Monthly Archives: February 2018


International cultural differences will have an impact on absolutely every element of any global supply chain.

Every single element of the complex chain you have developed will be touched by the effect of global differing mindsets. However, I’m going to take just four illustrative issues and highlight why lack of cultural knowledge and the practical application of that knowledge can seriously damage the health of any supply chain:

Contracts:

In the west we have a fairly standard understanding of what a contract is. Generally speaking it’s an agreement between two or more parties which binds those parties to the terms of that contract. It is the end of the process of negotiation and it is a full stop at the end of the sentence.

Unfortunately broad swathes of the world don’t share that definition of a contract with us. In many parts of the world (and in virtually all emerging markets), a contract is an agreement on the best set of terms possible at a specific point in time – but if those circumstances change it is unreasonable to expect people to keep to the original terms of the contract. Therefore ta contract is not binding – it is intrinsically fluid.

People go into supply chain agreements with fundamentally differing views on the nature of the contract. That’s great for lawyers but not so good for supplier/customer continuity of relationship.

Time and Schedules:

It’s a cliché I know but attitudes to time really do differ around the world and many countries just don’t feel the same sense of urgency as people maybe do in the US or UK. They do have a sense of urgency but just not the same sense of urgency as in most of the West. Deadlines in some countries are seen as guidelines and couple that with infrastructure problems, over-zealous bureaucrats and even issues around corruption – then schedules can easily drift.

In a recent seminar I was running for a major global MNC a non-native English speaking delegate confessed that he’d only recently realised what ‘asap’ actually means to Americans. He had taken the abbreviation literally, thinking that he meant he should do the task as soon as he had a bit of free time in his diary – even if that meant next week or next month!

Supplier selection:

Do you really understand what ‘good’ looks like in China or India? There are obviously ‘good’ and ‘bad’ in both places but do we really have the country-specific knowledge to make the call?

In my experience too many decisions are made based on what the home team’s view of the world is when very often the home team has little or no knowledge of any culture other than their own. We end up buying what we’d by at home – but that is very often not fit for purpose in countries as vast and complex as China, India, Brazil etc.

Communication:

No common language, no common style of communication and no agreement on protocols around communication. That just about sums up the situation we all find ourselves in.

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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 the problems related to any corporate globalisation process are caused by a lack of global cultural fluency which leads people to take the same approach to everything, every time, everywhere – they embrace a ‘once size fits all’ mentality.  In the multi-faceted, complex global world we all work in today, this s approach just doesn’t work – perhaps it worked twenty years ago when the big global players ruled the world but the world has since become a much more level playing field these days and a ‘one size fits all’ approach is quickly rejected just about everywhere.

So what should companies and individuals within those organisations do?

1. Recognise and accept how little you actually know about other countries and other markets.

There is no shame in recognising that ‘you don’t know what you don’t know.’  If you start with the assumption that there are a multitude of unknowns and then accept that it is your responsibility to do some initial research on those unknowns, things will probably work out better.

2. You also need to accept that you take a significant level of cultural bias into every cross-border transaction.

Your background makes you see things in a specific way – but your Chinese counterparty probably looks at the same situation and sees something completely different.

3. Build into your thinking that ‘just because things are different’ in another country it doesn’t necessarily mean that they are wrong

They might be wrong but a different approach might actually be better than the way you do it ‘back home’. This sounds simplistic but it is very often a difficult message for people to take on board.

4. Think about the impact of every decision for every location.

A centrally determined policy is usually biased towards the country it originate from (usually where the Head Office is.)  You want to move towards a flatter structure?  Great – but how do you make that work in a country where hierarchy is not only the norm but seen as the way in which the whole world (both business and private) is and always has been shaped?  A message from head office or a town hall meeting is not going to change a mindset 4000 years in the making! (Indeed is town hall meeting a good thing in the first place in certain countries?)

5. Accept that a good idea is a good idea

Regardless of where it started. Not all good ideas start with you or in your country.  The sign of a truly mature global company is when you begin to hear people in the centre talking about the things they can learn from the outside (other countries.)  Not all good ideas start in your head office – but equally not all ideas which come out of head office are bad.

What I am really saying here is that knowledge is the key.

People in your organisation (and not just a few at the top or in the ‘international function’) need to be more aware of the impact that international culture has on every facet of business, they need to be given the specific knowledge necessary to work their way around a complex global environment and then they need to apply that knowledge and awareness f0r the benefit of the business.

One thing is certain – cultural fluency within an organisation never happens by accident.  It needs careful planning, training and targeted interventions.

Over the years we have worked on scores of projects involving outsourcing projects to India and our brief is always the same – to try to make the interface between the India outsourced operation and the home teams in the West work more effectively. I have come to recognise a pattern with regard to where things tend to go wrong and therefore the things that need closest attention. You may think that how you structure the performance metrics, for example, is not a cultural issue but it most definitely is.

The issues highlighted below are not in any particular order but all play a major role in reducing cross-border efficiencies. Some of these areas of interest are inter-personnel and can be significantly improved through quality, targeted training; other areas are more strategic and need to be addressed as such at the most senior levels of an organisation.

