Insight on Coaching
Offshore Outsourcing: Coaching and Offshore
Outsourcing Transcript
Prepared for: Prepared by:
Insight Educational Consulting Ubiqus Reporting
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Time Speaker Transcript
0:26 Tom Floyd Hello everyone and welcome to Insight on Coaching.
Insight on Coaching explores the many facets, flavors, and sides of the emerging
professional coaching field.
I’m Tom Floyd. I’m the CEO of Insight Educational Consulting and your host for
today’s show.
This week our topic is Offshore Outsourcing.
We’ll set the stage in terms of the big picture, business drivers, and benefits that
companies are experiencing as a result of offshore outsourcing.
We’ll talk about some of the risks of offshore outsourcing, and most importantly we’ll
discuss how coaches are helping offshore and multicultural teams with issues
including: direct and indirect communication, language fluency, attitudes towards
hierarchy and authority, and decision making; just to name a few.
With me to explore this topic today are four guests, and let me give you a quick
overview of who we have with us today.
Our first guest, Maya Hu-Chan is an international management consultant and
certified executive coach with Global Leadership Associates, specializing in global
leadership, executive coaching and cross-cultural business skills.
She was an anchor for the China Broadcasting Company in Taiwan and has lectured
at UCSD, USC, and the International MBA Program at the University of Chicago.
Her publications include Best Practices in Leading the Global Workforce, Coaching
for Leadership: How the World’s Greatest Coaches Help Leaders Learn, and more..
Welcome to the show, Maya.
1:40 Maya Hu-Chan Thank you.
1:41 Tom Floyd Our next guess, Dr. Robert Lee, is chairman and chief executive officer of Achievo
Corporation, a leading global software and information technology outsourcing
provider with a local front-end and China back-end service model.
Dr. Lee is a 30-year veteran of the computer industry, serving as president and CEO
of Inxight* Software, Inc. as well as Insignia Solutions prior to joining Achievo.
Welcome to the show, Robert.
2:03 Dr. Robert Lee Thank you, Tom.
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2:04 Tom Floyd Our next guest ranked by Chambers & Partners as one of the leading outsourcing
lawyers in the world, Dan Mummery is a partner in the Silicon Valley office of Latham
& Watkins LLP.
His clients have included Charles Schwab, ChevronTexaco, General Motors,
McGraw-Hill, United Airlines and more.
He is a frequent lecturer on outsourcing topics at ITO, BPO and other offshoring
programs organized by BusinessWeek, Gartner, Sourcing Interests Group and more.
Welcome to the show, Dan.
2:31 Dan Mummery Thanks, Tom.
2:32 Tom Floyd And our fourth guest, Susan Schwartz, has more than 25 years of experience
creating innovative business solutions to help collaborative teams succeed.
She has coached a variety of global, cross-organizational teams targeting customer
satisfaction.
She’s been published in Chief Learning Officer, HR.com, and CEO Refresher.
Welcome to the show, Susan.
2:49 Susan Thank you.
Schwartz
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2:50 Tom Floyd I’d like to start the show today as we usually do, by sharing some data that our
research team pulled together just to set the stage.
According to the July 20th, 2006 issue of the Mondaq Business Briefing, the
volume of outsourcing activity has doubled in the last decade. One estimate puts
the annual growth rate of outsourcing at 20 to 30%. It states that outsourcing is
big business, estimated at well over $1 trillion.
According to Offshore IT Outsourcing.com, Contract Manufacturing transformed
the high technology industry, and Software Outsourcing is about to transform
the complete picture of IT & related products in the years to come. The site goes
on to state that the outsourcing model is already being leveraged by 40% of
Fortune 500 companies including GE, Lucent, Oracle, Microsoft, and Motorola,
and that the offshore outsourcing model can bring cost saving of 50% to 70%.
However while the U.S. has outsourced labor for decades, in recent years, this
practice has drawn criticism as Americans see jobs shifting overseas. However
some experts feel that one of the many benefits of offshore outsourcing is that it
is actually resulting in more job requiring higher skills and pay in the U.S.
