Global Outsourcing Key Considerations – Part 3

Much of the training and advisory work we do at Global Business Culture is focused on making global outsourcing projects work more effectively. We run many cultural awareness training and global virtual team programmes for clients who have embarked on a large-scale offshoring arrangement only to find that getting people to work efficiently across the barriers of time, culture, geography and language is very challenging.

Here are a few of our thoughts on what you need to factor into the process:

Virtual Teams and Global Outsourcing

Transitioning work from one country to another inevitably results in teams needing to work in an increasingly virtual environment. Tasks that used to be undertaken in one location are now passed on to another country to be performed by colleagues from a different cultural background who often have a different first language.

Working across the barriers of time zones, culture, language and technology will almost inevitably throw up a range of new and challenging situations which are going to require people to reassess the way they perform key tasks. Teams will be re-constituted, and tasks reassigned. Leaders will be asked to manage people who are located thousands of miles away, who they don’t know and probably (from a cultural perspective) don’t understand.

The issues of virtual working are not ‘soft’, and they are not peripheral to the process – they lie at the heart of how successfully you can make any outsourcing project work. If you can make virtual teams as effective as co-located teams, then half the battle is won – however if your virtual teams become malfunctioning the results can be enormously damaging and very costly.

Senior leaders need to recognise the critical nature of virtual team working and the need to give people the knowledge and skills to operate effectively in such a challenging environment. Emphasis should be placed on the following areas:

• Developing virtual leadership skills: Just because somebody has successfully managed a team in their home location does not mean they automatically understand the dynamics of virtual team working. Virtual team leadership demands a whole new set of skills and also requires people to develop new levels of global cultural fluency and awareness.
• Agreeing team protocols: Multi-cultural virtual teams will be made up of people with different cultural backgrounds and different corporate experiences. They will bring their own assumptions about ‘how things work’. Everybody will have a different expectation around what a good meeting looks like or how decisions should be taken. Global virtual teams need to establish agreed team protocols and they need to do this right at the outset of the project. Fail to address this issue and you automatically build-in inefficiencies.
• Improving communication skills: Different countries have very differing views around how to communicate effectively. Each team member might have a different view about how they want to communicate with the leader. Some cultures like instructions to be given in great detail; others like to be given an objective. Consistent, clear and comprehensive inter-team communication is a must if the team is to function to full capacity.
• Great technology: Global virtual teams rely on the use of technology in almost every situation – you cannot shout to a team member in another country. This complete technological dependency means that your technology has to be good and it has to be robust, but it also means that all team members need to be comfortable using it. Outsourcing projects often introduce people to new technologies but training on these new technologies is often overlooked because there are so many other things happening at the same time. Appoint technology champions and make them accountable.

If you fail to address these issues you will regret it down the outsourcing line. Getting this right requires time, training and budget – so factor those things into you plans from the start to avoid any unpleasant surprises.

Cultural Awareness – a Key Ingredient of Global Outsourcing Success

Increasingly, outsourcing projects happen cross-border which inevitably results in an increased amount of cross-cultural interaction. Any international shared-service centre environment must inevitably involve a high level of complex, multi-cultural interaction and, if the bulk of your off-shore development or back office processing is India, you are likely to encounter inter-cultural challenges.

How culturally fluent are your home teams prior to any transition activities? What have you done to ensure that your new outsourced resource has a good understanding of the cultural expectations of your home teams – and more importantly of your clients? Are you even aware of what some of the key cultural challenges you are likely to encounter might be or do you prefer to pretend that everything will be fine?

In our experience, managing global cultural complexity is one of the key difficulties any major cross-border outsourcing project is likely to face. These challenges are both strategic and interpersonal but all of them can have a dramatic impact on the overall effectiveness of your operation:

