CULTURAL ASPECTS OF OFFSHORING TO INDIA

Craig Storti and Peter Franklin

Source

"INTERCULTURAL MANAGEMENT" by Christopher Barmeyer and Peter Franklin, 1^st edition, 2016

Introduction

Since the 1980s, numerous companies in developed countries have taken advantage of cost savings to locate or move certain functions or business processes offshore or to augment local staff with additional staff overseas, usually in economically less-developed countries. While India was the first choice of many companies, the menu has expanded considerably to include locations in Europe, Latin America, and Africa. But India remains very popular for several reasons: (1) it has a large pool of well-educated professionals, especially in the information technology (IT) sector; (2) labor costs are still comparatively low (albeit increasing); (3) English is widely used; and (4) over the last 25 years the skillset of the Indian workforce has matured considerably, due in part to its head start as an outsourcing location.

During the first wave of outsourcing, the type of work sent offshore was usually in the IT arena - labour-intensive, repetitive, relatively unskilled work (e.g., data entry) that needed an English-speaking, technically trained workforce but was not complex and did not require sophisticated skills. Later, of course, many companies moved their call centres and computer helpdesks to India - and a few moved them back home. Today, a variety of increasingly sophisticated work has followed the path blazed by IT and call centres, including manufacturing, research and development (R&D), distribution and the ever-growing body of services collectively known as "back office" or business process outsourcing (BPO).

As the type of work sent offshore has evolved, so have the reasons for doing it. A recent survey by Statistic Brain identified the top five as:

1. To reduce or control costs 44%
2. To gain access to IT resources unavailable internally 34%
3. To free up internal resources 31%
4. To improve business or customer focus 28%
5. To accelerate company reorganization/transformation 22%

(Statistic Brain, n.d.,www.statisticbrain.com)

Other reasons cited were to accelerate the project (15%), to gain access to management expertise unavailable internally (15%) and to reduce time to market (9%).

Along the way, companies have used various models to structure their offshore operations, ranging from vendors to partnerships/joint ventures to wholly owned subsidiaries/divisions. Different relationships have proven effective for different types of work and for different corporate entities, and many companies use several approaches simultaneously.

And it has worked. The annual growth rate in the IT and BPO sectors in India was regularly 13-18% from 2000-2008, and, although slowing somewhat more recently, growth was 12% for BPO in 2011 and is projected to be 11-14% for IT in 2013. Total revenue for IT and BPO in 2012 will top $132 billion.

Case Description

The situation

A large US-based global business services company (hereafter GBS) has nearly 60,000 employees in North America and operations in more than 100 countries. In 2011, GBS's total revenue exceeded $30 billion.

Some ten years ago, GBS concluded that staying competitive in its industry required, among other things, outsourcing certain tasks to lower-cost locations overseas. While GBS considered several destinations, including Ireland and Mexico, the available labour pool was much larger in India, a key consideration given GBS's long-term master plan eventually to have as many as 15,000 offshore employees (a number it is now approaching in 2012). Moreover, the cost savings in India (at the time) were estimated to be 60%.

Competitive pressures notwithstanding, the decision of this more than 125-year-old company to move a significant percentage of its work (and its workforce) to a foreign country some 12,000 miles and more than nine time zones away occasioned a great deal of internal head-shaking, soul-searching, hand wringing - and resistance. The move offshore, in short, would have to be aggressively "sold" in the face of considerable skepticism and widespread anxiety. It may have been a financial "no brainer," but it would need to have considerably more momentum behind it.

At the core of the selling strategy, not surprisingly, was an intensive effort to make the case that nothing is going to change, also known as the "you-won't-notice-any-difference" argument. The idea here was that sending certain tasks offshore, thereby creating the need for Americans to work closely with Indian colleagues half a world away, would not be any different than working with colleagues and direct reports just down the hall.