According to the U.S. Bureau of Labor Statistics, growth in high-skilled, well-
paying jobs has been rapid during the past 20 years and will continue into the
foreseeable future. Between 2004 and 2014, employment in managerial,
business, financial and professional occupations is expected to increase from a
combined 30 percent of total U.S. jobs to 32 percent.
Dan, I’d like to start with you.
How is some of this information landing on you?
Can you set the stage, from your perspective, in terms of the current “state of the
state” as it relates to offshore outsourcing?
4:42 Dan Mummery Sure. I don’t think that those statistics are surprising at all.
The market is clearly booming, however you want to count it.
Obviously the numbers depend on what particular function you are looking at.
Are you talking IT?
Are you talking about business process outsourcing, human resources, finance and
accounting?
It all depends on how you bundle all of that.
But there’s no question that the offshore market has just been continuing to grow.
I’ve seen numbers that suggest that that market in itself is somewhere around $45
billion today.
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5:18 Tom Floyd Wow.
5:19 Dan Mummery With a breakout of 65% of that is IT and then the remaining percent is some other
business function.
Clearly, historically India has been the top destination. I think that no matter who you
talk to, India still tends to be the primary destination.
What you are really seeing is other destinations that are really blossoming. In
eastern Europe, for example, in Africa believe it or not, Latin America, China
obviously, we’re going to hear a lot about that today.
There’s just no question, I think, in today’s world with the opportunity to send
anything around the globe, anything that really isn’t core, the sky seems to be the
limit.
It’s really just a question of having the right demand and the right supply capability
and then matching that.
Then obviously a lot of complexity around how you put those deals together.
I suspect that is one of the topics that we will get into here shortly.
6:17 Tom Floyd If you just had to quickly summarize the top three types of services or work that are
typically being outsourced, it sounded like that IT is definitely number one.
I think you mentioned about 65%.
What would you say the other two larger services are that are typically being
outsourced?
6:34 Dan Mummery You mentioned contract manufacturing, obviously that has been going on forever.
In addition to that, classic business functions today, human resource, HR as people
call it, finance and accounting, obviously call centers that’s a huge part of the
offshore market.
But what you are seeing now I think the highest growth rates at the moment are in
the clinical data and researcher, more R&D work being sent offshore.
Now animation, services that people weren’t even thinking about doing three, even
five years ago, things that would clearly be considered to be strategic and core to any
business.
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7:12 Tom Floyd Interesting.
What were some of your thoughts on the U.S. Bureau of Labor Statistic’s prediction
that high-skilled, well paying jobs are actually increasing and that offshore
outsourcing is not having the negative impact that some people are worried about?
7:27 Dan Mummery Well I actually think that is right. That is dead on.
I think the economists have really won the argument here.
Obviously in the last presidential election we had a lot of emotion around this topic.
You had the President talking about CEOs who outsource and offshore, in particular,
as being Aaron Burr’s].
I was always slightly bemused when President Bush said that he thought about
outsourcing as much as the next guy.
That actually made me very happy and my mother in particular.
But I think obviously we had a lot of hyperbole, a lot of emotion around the
presidential campaign. I suspect that we will hear more about that again as we get
closer to the next election.
I don’t think there’s any question that when you look at the economic data the
economists have really proven that offshoring, in particular, has not had a negative
impact.
And that’s clearly a function of a number of things; jobs coming back into this country,
but really just pure economic reality.
That is as some of these jobs have gone offshore that has created the need for
people to increase their skill level and take on new responsibilities.
And I think that has been clearly a net positive for most of the people that have been
impacted.
8:40 Tom Floyd Maya, in your experience, what business drivers typically prompt a company to
consider outsourcing?
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8:47 Maya Hu-Chan I have worked with quite a few global companies that they are doing outsourcing.
Some of the key reasons that they decide to go offshore was, one of them is just that
this would dramatically reduce their turnaround times. They are not restricted to 9:00
to 5:00 work hours at their headquarter office.
Also, they will be able to expand their hours of operation to match the needs of their
customers. They will be able to find people in their offshore locations to work on
Saturdays and Sundays, and also expand their hours of operations to really
accommodate their customers.