• Aligning structures: How will you structure your organisation in the new territory? This is a key strategic decision when opening a captive in another country and can also have a significant bearing if using a third-party provider. Many Western operations want to recreate their own flat systems around the world but this can cause chaos if your chosen outsource destination is a rigidly hierarchical country such as India. Get this decision wrong at the outset and you will live with the consequences for years.
• Leadership style: If you have people in the home teams’ leading team members in the outsourced destination then you are very, very likely to have a clash of leadership styles. Leadership is geographically conditional – what is good leadership style in one country is often viewed as poor leadership in another. Both leaders and team members need to understand these dynamics and adapt their approaches accordingly.
• Cultural bias: Home teams are prone to equate ‘different’ with ‘wrong’. If colleagues in an outsourced destination have an approach to any specific task which is different from how it is normally performed ‘at home’, the new approach is often felt to inferior (even if it is, in fact, better). All parties need to learn to shed their natural unconscious bias and develop very high levels of objectivity when appraising the work done by new overseas colleagues.
• Effective communication: Communication is difficult enough within single-country organisations but is obviously much more complicated across cultures and language groups. Add the necessity for almost all communication to be driven through technology of one form or another and you have the perfect recipe for confusion and misunderstanding. Focus on effective communication is essential from the outset.

Global cultural differences challenge you in a way that is complex and often concealed. Our experience is that many organisations only become fully aware of cross-cultural challenges at the point when things are starting to go badly wrong and starting to impact negatively on a host of critical metrics.

Managing Distributed Processes

As you move work, you might find you have different parts of a process in different locations. It is always best to keep work hand-offs and feedback loops between different people in a process simple and tightly connected. Think about how the best relay teams in athletics succeed. The baton hand-offs are as important as the individual performances between hand-offs. With a change such as off-shoring you will have changed the context in which this happens for some people and they will need to develop the skills to manage a distributed process.

Here are a few considerations to bear in mind. They are important when you have a single location structure, even more so when work is distributed.

Who is the end-to-end owner of the process? Developing this role and the skills it requires are vital to bring together the different people in the process especially when there is change or improvement happening. The owner needs to have a grasp on how things are running today, a future vision of how the process should evolve and the ability to influence across functions, countries and partner organisations.

If the work hand-offs have changed then you may need to re-define what good looks like in the new context. This would cover aspects such as metrics, communication and escalation procedures and support to help implement these changes. Having people with the skills to facilitate the design of the new situation will be important.

With a distributed process and team, you might need to re-think how collaboration takes place. How will teams share simple visual performance data? How will teams carry out regular progress meetings to ensure the team is connected and working on the right topics?

When you move to a distributed process, leaders will face new challenges. It’s often the case that leaders who are already strong at delegating effectively will thrive in a distributed process. Leaders who get too involved in the work of their teams may need time and support to adjust.

Managing Attrition in Outsourcing

The decision to outsource work to another geographic location is often predicated on the expectation of large potential cost savings and access to scalable talent pools. Whilst both goals are achievable, they can be severely impacted on by high levels of attrition at the outsourced destination (and even at home). Without wanting to sound alarmist, your approach to managing attrition could make or break your plan in the medium to long-term.

All the evidence shows that rates of attrition are higher in the outsourcing world than in other areas of business and there are a number of factors which contribute to these disappointing statistics:

• Competition for talent in the outsource market
• Lack of promotional opportunities because of flat corporate structures
• Wage inflation in-country and an unwillingness to keep pace with this
• The nature of the work which is outsourced – which is often quite boring
• Recruiting overly qualified staff for mundane tasks
• Lack of a sense of inclusion within outsourced teams
• Outsourced partners moving their own staff around as new clients are onboarded (you wanted their best people but so does everybody else).

Any outsourcing project needs to have the management of attrition at its core. It might sound pessimistic to start the process by assuming that many of the people you recruit will leave but unfortunately experience proves that is exactly what happens.

Ask yourselves a series of basic questions:

• What is the cost of attrition to my business and how might that offset any cost benefits you are expecting (include in this calculation recruitment, training, opportunity cost, impact on clients and the home teams etc.)?
• At what level of attrition do I lose any cost savings I am expecting from the transition process?
• Why would people want to work for us?
• Why would they want to stay long-term once they have joined?
• What is the clear career path I can show new joiners?
• What incentives can I offer to make retention more likely (things other than cash often go a long way)?
• How will we manage at a distance and promote an atmosphere of inclusion?

Unfortunately, attrition is often treated as a HR issue and fingers are pointed if attrition rates are high. The management of attrition is a whole organisation priority and senior leaders need a laser-like focus on this throughout the lifetime of the project. If fingers are to be pointed over this issue, then they should be firmly pointed at senior leaders.

We have helped dozens of organisations rise to the challenges outlined above which are inherent in any cross-border outsourcing project and would love to talk to you about how we can help your organisation become more culturally fluent.