But to make this case, GBS would have to address and somehow neutralize three common concerns: we won't understand them (the language issue); they're sleeping when we're working and vice versa (the time difference issue); and they don't think or work the way we do (the cultural issue). Another possible challenge - they don't know the GBS way of doing things - was a non-starter, as a comprehensive 14-week orientation and training programme was developed for all new Indian hires.

The language issue was not about Indians' ability to speak fluent English but whether or not Americans could understand the Indian accent. While this has turned out to be a lingering concern, it has not proven to be a deal-breaker, largely because most Americans, after some initial frustration and confusion, have become used to the Indian accent. The time difference was most commonly addressed by scheduling three daily shifts so that staff was always available during US working hours. The time difference was, in fact an advantage in those cases where the Americans could assign tasks at the end of the US workday and the Indians would complete the work overnight.

The third concern, the cultural issue, was not addressed but, rather, ultimately dismissed. This may sound odd on the surface - surely cultural differences would influence the US-India work relationships - but it is somewhat common that both parties in an offshore venture tend to underestimate the role of culture. While there is no doubt a self-serving motive at work here - it is in neither side's interest, after all, to suggest that working with Indians is any different from working with Americans - there are at least two other factors that come into play. One is the common Indian sentiment that having worked with Westerners before, perhaps having worked only with Western clients or partners, Indians are very familiar with Western culture and easily adapt. The other related factor is that while both sides accept that there may be cultural differences, they consider them to be minor and, more importantly, they are far outweighed by the similarities. The differences are superficial, this logic holds, whereas the similarities are profound.

Whatever the explanation, GBS's senior management was either persuaded or persuaded itself that culture was not going to be a problem. While this was certainly convenient and completely consistent with GBS's "you-won't-notice-any-difference" theme, it does appear in retrospect that GBS came by this sentiment honestly, that there was not in fact, any attempt on either side (India or the US) to deliberately minimize or ignore possible cultural differences, tempting as that might have been. Culture was discussed in headquarters, although not with any cultural experts, and GBS concluded it would not cause any significant problems. In short, there was not a cultural "issue".

Work in India began with some trials, mostly in the tax division of GBS, lasting between three and six months. The results validated many aspects of the offshore model, and with some adjustments of other features, the company began to expand what came to be known as GBS India.

The challenge

Some 18 months into the experience, three major recurring challenges were still not responding to any of the traditional fixes. Americans complained that:

1. Indians fall behind on their work, but they don't tell us and then they miss their deadlines
2. Indians say they understand something when in fact, they do not, and as a result, much of their work has to be redone.
3. Indians don't tell us when they think something we have asked for is impossible, won't work, or when they know a better way of doing it; they don't give honest feedback.

Initially, GBS responded with the standard expectations-setting approach: bring the parties involved together, describe the disconnects, layout and get agreement on expectations going forward, and then wait for the necessary behaviour changes to start showing up.

But when Indians were made aware of the three complaints, they responded as follows:

1. "We always tell you when we fall behind, but you don't seem to understand and are surprised when we need more time." "We remind you of the deadline; we ask you if a given date is still the deadline; we mention we are working overtime and even coming in at weekends; we send an unsolicited update that does not specifically state we are behind but shows where we are on the timeline (which is not where we need to be if we are still on schedule). We assume you Americans are reading these messages correctly (since you do not say you don't understand), and you have postponed the deadline. But you Americans just don't get it."
2. "You don't give us very much guidance, so we have to try to guess what you're looking for, and sometimes we guess wrong." "We can't tell you that we do not understand something you have explained because this could embarrass you by implying you did not give a very good explanation." "When you ask us the question, we probably would casually say 'yes' and then fully expect you to follow up, checking in regularly to see if we had any questions. When you do not follow up, in effect, taking 'yes' for an answer, we are forced to work on our own rather than approach you, which would embarrass you by asking for further explanations." "We would like you proactively to offer guidance and tell us what to do."
3. "We give honest feedback, but sometimes you don't listen." "We can't possibly say anything negative to you. What we can do is not say anything positive or not say anything at all. Just not saying anything doesn't mean we agree or approve of what you say."