Also, they will be able to leverage a large pool of skilled resources in offshore
locations and lower operating costs.
So that would really dramatically drive-down their overall cost.
Through that increased flexibility they also can ramp-up or ramp-down to more
effectively meet business demands.
For example, one of my clients they work with vendors in India to increase their
workforce during the very busy time or decrease their workforce during the less busy
time.
They only need to give the vendor very short notice.
So it gives them a lot of flexibility.
This can also help them focus on their core competencies at the headquarters.
Those are some of the key benefits for offshore outsourcing.
10:20 Tom Floyd Are you finding that companies or even the leaders within the companies are typically
prepared for what it takes to do offshore outsourcing well?
10:32 Maya Hu-Chan Not always. They are not always prepared.
A lot of times they agree that this is an important business strategy and is something
that they have to do in order to stay competitive.
For leaders in an organization they don’t always know what it takes to be successful.
It is certainly a challenge and it is a learning process for many of them.
10:56 Tom Floyd Robert, from the perspective of a C-level executive, what are some of the benefits
that you have experienced from offshore outsourcing?
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11:03 Dr. Robert Lee First of all, my company, Achievo, is a provider of software outsourcing. Perhaps
then I can comment more on what my customers—
11:14 Tom Floyd Sure.
11:15 Dr. Robert Lee —see as some of the main benefits.
11:17 Tom Floyd Okay.
11:18 Dr. Robert Lee Obviously software outsourcing reduces costs, that’s a given.
But there is the assumption that it is managed properly, of course.
More important than just saving money is really time to market for people that take
advantage of software outsourcing.
Whether or not it is time to market for their own products that they developed using
software outsourcing vendors or special things that they use internally to help the
company become more competitive all boils down to time to market.
What I have found, by talking to many of the CEOs of very large clients of ours, is
that they understand that.
They also understand the economic benefit, not just because of outsourcing savings
per se, but it is the dynamics of the economics it generates for the company.
In this fast-moving world whoever gets to market first has a big advantage.
That is what I hear over and over again from these executives.
12:38 Tom Floyd Okay. Susan, from a coaching perspective, are you typically consulting or coaching
the folks from the actual companies who are doing the outsourcing?
Is it doing coaching for the suppliers who are fulfilling the outsourcing contracts?
Is it both?
What is that looking like?
12:55 Susan I tend to work with the companies who are outsourcing the work.
Schwartz
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13:04 Tom Floyd Okay.
13:05 Susan Then also what has been really interesting is, as companies also outsource then they
Schwartz sometimes in remote areas they will start to acquire some companies.
So they will have subsidiaries in those foreign countries.
So they might be working both sides of the globe.
I think just like what Maya was saying, is that the positive benefits are being able to
leverage the 24/7 as far as getting development done.
And like Dr. Lee said, with shortening the time to market, increasing the response
time.
I think the third piece to that is if you are servicing global markets and you want to
expand beyond North America, working with these outsource vendors.
If you are really communicating well, and listening back and forth, you can also
improve your market data to support some of these global markets.
14:05 Tom Floyd Got it. Let’s go ahead and go on pause.
I’m starting to hear the music for our first commercial break.
Stay tuned, everyone, more from Insight on Coaching and about Offshore
Outsourcing when we return.
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Time Speaker Transcript
16:48 Tom Floyd Welcome back to Insight on Coaching, I’m Tom Floyd.
Today the topic is Offshore Outsourcing.
With me are Maya Hu-Chan, President of Global Leadership Associates, Dr. Robert
Lee, Chairman and CEO of Achievo Corporation., Daniel Mummery, Attorney and
Partner with Latham Watkins LLP, and Susan Schwartz, principal and owner of The
River Birch Group.
For those of you just joining us in the first part of our show we talked about the big
picture, business drivers and some of the benefits related to offshore outsourcing.
I’d really like to continue our conversation today by talking about some of the risks
and legal issues related to offshore outsourcing.
The risks of not getting it right when it comes to offshore outsourcing are certainly
high.
