Talking about Race and the Global Economy

One of my favorite business authors, Rosabeth Moss Kanter, just put up a post on the Harvard Business School blog about the Gates arrest and its connections to global business management, “Henry Louis Gates and the Global Economy.” She went straight for the jugular on this issue, emphasizing that:

The incident is about race, regardless of Sgt. Crowley’s intention, regardless of whether the officer reacted appropriately, and regardless of whether Gates should have held his temper.

Then she drew a parallel with the situation of a white American manager working for an Asian company, who “felt increasingly marginalized, stereotyped, racially profiled, and excluded from inner circles.”  The point is that race is embedded in the context in which we work, whether or not there are active racist intentions at play.

She concludes:

Obama’s election, and now Gatesgate, moved discussion of differences from under the table to the center of the table. Business executives everywhere should start talking about this topic openly. If we can mention it, we can transcend it. And transcend it we must, if we are to prosper in a salad bowl of a global economy where talent comes in hundreds and thousands of varieties.

She said it much better than I did!

(Not) Talking About Race

It’s been an “interesting” time in Cambridge, Massachusetts (where I live) in the past week.  Every day the front story above the fold of the Boston Globe has been about one aspect or another of the controversy around the arrest of a black man, Harvard Professor Louis Gates, by a white man, Cambridge Police Officer Tim Crowley.  And every time I open my iGoogle news page, one of the top 5 news stories is related to it.

Out of all the commentary I’ve read, this comment by Donna Brazile stands out for me:

“No one wants to talk about race,” said Donna Brazile, a Democratic strategist and ABC News consultant. “He [Obama] does not inject race into the conversation regularly because it clears the room. There are designated times, like Martin Luther King Jr. Day or when we have a large gathering of black folks, like at the NAACP recently, but that’s about it.”

When I read this remark, it struck me that in the seven or eight years that I’ve worked with or in the Indian outsourcing industry, I can’t think of more than a handful of times when race has been mentioned.  We have conversations about cultural differences, regional differences, multiple religions, and different communication styles, but no one wants to talk about race, and when it is brought up occasionally, it often clears the room.

I don’t think that’s because race is an insignificant issue.  Race – however we define it – is a major element in the history of both the U.S. and India and, as the recent news coverage shows, continues to be a controversial and emotional topic in U.S. politics.

I think this is a blind spot in our conversations, and one that we can ill afford.  The root cause of outsourcing engagement failures almost always lies in the relationships between the organizations and team members, and rarely in the contract or business process definition.   Developing a shared understanding of the business, culture and environment, across both the outsourcing client and the outsourcing vendor (or distributed locations in a shared services model), is key to a successful business relationship and engagement.  And recognizing the differences in those cultures and environments — from the business model, corporate culture, language, communication practices, to holiday schedules, phone service and weather — is part of developing that shared understanding.

When outsourcing projects go bad, there is almost always finger-pointing about the other side, and it usually includes remarks about “Indians do this…” and “Americans think that…”  While the issue is often not racism per se, I think it’s impossible for us not to be intertwined in our racial histories in one way or the other.  If we don’t recognize and acknowledge this, it’s difficult to have open, productive conversations about what’s going on, and if we can’t discuss it, it’s almost impossible to fix it. Given how much we invest in making outsourcing engagements work, can we afford not to talk about race?

Inside Sales by “Outsiders”

A friend of mine who runs a direct marketing business, knowing I work with in the Indian IT outsourcing industry,  told me a story at a party last weekend:  His business is putting together integrated direct marketing campaigns, including direct mail and internet sites, to generate leads.  One of his recent clients is a small Indian outsourcing business, and he built a  promo for them that seems to be working exactly as planned – prospects are finding them, clicking through to a white paper, providing contact info for the company to use for a follow-up phone call.  But so far, no sales results – and he thinks he knows why.  When my friends talks to his client, he can’t understand him.  “‘Slow down!’ I tell him, ‘I can’t understand what you’re saying!’ He talks so fast, and he has such a strong accent, I don’t think anyone can understand him.”

Of course, by “anyone” what he really means, is any American – but that is who his client is selling to. Selling across cultures is always challenging, and in B2B sales, building good relationships is key to major sales.  It’s hard to start building a relationship when your prospects can’t understand you easily!  So what do you if you’re in this situation?

On a structural level, one solution is to map out your company sales process so that inside sales calls are made by people with the same native language and accent as your prospects.  Call center managers know this very well – American call centers are often placed in regions that are perceived as having a “neutral” American accent, such as Maine; and offshore call centers devote lots of training to accent neutralization.  In American B2B sales, it may make sense to have the first phone call to prospects made by an American inside sales rep,   who sets up a face-to-face meeting with the sales rep.  Even if follow-up meetings are usually done by phone, accent issues can then be mitigated with an agenda and presentation that provide context and support for the verbal message delivered by the sale rep.  This hand-off does require coordination between inside sales and the outside sales rep, but if it improves the lead generation results, it’s worth it.

On an individual level, the old adage, “practice makes perfect,” comes to mind.  Most good sales reps, no matter their nationality, practice their telephone pitch; if you are selling across cultures, and accents, practice is essential.  Ask your friends and colleagues of the same nationality as your prospects to listen to you and give you pointers.