Since the whole subject of culture and cultural differences had been taken off the agenda at the beginning of the offshore experiment, GBS had to find other, more conventional explanations for what was happening. In the case of the three complaints, the causes had to be located elsewhere, with one or more of the "usual suspects": the wrong skillset, incompetence, not enough experience, or, simply, individual staff members who were just "difficult".

And the solutions, likewise, had to fit these standard explanations: tighten the job qualifications, improve the interview and selection protocols, do more targeted training, and replace difficult people. In the end, because GBS had turned a blind eye to culture, it never identified the true causes of the three problems, and its "solutions", of course, had little or no effect.

For two years, nothing happened - nothing, that is, except for growing frustration and discontent inside GBS with all things offshore, undermining the entire strategy and jeopardizing ambitious expansion plans. In the end, the impasse forced GBS to re-examine its "you-won't-notice any-difference" strategy and to engage the services of an outside cultural consultant who had worked with numerous American and Indian companies. The consultant was charged with determining whether cultural differences disrupted the working relations between US and Indian colleagues. When the consultant found that cultural differences were at the heart of the three complaints described earlier, senior leadership at GBS was obliged to acknowledge that culture was an "issue" and devise a strategy to address its impact.

Concepts, models, and frameworks

Communicating across cultures

At the heart of the three complaints is the classic cultural dynamic wherein people from one culture (call it culture A) inevitably interpret the behaviour of people from another culture (call it culture B) from their own (culture A's) point of view. This is unavoidable, of course; what other point of view do people from culture A have? But if the people we interact with are not from our cultural background, then using the life experience learned in A to make sense of the behaviour of people from B is a questionable strategy.

This dynamic explains why the Americans and Indians working for GBS could look at the same three sets of behaviours - regarding deadlines, asking questions and giving feedback - and come up with completely different interpretations. Behaviour, in other words, does not have inherent or built-in meaning; it has whatever meaning people assign to it. And people from different cultures will often assign different meanings to the same behaviour.

When people communicate and cooperate in any setting, not just across cultures, they do not simply transfer meaning but co-construct understanding and, indeed, sometimes more explicitly negotiate understanding. This is because it is impossible to express everything explicitly in the language code (and even if this were possible, it would frequently not be appropriate). They have to interpret, or give meaning to, a large part of what is said - alone or in a joint undertaking. They do this by using their proficiency in the language they are communicating in and their ability to interpret non-verbal signals, their knowledge of the world and the particular situation in which they find themselves, their knowledge of their interlocutor and, not least, of the culture and cultures of the people involved.

When people communicate across cultures, this co-construction of understanding can become particularly difficult because people communicating draw on 1) different sets of cultural knowledge; 2) this is often unconscious to themselves, but 3) sets the norm for behaviour in their own cultural setting (and often not for behaviour in the other culture). Consequently, communication can easily break down, become dysfunctional and lead to transactional and relational conflict. This in fact, makes the explicit negotiation of meaning more necessary, although, for relational reasons (for example, the threat to face), it may not take place.

As Spencer-Oatey and Franklin (2014) report, research into international teams has regularly identified three strategies for handling culturally influenced misunderstanding: being flexible in the use of communication styles (e.g. Holmes et al. 2011); spending time sharing background information before focusing on task (e.g. DiStefano & Maznevski 2000); and double checking the meaning of key words (e.g. Jankowicz & Dobosz-Bourne 2003).

Not only do we have to pay special attention to the management of meaning in intercultural communication, but the management of interpersonal relations also requires careful handling because of different notions of appropriately polite behaviour. Leech (1983/2005) suggests that politeness maxims or constraints (e.g. Tact, Generosity, Modesty, Agreement) influence people's behaviour and how important a given politeness maxim is can vary from culture to culture.