In an article from the Outsourcing Journal, editor Beth Ellyn Rosenthal states
that:
“Risk management has become even more important in outsourcing–
American buyers are asking more questions and are wanting reassurance in
writing from offshore partners.”
She also states that companies outsourcing IT functions to offshore
providers are now diversifying, so their code development is handled in many
countries. As a result, she states that outsourcing is increasing to countries
like the Philippines and Russia.
Now if we take a look at a few recent high-profile lawsuits involving offshore
outsourcing:
Just this past month, on September 7th, Toshiba has sued a German disc
replicator of DVDs for a patent infringement.
And in another recent case, on August 7th of this year, New York-based
Buying Triangle sued one of India’s largest outsourcers, Infosys, for holding
its data hostage.
Dan, from a legal perspective in general, what are the legal risks and landmines to
watch for in offshore outsourcing arrangements?
18:31 Dan Mummery That’s a good question.
I think one thing that is very important at the outset is to be clear about the distinction
between offshoring and outsourcing.
And often people use those terms synonymously and, in fact, they are different.
Offshoring is really a component of outsourcing.
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18:49 Tom Floyd Okay.
18:50 Dan Mummery Not all deals involve offshoring.
I think there is sort of a gut feeling immediately because when you are talking about
offshoring and you are talking about going to a foreign destination that there
somehow is enhanced risk, as opposed to the risk that you would find in any
outsourcing transaction where you are turning over data and information, and you are
providing access to your systems and your IT to third parties and the people under
their control.
I think the first question is, is there fundamentally more risk in an offshore deal?
I suppose that theoretically if you look at it from one perspective that is, is there an
adequate legal framework in the country where I am going to outsource or offshore?
If the answer is no then sure, there could be more risk.
19:44 Dan Mummery That I think is driving some of the anxiety and some of the concern about some of
these emerging offshoring markets.
What is the legal system like?
For example, we talked about India. India has been a top destination for a variety of
reasons.
One reason is that the legal framework is pretty good.
It is essentially a structure that people can understand and get comfortable with.
There are some areas in which the protection around intellectual property, in
particular, is not as well defined and is not as clear as you would find in the United
States.
In effect, today you can go and enter into an offshore deal with an Indian provider.
Ninety-nine percent of the time that company is going to have a U.S. subsidiary,
which is well capitalized and has a clear operating history.
If you need to get 100% comfort, in terms of having remedies, you can actually
contract with that party as well.
So you are not putting your hand simply in the fate of the Indian judicial system.
20:51 Tom Floyd So it sounds like one of the things to really look for is a solid, strong structure in
terms of government and stability and things like that?
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21:00 Dan Mummery Absolutely, because it is like doing any other transaction.
People want to know, is there a predictable system where if something goes wrong
we can estimate, we can anticipate what would happen in terms of how disputes
would get resolved.
Disputes are going to happen, there is no question about it.
Not to spend too much time on this, but for example, in the U.S. when people
contract for outsourcing arrangements typically they provide that if everything fails, if
there is a problem and the parties cannot work it out ultimately the courts will resolve
that. We have a judicial system that is pretty well understood.
In India there is a little bit of risk with that because the Indian courts do not have to
directly enforce a judgment of the U.S. court.
What that means is that the Indian court would go in and look at it.
It could take some time to resolve it.
Fortunately, you can use arbitration in India as an alternative, because India is a
party to the New York Convention.
If you had an arbitration award here it would be directly enforceable.
So things like that sort of get you comfortable that at the end of the day you’re really
not dealing with a completely unknown structure.
At the end it’s really, I think, it’s a matter of fit and diligence, and which companies
are you doing business with.
That is where you have to get comfortable from the very beginning.
22:20 Tom Floyd Interesting. Robert, what is your take on some of the legal risks involved?
22:26 Dr. Robert Lee I live with this, of course, just about in every case because our customers have
similar concerns, as they should.
As Dan said, there are many ways to do this such that it can either be handled or the
issue can predominantly be avoided altogether.
For example, Achievo is a software and IT service company with three-quarters of
our headcount located in China.