If you manage an international sales team, work with each of your sales reps to be sure that their verbal pitches are both appropriate  and understandable by their target audience.  Build this practice into your on-boarding process for all of your sales reps, and incorporate it into your sales meetings when new sales materials are introduced.  This effort really pays off in widely distributed teams, where new reps have limited opportunities to participate in training calls; you will appreciate it when you accompany your rep to a key presentation for a major sale.

Recession Driving Changes in Captive Center Strategies?

A recent article in the Wall St. Journal consolidated reporting on a number of recent changes in so-called captive centers (IT or back-office services operations in India owned by non-Indian, usually US or UK, businesses).  While the leading sentence talks about “reversing a  a decade-long trend,” I think the article reveals a more complex picture.

The author points to three large financial services companies (Citigroup, AXA and Aviva) that have sold their entire outsourcing operation – facilities and staff – to leading outsourcing firms, for cash payments and multi-year contracts for services from those same facilities and staff with the outsourcing firm.  Two airlines, Delta and United, have made similar deals.  These are all examples of businesses in industries that have been hard hit by the global financial crisis and recession, and are desperate for cash infusions.  The deals are not shutting down their Indian operations, just shifting the ownership and management to an Indian outsourcing firm, typically one of the top 10 IT or BPO firms.  What’s not discussed in the article are two other benefits of these deals: first, the company no longer has any potential “offshore” profits which could be taxed under Obama’s proposed tax law changes; and second, the company reduces its political risk in the U.S., since it no longer has any Indian employees, just a contract with a vendor.  (The company may also reduce political risk in India, since it is sending revenue to a large India-owned company.) One could also argue that they have reduced their management workload, since they are no longer managing the Indian employees and services directly, but I suspect that on a day-to-day basis, there is not a lot of difference for project managers, and at the senior management level, they have  probably just traded some of their operation management to vendor management.

Another kind of situation is the example of a small biotech firm quitting most of its Indian presence and selling its facilities to a mid-sized outsourcing firm, along with signing a 10-person services contract for 18 months (probably for transition purposes only).  Small captive IT services operations are notoriously difficult to manage, and are often started with the idea that while they require an upfront investment, they will make sense financially over the long run.  If the business doesn’t grow as expected (common in this recession), or if the people managing the center quit, the company can be left with a money-losing headache.  It can make a lot of sense then to turn it over to an India-based services company that can integrate the facilities and staff into their operations.  Reducing the U.S. political risk can also be a factor, particularly if the company is looking for U.S. government contracts or funding.

In contradiction to the main story line, the article also points out that Everest, a leading outsourcing advisory firm, knows of four companies who opened new captive centers in the first quarter of 2009.  This suggests that there continue to be some benefits to the captive model, such as greater control, security & IP protection; establishing a geographic presence in another region, and potential cost savings.

The bottom line message, for me, is not that there has been a wholesale change in outsourcing strategies, but that the strategy about how to engage and manage services in India is always complex, and usually evolves over time.  These examples are great object lessons about the importance  of evaluating a number of factors, and considering a wide range of possible scenarios for both the environment and business model, in developing smart outsourcing strategies.

Evaluating Vendors Across Cultures

Recently we were talking with an American client about an upcoming trip to India to evaluate outsourcing vendors.  They are experienced managers, who have evaluated a number of vendors for different kinds of services for their business, and they have a well thought-out vendor evaluation process.  But they’ve never outsourced work to India, and none of them had ever visited India.  Alarm bells started going off in our heads.

We had two major concerns.  The first is simply managing the travel in India.  American and European business travelers are often challenged by the double whammy of a very different culture and an underdeveloped infrastructure.  The outsourcing industry is rife with tales of prospective clients who got off the plane in Mumbai or New Delhi and then turned around, without ever making it to the vendor campus, so much so that most vendors make sure that first-time visitors are met at the airport and are provided some kind of travel support, if not actually escorted to the vendor site.  A global outsourcing sales exec told me “I would never let a client travel to India on their own for the first time!”  Beyond the initial culture shock, there are any number of relatively small issues – canceled domestic flights, missed car pick-ups, phone problems, monsoon-related road closings – that are hard to navigate in India, and can result in travelers losing whole days carefully planned business agendas.

The second challenge is more subtle, but of more importance when you are considering potential long-term vendors, and that is being able to evaluate vendors across the cultural differences.   Americans with limited outsourcing experience can easily mis-read what they are seeing.  Once visitors get past the views of roadside poverty, they may be so dazzled by a gleaming new campus that they will not question other aspects as thoroughly as they should.  Or they may misinterpret elements: they may not realize that a beautiful building in the suburbs means employees will spend hours commuting on company buses (car ownership is still quite low in India), and a more dingy-looking city building may be a better choice for certain kinds of work.  They may be put off by the poor accent or shy presentation of one manager, and not be able to properly appreciate the level of expertise or client service skills.  On the other hand, they may be overwhelmed by cultural differences and overlook clues that indicate issues that will come back to haunt them later on.   Western clients often focus questions on electricity and internet back-up, which virtually all reputable vendors have covered, and then neglect to ask for a more detailed review of employees’ education levels, which is a much harder area for foreigners to evaluate and can have a big impact on service quality. And so forth.

If you are an outsourcing buyer, and have stories about what you wish you had done differently in your vendor due diligence site visits, I would love to hear them.   Please email me directly.