to keep pace with that growth. It is not a question of education or technical ability; it is more an issue of commercial experience and acumen. Many Western clients who transition work to India are looking for people who can operate with a knowledge of home country market conditions and – even more difficult – an understanding of home country cultural expectations.
This is a tall order and those two demands can be very difficult to meet. Don’t expect too much at the outset and be prepared to invest in training people to make up the skills and knowledge gap.
Attrition rates: How does your potential partner manage its attrition rates? Attrition rates are notoriously high in the offshore industry in India and this can cause you serious difficulties on an ongoing basis. Attrition leads to knowledge and skills seepage and massive recruitment and re-training costs (which can eat away at any cost arbitrage you were looking to harvest.)
Try to get some accurate figures on attrition from any potential partners and don’t just look at the numbers, look at the trends over a few years. Ask your partners how they manage this issue, what policies and processes they have in place to address the challenge. If they just brush it off as irrelevant, be very wary. When we talk to home teams, lack of continuity of contact in India is often cited as the biggest headache.
Size: Should you team up with a large, well-established player in the market who has size, scalability and well-tested procedures, or with a smaller outfit who are growing and hungry? With a larger player, you might end up being a small fish in a very large pond and feel you are of little importance whereas a smaller partner may see you as strategically vital but lack the sophistication you are looking for.
You need to balance these conflicting arguments and find a solution that you are comfortable with in the short and medium term. Again, it has to be about chemistry as well as commercials.
Price: If you are going through the whole process as a cost-reducing exercise then this obviously becomes a key factor in the final decision-making process.
But just a few words of caution, which come from experience. If you drive too hard a bargain, people will resent it. You are shedding people back home (this is resented at home) and you are squeezing the pips of your new partner (this is equally resented in India). The whole process can become pretty sour very quickly and you end up with massively resentful workers in two locations.
In addition, your India partner often becomes critical to the well-being of your global business. In fact, the better your partner performs, the more critical they become as you invest even more heavily in them in terms of time and emotion. What are you going to do if they turn around and say, ‘we can’t support this level of work anymore at the price we are charging?’ You may find they have you over a barrel.
The deal must be fair from the outset – that’s what will bring the cost savings in the long run.
It’s probably not a great idea to start a post by appearing to insult most of our clients – so I’d better quickly explain what I mean by calling you WEIRD.
Joseph Henrich, Steven J Heine and Ara Norenzayan issued a research paper a few years ago showing that most behavioural science theory is built upon research that examines an intensely narrow sample of human variation – disproportionately biased towards US university undergraduates and that this has skewed the findings of a great deal of research when you try to make it fit a culturally diverse world. Their definition of the sample base was that they were quite simply WEIRD
I think that all of this seems very likely to be true but I think that you can take the hypothesis way beyond the fields of behavioural science into the world of politics and it also seems incredibly true in the world of commerce.
I spend my days working with (mainly) western companies who are international in nature and who struggle with the complexities of interacting across the boundaries of global culture, time zones and geography. We help them understand how significantly and deeply cultural differences can impact on the effectiveness and efficiencies of their global operations. The longer I work in this field the more I come to realise that this WEIRD issue is at the heart of a lot of the dilemmas our clients face.
I have come to realise that (either consciously or subconsciously) people who are WEIRD in North America and Europe look around the world and think that the rest of the world is also WEIRD or, if they are not, would really like to become WEIRD at some stage in their ‘evolution’. The problem is that probably 80% of the world (by population) actually are not WEIRD and have no desire to become so. In fact the 80% of the world’s population who are not WEIRD look back at North America and Europe and think ‘those guys are seriously WEIRD’.
Where are most global compliance policies driven from? Europe and North America on the whole. We are moving around the world trying to apply WEIRD policies, processes and ethics into an un-WEIRD world and people simply just ‘don’t get’ what we are talking about. Our core values and beliefs are simply an irrelevance to people in many parts of the world.