The concept of face is of central significance when behaving politely and handling and explaining relationships in intercultural interaction. Goffman (1967:5) defined face as "the public self-image that every member wants to claim for himself", and from this, Brown and Levinson (1987) developed what has become a well-established theory of politeness. This theory highlights the notion of face, and how face can be damaged, and impoliteness occurs through what is known as face-threatening acts, particularly through speech acts such as requests. As Spencer-Oatey and Franklin (2014) point out, theorists differ on the question of how culture is related to face. Some linguists (e.g. Brown & Levinson 1987) believe that face sensitivities are universal, whereas Ting-Toomey (1999), for example, suggests that individualists are mainly concerned about their own face, whereas collectivists are mainly concerned about other people's face.

The cultures of the USA and India compared

Key to an understanding of this case are insights into the different national cultures of the USA and India. There follows an overview of the differences between the two cultures as ascertained in etic studies by Hofstede (1980/2001) and House et al. (2004), which should be consulted if the terms and concepts are unfamiliar.

Table 1 Overview of the differences between the two cultures

Cultural dimension	USA	India
Power distance (Hofstede): expectation and acceptance that power is distributed unequally	lower: 40/38	higher: 77/10-11
Power distance - practice (House et al.): expectation and acceptance that power is distributed unequally	Band B	Band A
Individualism (Hofstede): prime orientation to self	high: 91/1	lower: 48/21
Societal institutional collectivism - practice (House et al.): institutional practices encourage and reward collective action	4.20, Band B	4.38, Band B
Societal in-group collectivism - practices (House et al.): individuals express pride, loyalty and interdependence in their families	4.25, Band C	5.92, Band A
Performance orientation - practices (House et al.): innovation, performance and improvement are encouraged and rewarded	4.49, Band A	4.25, Band B
Assertiveness - practices (House et al): value assertive, tough and dominant behaviour for everyone	4.55, Band A	3.73, Band B
Humane orientation - practices (House et al.): encourages and rewards people for being fair, altruistic, friendly, generous, caring, and kind to others	4.17, Band C	4.57, Band B
Communication style (Hall & Hall 1989)	fairly low-context communication	High-context communication

Key: House et al: figures refer to scores for practices. Band A is high, Band C is low Hofstede: first figure is score, second figure is rank

Two of the most often cited differences between US and Indian management styles are: (1) the American instinct to delegate authority vs the Indian instinct to centralize authority; and (2) the American tendency to minimize differences in rank vs. the Indian tendency to emphasize differences. With respect to the former, Americans believe that those who manage least manage best, that direct reports do their best work if given broad objectives and guidelines and then left alone to reach those objectives in the way that suits them best. For their part, Indian managers typically retain more control over the work of their staff (in part because they are also held more closely accountable for it), and staff expect close guidance and supervision.

Concerning rank, America is a famously egalitarian culture; people believe that no one is inherently superior to anyone else, regardless of their rank. Direct reports are very sensitive to any actions on the part of management which might suggest a superior/inferior dynamic. And managers are very careful not to "pull rank" (to act superior) and not to "wear their rank on their sleeve" (to draw attention to occupying a higher rank). It is not that Americans do not hold different ranks, but only that people should not be treated differently merely because of their rank.

Indians tend to be very aware of and sensitive to differences in rank; one treats one's superiors, peers, and inferiors (and Indians use these terms) in distinctly different ways. It is not appropriate to treat a peer the way one treats a superior or direct report. Rank determines how one gives feedback and questions or challenges dubious guidance or mistaken directions.

Intercultural competence development

Figure 1 Gudykunst and Hammer's classification scheme for training techniques.Gudykunst, Guzley and Hammer (1996).

Questions

What synergies can GBS expect to create by raising company-wide awareness of the cultural issue? What leverage can GBS gain by acknowledging the reality of cultural differences?