However, our headquarters is actually in the U.S. We are a U.S. corporation.
Therefore, our clients contract with us directly in the U.S. or in Europe, wherever they
happen to be.
Therefore, the legal structure, both in terms of enforcement, if you will, including IT by
the way, can be done in very familiar territories where our customers operate while
getting the benefit of using an offshore department capability.
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23:26 Dr. Robert Lee So those things when structured properly can be quite straightforward and does not
require one to have a degree in Chinese or Indian law, for example. Right?
So we found that our customers have really found this to be very simple and easy for
them so that they can focus their energies on making the project successful with the
assurance that the other things at least intersect in a familiar way.
24:00 Dan Mummery Just to build on that, I actually think that when you are thinking about risk and legal
risk you have to think about legal and also operational risk.
As I go through and sort of do a checklist, I think at the end of the day I conclude that
the operational risk is probably greater.
I agree with Robert. I think the legal issues are largely solvable.
That is not to say that there isn’t more risk in doing business in China than there is in
the U.S. or even in India. That is clear, and we can talk about specific concerns that
people have, particularly around the protection of intellectual property.
At the end of the day I think the operational risk is probably greater.
That really relates to getting the transaction right.
I’d start that off by building on something that Maya said in the beginning when you
asked her about are executives ready for offshoring, that is really the key question.
It is cultural readiness because offshoring is not for everybody.
I think in the early days people thought, “I’ll offshore because I want to take
advantage of the labor arbitrage. I will just send the work offshore. It will get done
and everything will be perfect.”
People are now realizing that that doesn’t work.
25:13 Tom Floyd So the cultural and the people components are even more critical than some of the
legal issues that may arise?
25:19 Susan Exactly. I think the greatest success if when you are able to set expectations and I
Schwartz think the toughest part is listening and understanding.
Because when you are dealing, not only in multiple languages, but multiple
organizational structures and governments and cultures, sometimes each party is
nodding yes, but they are nodding yes in a balloon over their head.
Or one says A and the other says G.
25:48 Maya Hu-Chan Yes, exactly.
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25:49 Susan So they have got to work towards gaining common ground and making sure that you
Schwartz both understand each other’s intent and language.
25:59 Tom Floyd Maya, anything that you would add?
26:02 Maya Hu-Chan I think I could not agree more with Susan and Dan that when we talk about working
with our offshore teams one of the key challenges, and, in fact, one of the biggest
challenges is communication.
It is not only that we work with people who are speaking English as a second or third
language, but also we are using communication technologies such as conference
calls and e-mails and we rarely see each other face to face.
This can potentially create a lot of misunderstandings.
We have seen this type of situation happen over and over again that when we do not
fully understand each other and we tend to make the wrong assumptions.
26:44 Maya Hu-Chan Sometimes it is that we speak English as our primary language to communicate, and
like Susan said, we hear people say yes.
And for Americans we think yes means agreement or understanding, but then for
people in China this just means I hear you.
So this can really create some big problems when we carry the wrong assumption
moving forward.
So communication is definitely one of the key challenges when we work with our
cross-cultural or multicultural teams.
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27:20 Tom Floyd Now I had actually seen a 2006 Global IT Outsourcing Study by Diamond
Management and Technology Consultants.
The study cited three reasons why some firms are cutting back.
The reasons that they listed were:
They mistakenly outsourced a process or function that is core to their business
and are now bringing these back in-house.
Their provider over-promised and under-delivered.
And the complexity of managing and measuring outsourcing projects and
relationships overshadowed the benefits.
It is that last point, the complexity in terms of managing and measuring it sounds like
the people aspect probably played into that as well.
Based on what it really takes to be successful in doing this, are any of you seeing
instances or examples where some companies have just totally pulled out based on
that?
28:13 Dan Mummery I don’t see a lot of companies that totally pull out.
I see a lot companies that restructure. You see that.
You’ve always seen that in outsourcing.
I think the statistics on deals getting renegotiated or restructured within a couple of
years into them are pretty high.
That makes sense because of exactly what we’re talking about.
