Building an Effective Operation in India – Part 1

At Global Business Culture, we spend a lot of our time helping Western clients learn how to work more effectively with their operations in India.  Let’s be honest, they usually come to us because they have a problem – they wouldn’t come to us for support and guidance if everything was going smoothly.  This means we have a lot of experience in situations where the relationship between the ‘home’ teams and the India teams is breaking down or has already broken down.

Do we see a pattern in where things tend to break down – yes, we do, and the problems usually start right from the beginning when the concept of having a team in India is first discussed.  I therefore thought it might be interesting to set out some of the key areas that really need to be addressed by any company contemplating opening an operation in India, but I also hope that some of my thoughts might help those companies who are already in India but find themselves struggling.

I have tried to put down my thoughts in a chronological order in terms of the issues which need to be considered – and these areas usually need to be considered at the senior leadership level because many of them are strategic.

Choosing an Operational Model

This is a fairly obvious point, but you need to decide if you will:

• Open a captive operation
• Work through an outsourced third-party model

I have seen both approaches succeed, and I have seen both fail.  Having worked on over 50 India ‘transition’ projects I am firmly of the view that it is easier to make a captive work than it is to have an effective long-term partnership.  There are lots of reasons for this, but the major ones are:

• You have less control over the selection of the people working with you
• The employees in an outsourced operation are always trying to juggle two cultures – your culture and their employer’s culture
• Attrition levels tend to be higher
• Good team members get moved onto projects with other clients
• They are never really ‘wearing your t-shirt’ and have less of a sense of accountability to the end client
• The cost arbitrage often isn’t realised

I’m sure people in outsourced operations all over India will disagree with these points but this has been my experience.

If you do decide to go down the outsourced route, have a look at this blog: Off-shore Partners in India | Global Business Culture

So, let’s assume at this point that you elected to start a captive operation in India, what issues do you need to think about?  Well obviously, there is a mountain of legal, compliance and location research which needs to be gone through but I’m going to assume you have that under control and simply focus my thoughts on the operational aspects of your plans.

What do you need to think about first?  Surprisingly I’m going to say culture and organisational design.  These two issues should be at the front, middle and back of your planning – yet they are usually either overlooked completely or given a cursory mention in a document that nobody looks at.

What culture do you want to develop in India?

India is a hierarchical culture.  It may be changing over time, but it remains hierarchical in both business and societal terms.  This is neither a god nor a bad thing.  It is just a fact.  Accept it.  You are not going to change it.  It might change from within, but you are not going to change it.

So, what type of culture and organisation do you want to develop in India?  Do you want to replicate your flat, matrixed structure from the US, UK or the Netherlands or do you want to have a completely different, much more hierarchical set-up?  This is something you should think about in detail at a very early stage.  And don’t just think about it; make a conscious decision and then develop a plan to ensure you achieve your goals.  You should address this (ideally) before you make your first hire – especially if that first hire is your senior leader in India.

Let’s imagine that you decide that you want to replicate your more egalitarian structure in India but you then, unwittingly, hire a hierarchically minded head of operations.  Your plans will be doomed from the get-go – I guarantee that they will be.  I’ve seen it many times.

Every decision you make, every action you take should be from the position of ‘does this support the culture we are trying to build?’

People reading this may be thinking, ‘another consultant banging on about the importance of strategy’ but most of the challenges that we try to address in the work we do hang on these issues of a mismatch of cultures and cultural expectations.

Maybe you should try a mixture of hierarchy and flat?  Don’t even go there – that will only succeed in confusing everybody.

Culture is about people

It’s fairly easy to decide what type of culture you want to develop (especially if you already have a well-defined culture back at base) but it is not so easy to build that culture in a new country which has a completely different business approach to most things.

The key is to recruit for cultural fit.  Most companies go to India for technical expertise at scale and recruit mainly for technical ability.  In fact, their whole recruitment strategy is focused solely on technical competence.  Technical competence is fine; but it’s not enough.  Technical competence will not overcome some of the common challenges we come across within these cross-border collaborations.

You need technical competence and cultural fit.  They are a package.  Either one without the other will lead to problems and that means that your recruitment process must be carefully constructed and constantly revised and revisited.  Some headline issues you need to consider:

• Have you clearly articulated the culture you are trying to develop in India?
• Have you conveyed this to the recruitment team and are you confident they understand it?
• How will you check for cultural fit?
• Are your recruitment team culturally fluent enough to recognise what ‘good’ looks like in terms of candidate personality and attitude?
• Have your senior appointments in India bought into what you are trying to achieve? Are they just paying lip service while working to develop their own fiefdom in their own image?

We have developed a culturally sensitive recruitment methodology for India which we know works.  Recruiting for cultural fit is a complex process but we believe it is the key to success because it:

• Leads to reduced rates of attrition
• Brings down the cost of recruitment in the medium term
• Reduces training and onboarding costs
• Massively increases cross-border effectiveness
• Improves profitability through efficiency gains

Is your human cost base India aligned?

Before starting to recruit in India you really need to conduct a rigorous, in-depth salary benchmarking exercise.  If you don’t do this, you risk two major challenges:

• • You might end up paying far too much for junior level employees which pushes salaries up exponentially throughout the company pyramid and this will make you commercially unviable

or

• You might end up getting caught up in the ‘India is a cheap location’ bandwagon and offer too little which means that you won’t be able to recruit the right people and you won’t even be able to retain the wrong people

Don’t rely on the gut feelings of a few early hires to give you a feeling for indicative salaries in India.  Salaries vary wildly across India depending on location, local competition, recent wage inflation etc.  Your local hires are likely to be experts in engineering rather than salary benchmarking.

It is a good idea to salary benchmark regularly – especially if your attrition rates start to increase in India.  Of course, Indians will move job for a variety of reasons such as job title., better company culture or more convenient location but they also move for money (just like everywhere else in the world.)

I have briefly highlighted a number of areas which companies who are working with India need to consider and in my next blog, I will address a number of additional issues including:

• Onboarding
• Commitment to training
• Retention strategies
• HR policies
• Cultural awareness development

If you would like to discuss any of these issues with our team, please get in touch.