A very good, very topical example of this would be the reaction of the majority of Russians to Vladimir Putin’s close association with the recent Panama leaks which highlight tax evasion amongst the rich and powerful. A BBC reporter, when interviewing ‘the man in the street’ in Russia was greeted with this reaction. “People high up have always had accounts like these and they always will. Putin can’t keep an eye on everyone.” In other words – it doesn’t matter and I don’t care. Contrast that with the reactions to the news that the Icelandic Prime Minister, Sigurður Ingi Jóhannsson, was associated with the scandal or that David Cameron’s father had been named.
I’m not saying that I disagree with the ethical and commercial standpoints espoused by the WEIRD – I’m WEIRD myself – it’s more about getting people in the WEIRD countries to recognise that the ‘universal’ truths that they see as ‘self-evident’ are only ‘self-evident’ to a very small minority of the people on the planet. The starting point should be that ‘there may very possibly be a fundamental disagreement on this issue’ rather than am assumption that everybody, everywhere will ‘get it’.
It will be interesting to see, as China and India evolve as global super-powers, whether these WEIRD ideas will prevail globally or be eclipsed by other philosophies and approaches. Any thoughts from my WEIRD (and non-WEIRD) contacts?
For more information on how Global Business Culture can help you become more globally savvy contact me at email@example.com
I am often asked about the key elements of effective international collaboration and whilst there is no secret recipe for success, these ten points might help you to navigate through the complexities of international cross-border working. The list is not exhaustive but I hope these hints and tips are a good starting point:
You can probably think of many other ‘Golden Rules’ but these are a good starting point to a more open and culturally aware approach.
Global Business Culture works with clients all over the world, helping them develop greater levels of cultural fluency within the organisation. If you would like to discuss how we might be able to assist you or your business contact me at firstname.lastname@example.org
Over the past decade, I have worked with some of the world’s greatest international Law Firms and I have been heavily involved with their globalization processes. This has been a fascinating journey and I’ve learnt an enormous amount along the way. Many of the firms have grown from local powerhouses to global super powers and… Read More
Over the years I’ve been involved in a number of major projects where U.S. or European companies have looked to transition work from their home countries to outsourced facilities in India. The drivers behind these projects have been many and varied, but I suppose that cost reduction is always a major component of any such… Read More
A report published by Control Risks titled ‘International Business Attitudes to Corruption’ succinctly highlighted some of the extreme challenges faced by Compliance Officers within global organisations. As regulators increasingly extend their global reach whilst at the same time anti-corruption laws become ever more comprehensive, Global Compliance comes face-to-face with culturally differing norms around the world…. Read More
I really believe this statement is true if any person is to be able to work really effectively across the barriers of culture, language, geography and time. The basic problem is that people are not born with an innate understanding of how business works in areas of the globe they don’t know and maybe have… Read More
It’s probably not a great idea to start a post by appearing to insult most of our clients – so I’d better quickly explain what I mean by calling you WEIRD. Joseph Henrich, Steven J Heine and Ara Norenzayan issued a research paper a few years ago showing that most behavioural science theory is built… Read More
A report published by Control Risks titled ‘International Business Attitudes to Corruption’ succinctly highlighted some of the extreme challenges faced by Compliance Officers within global organisations. As regulators increasingly extend their global reach whilst at the same time anti-corruption laws become ever more comprehensive, Global Compliance comes face-to-face with the often uncomfortable on-the ground reality… Read More
Like it or not, English is the common global language adopted by most international companies. The trouble is that language levels in English vary around the world – even within one organisation. Native speakers often assume that ‘if somebody is working in my company, they have to have really high levels of English.’ This is… Read More
Lots of organisations seem to face huge capability gaps when it comes to successfully implementing global strategy. The strategy may be fine as a concept but individuals within companies very often lack a sufficiently global mindset to allow them to implement the strategy successfully – and that’s when things can go badly wrong. Many of… Read More
I am often asked about the key elements of effective international collaboration and whilst there is no secret recipe for success, these ten points might help you to navigate through the complexities of international cross-border working. The list is not exhaustive but I hope these hints and tips are a good starting point: Avoid making… Read More
The findings of a recent Boston Consulting Group report highlighted the fact that many companies face a huge capability gap when it comes to implementing their global strategy. The strategy may be fine but if individuals within the organisation lack the global mindset to enable them to implement the strategy successfully, then things can go… Read More