If you think about it, outsourcing is a little bit like trying to nail a jellyfish to the wall.
On the one hand, you want a lot of specificity around what am I buying and what am I
paying for.
On the other hand, as Robert was talking about, I mean in order to get that speed to
market advantage you have got to be very adaptive.
Things are going to change in your company, in the market, et cetera.
So you are contracting for change and that is very difficult to do.
What I often see, and I think this has been echoed by a number of people, is that
very often times in the beginning of any one of these transactions there is a
fundamental mismatch between what was being promised as what was being sold
and what was actually bought.
Then how that was communicated within the organization in terms of the benefits.
So if you start off without having a clear understanding about that you are doomed. I
agree with that.
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29:28 Tom Floyd So it sounds like that setting expectations is really key.
29:32 Susan If I can just touch on to that.
Schwartz
People when you outsource and you are trying to take advantage of that 24/7 so you
can take a project and get it started, say in Germany, and pass it over to London,
who passes it to New York, who passes it to San Francisco, who sends it over to
Sydney so that you can get that time value.
If people are dealing with traditional management styles, it is going to fail.
So that is, I think, the greatest challenge for our CEO and the middle manager as
part of setting those expectations is also adjusting and adapting your management
style from what we all learned as central to being distributed.
30:17 Tom Floyd I definitely want to touch more on that in our next segment.
Let’s go ahead and go on pause for our next commercial.
Stay tuned, everyone, more Insight on Coaching when we return.
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33:01 Tom Floyd Welcome back to Insight on Coaching, I’m Tom Floyd.
Today the topic is Offshore Outsourcing.
With me are Maya Hu-Chan, Dr. Robert Lee, Dan Mummery, and Susan Schwartz.
In this segment of our show I would like to change gears a bit. I want to talk more
about some of the people issues that we referenced earlier, some of the things that
can arise on a day-to-day basis within a multicultural team.
More specifically, I would like to spend some time discussing how coaches are able
to address some of these challenges.
A November 2006 article from the Harvard Business Review titled Managing
Multicultural Teams cites four categories of challenges that typically arise on
global multicultural teams:
Direct versus indirect communication
Trouble with accents and fluency
Differing Attitudes Toward Hierarchy and Authority
Conflicting Norms for Decision Making
A September 17th article from a few weeks ago in the Wall Street Journal
expands upon the importance of communication. In the article, a team
member involved on the supply end of an outsourcing engagement for IBM
states that clear and frequent communication is important. She shares in the
article that she tells new programmers to learn about the other members on
their team, so they know where to go for help. She also states that she
encourages developers to contact colleagues immediately with questions,
which she says is an important message for Indian programmers in
particular, who tend to be reluctant to interrupt others.
Maya, you had already started to talk a little bit earlier about the communication
team.
Can you talk a little bit more about that, and more specifically as a coach what are
some best practices that you have put in place to help ensure team members are
communicating effectively?
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34:50 Maya Hu-Chan Absolutely.
As we talked about cultural differences and that directly impacts how they
communicate.
A lot of times when we work with people from India or China, for example, culturally
they have a much more indirect communication style compared to, say, the western
culture like the U.S. culture.
Especially when it comes to business contacts they tend to be much more reluctant
to raise their concerns or talk about problems.
In a group setting they are especially reluctant or even to disagree with their
superiors because of the cultural concern that they respect the hierarchy and they
certainly don’t want to cause anyone to lose face.
So as we coach the virtual team, the outsourcing team leaders, especially if they are
in a western cultural background, is to ask them to really listen to those indirect
messages.
And then don’t take silence as agreement.
A lot of times you need to be able to learn to ask the right questions, and perhaps
you want to really focus on listening to what is last said, rather than just focusing on
what has been said.
Focusing on spending more time one-on-one to build the trust and relationship with
your virtual team members, your multicultural team members, and to truly understand
their concerns.
In the meantime, make them feel like I have your back and I am here on your side.
So tell me what is happening so we can solve the problem together.
36:34 Susan Right. To tag on to Maya, a lot of times because we are dealing with time differences
Schwartz as well as language differences, people fall back very often on e-mail.