  • Corporate structure: India is a hierarchical society. There’s no getting away from that – it just is and will be for the foreseeable future. The fact that society at large is hierarchical means that the Indian mindset within the business environment is also hierarchical. This is neither a good thing nor a bad thing – it is just the reality of the situation. The problem is that lots of Western companies want to introduce a much flatter structure into their Indian operations. Why? Is it because flatter is better or that we feel the need to have the same approach everywhere around the world?

Indians are, on the whole, aspirational. They want to progress within the organisation and they want to progress quickly. This progress is often measured not just in added responsibility or increased money (although they are important) but also through job title. If you develop a flat structure you give people nowhere to go – other than out of the door (see attrition below).

Before starting your outsourced operation you really need to think long and hard about corporate structure. If you suffer from high attrition rates you need to analyse if your corporate structure is partly to blame. Are you going to impose a standardized, Western approach or will you adapt your approach to ensure best fit for the territory?

  • Metrics: This is a perennial problem. We measure everything and punish if the metrics are not met. The standards are always (understandably) high but when I challenge the ‘home’ teams as to whether these metrics were always met when the work was done back home, the answer is usually that they weren’t even measured back in the day.

The problems accruing from this are threefold:

  1. The home teams lose confidence in the India teams because they are perceived as failing to meet their KPI’s on a regular basis.
  2. The India teams see failure to meet the metrics as detrimental to their chances of moving ahead with their careers. If I can’t hit my targets, do I have a future here?
  3. The result of this is that the two sides spend lots of time arguing about whether or not the metrics have in fact been hit – almost ensuring that next month’s metrics will also be missed.

It is so important that the metrics you set the teams in India have some kind of resonance with the needs of the home team. Metrics are often quantitative and the complaints of the home teams are usually qualitative. If you set quantity as the metric – that’s what you get. Lots more thought generally needs to be put into this area. Honestly, I have never worked on an outsourcing project where this dissonance hasn’t been a major source of frustration.

  • Attrition rates: These are notoriously high in India in the BPO and KPO environments. This becomes a real problem when you need to build in-depth corporate, client or product knowledge within the Indian teams. If people leave on a regular basis – you constantly have to train new people and this can result in poorer service and increased costs.

So why are attrition rates so high? There are lots of reasons but some of the key factors are:

  • Aspiration – people want o progress and they want to do so quickly. If I can’t find that progression with this organisation because it has a flat structure, I can go next door and they’ll give me the promotion/salary hike/ job title I’m looking for.
  • Boring work – let’s face it, we often sell the off-shoring model to the home teams by telling them we are moving all the boring, repetitive work to India. Well not surprisingly your highly educated, ambitious, enthusiastic colleagues in India also find this boring work of little interest. So they move looking for a more stimulating environment.
  • Feeling like a commodity – Indians like to have a close, familial relationship with co-workers but very often they are just seen as a commodity at the end of an email delivering a product. This is not conducive to developing a one team approach where people feel valued.

There are other reasons in addition to these and you really need to have policies and processes in place to counter this trend – and I firmly believe that the home teams need to take a leading role in addressing this. It can’t be simply left to leadership in India because so many of the problems tend to originate outside the country.

  • Using initiative – the most consistent issue that comes up when talking to home teams about the challenges they face when working with co-workers in India is that they do not show any initiative. This complaint comes up every single time I work on these projects. On the other hand, I get lots of complaints in India about the incredibly poor instructions they receive from the US or the UK.

So what’s going on here?

Again it’s complex and deeply cultural in origin. As already stated, India is hierarchical and as a result Indian leadership style tends to be more authoritarian in nature. Leaders are expected to give direct and precise instructions and followers are expected to do what they have been told to do. Instructional style in the West is more subtle and indirect. People in the West are familiar with being given vague goals and left alone to work out how to achieve those goals.

The result of this is that Indians often receive only partial instructions by western colleagues and they then do precisely what has been asked of them – but this will frequently fall short of what the home teams actually wanted to be done. Lots and lots of work need to be done on this to iron out a misunderstanding on both sides. Fail to address this issue and you are guaranteed to be building in inefficiencies.

  • Over-assumptions– the home teams just often assume that their Indian colleagues will somehow automatically understand the way things work in the West, what client expectations are in the USA, how a product line fits into a wider supply chain etc. Why should they be able to do that if they’ve never been to the States or have no previous knowledge of your industry?

The average age of workers in the BPO and KPO industries in India is very low – maybe around 24 years old. Your team in India are probably very technically capable, talented and enthusiastic but they are not necessarily commercially astute. How can they be a 24? Imagine if 80% of the people back home were 24 – you’d probably be lacking commercial acumen there as well.

Don’t just train people on technical, process and product issues. Look at their commercial development as well.

The comments above are not meant as a criticism of either the home team or the Indian mentality– they are simply issues I have come across on a consistent basis over the past 15 years working on these matters in the US, Europe and India.

If you are interested in discussing how you can improve efficiency and performance in these type scenarios please contact me at keith@globalbusinessculture.com

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