So often with sentence structure you can read energies and emotions or non-emotion
into e-mail.
I think sometimes it is a little bit harder to manage the 24-hour cycle.
You do need to pick up the phone, and once you hear their voice and can listen to
those intonations your e-mails can become more understandable.
But it’s taking that extra step to try to visualize your contact in that full person
dimension.
37:23 Tom Floyd Is that hesitancy to build that relationship, is that typically on both sides?
Do you see that more within some cultures than others?
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37:39 Maya Hu-Chan Definitely. I see that in the Asian culture that this is especially obvious.
For example, one of my clients, they do a lot of outsourcing with our call centers in
India and China as well.
What happened was that the leader really invested a significant amount of time to
build a relationship and trust.
She would make trips, very early on, she would visit the vendor sites and spend time
socializing with them and listening to them, and find out their capability and their
concerns and limitations.
She gave me the example that she said she was invited to an Indian associate’s
home for dinner.
Then when she got there she would buy a local outfit so she would be wearing that to
the dinner and to a dancing party with their associates.
Once they spend some together they feel much more comfortable with her.
Then they are more open to sharing with her some of the issues and concerns.
They also feel more comfortable calling her after she comes back to the U.S. if they
have any kind of issues and concerns or challenges.
There is definitely a better communication.
Face-to-face contact, it is not always possible because of the budget limitation, but
we always encourage our client to do that, at least at the very beginning, to make
sure that you build their trust and comfort level with your overseas partners.
39:23 Susan Right. If you do have a limited budget you can spend a little bit of time getting to
Schwartz know people.
At an appropriate moment you can drop something about your family and they might
answer with something about their family.
What I’ve found is dealing with difficult cultures, at the end of the day everybody just
wants to go home and hug their kids.
Once everybody gets—
39:48 Male Speaker Yes.
39:48 Susan —to that common ground then the business differences all of a sudden become…
Schwartz
We all realize what is really important and then we can negotiate and talk about that.
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40:03 Tom Floyd Robert, any examples that you can share related to communications or the
importance of really trying to establish a relationship and things like that?
40:10 Dr. Robert Lee I have found that what was discussed is actually more valuable than people realize.
Actually considering the cost of travel these days, which is quite minimal, a budget
should rarely be an issue when weighted against the benefits.
We encourage our clients to come visit.
Whenever they do, they go home happier and more confident, as well as the people
that work at our offices for them in China are also energized by that interaction as
well.
40:48 Dr. Robert Lee So I think the effectiveness that one gains from doing this way outweigh the
expenses.
Many of our clients come visit with our staff and, in fact, we do send people from
China to Europe or Canada or the U.S. where our clients are as well.
41:08 Susan What about webcams? Do they do video conferencing?
Schwartz
41:13 Dr. Robert Lee They do that too. They use all the channels. Right.
These days, obviously, we have many options available to us.
Now actually some are particularly effective.
One that sometimes we don’t think about is instant messaging.
Now this actually works surprisingly well with sometimes a language barrier involved.
Take a lot of our staff in China, for example.
They actually can read and write English quite well.
Because of the cultural background, that was mentioned earlier, they are a little
afraid to speak up, and also being able to deal with a live conversation sometimes
they are a little uncomfortable about, for no other reason, just because they are a
little shy sometimes.
However, what we have found that when people use instant messaging that two
seconds of delay actually does magic for people to then be able to communicate with
each other.
Since a history can be constructed out of instant messaging it turned out to be a very
effective media for live dialogue.
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42:29 Tom Floyd As an instant message—
42:30 Maya Hu-Chan Yes.
42:30 Tom Floyd —junkie, I’m smiling.
42:32 Maya Hu-Chan I completely agree with what Robert just said.
In fact, a lot of my clients have told me the same thing.
Instant messaging really is a nice alternative to conference calls, because in
conference calls a lot of times people who do not speak English as a first language
they have a hard time keeping up with the conversation.
Sometimes we use a lot of slang and idioms and also with the accents it is hard for
them to follow.
Then if they have a way to type in the message and then they can see what is being
said it just makes it so much easier for them.
That also brought up another really good point, is that when we run the virtual
meetings we should be definitely fully taking advantage of those virtual
communication technology features.
So that would allow issues to be raised anonymously by any team member.
So if people are very self-conscious about speaking English they can type in their
questions and they don’t have to also worry about whether my boss or my supervisor
is going to be upset with me because it is all anonymous.
So that is certainly something that I think can be used very effectively for multicultural
team meetings.
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43:53 Tom Floyd I want to talk a little bit about conflicting norms around decision making, as well as
another topic.
The Harvard Business Review really brought up some interesting examples with that.
One of the things that it mentions was that in many cases factors, like how decisions
are made and how much analysis is required beforehand could be frustrating for
team members.
It also stated that U.S. managers, in particular, are likely to make decisions very
quickly and with relatively little analysis by comparison with managers from other
countries.
Maya, it actually referenced the example that you gave as well, by sometimes saying,
“yes, ‘yes’, it doesn’t mean I agree, it means I hear you, I am listening.”
The example it cited was where the managers were coming back the next day ready
to talk about point number four or five and the other folks in the room were like,
“actually we want to talk about one, two, and three again.”
44:52 Maya Hu-Chan Absolutely.
44:52 Tom Floyd Any examples you can share around that, or as a coach how do you help facilitate
that and get both sides to understand the agreed upon standards for making
decisions?
45:05 Maya Hu-Chan When we worked with leaders in this type of situation it is always to remind them to
ask open-ended questions instead of yes or no questions.
Because a lot of times, like we said earlier, when you ask yes or no questions, and
especially when you work with a more indirect culture, for many reasons that they do
not like to say no to you.
Instead of saying, no, they may use phrases like, “I will try my best,” or, “this might be
difficult”, and sometimes it is just silence.
It is very easy for us to misinterpret that.
The best thing is that if you realize that there is some hesitation, or you are not quite
sure if the yes is a real firm yes then the best thing is for you to ask more open-ended
questions like, “what do you think,” and, “what would be the next step,” “who will be
responsible for this,” “when do you think we will be able to expect the delivery of this
product?”
So that by asking those questions people will have to give you an explanation and
then you will be able to truly understand whether you wanted to verify and qualify this
“yes” before you move forward.
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46:20 Tom Floyd Dan, any examples that you can share, any issues related to decision making and
things like that?
Anything that you have seen from your experience?
46:29 Dan Mummery To me it goes back to one of the first things that we were talking about, which is on
the operational side, what is the cultural set.
I think what you are really talking about is companies, buyers in particular, really
need to be introspective at the beginning and take a hard look at, what is my culture,
what type of culture do I have here around how decisions are made.
Is this a cultive personality culture where decisions are made largely at the top and
mandated and dictated, or is this more of a consensus-driven organization?
46:59 Dan Mummery I think Duke Business School did a very recent study that was fascinating about
looking at companies and identifying the type of culture they have from that very
perspective.
How are ideas conceived and then decisions communicated?
I think that it is probably smart if you are going to embark on a substantial, significant
project like this that you take a hard look at, how do we do things.
That is part of the diligence that ought to go into picking the right partner, because
you are going to find lots of different types of providers out there.
Some of them are going to be focused on cost as their driver, some of them solution,
but some of them culture.
There are companies that are now in business because they have reacted to some of
the other companies who are in business and essentially said, we are going to do it
differently.
So I think that really has to take place at the beginning.
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47:50 Dr. Robert Lee Actually Achievo deals with this culture issue, which is very important, in a very direct
way.
We actually have, what we call, a front-end delivery capability coupled with our back-
end China delivery capability.
Where we actually have local staff that work alongside with our clients on the
facilities onsite and are part of the team.
In addition to being competent peers for our clients’ team, these people are, of
course, very familiar with how to take advantage of the China back-end fully.
As a result, since these people are local, and we hire them all locally by the way, we
did not fly them from China or India in most cases, they are really quite culturally, of
course, the same as our clients.
As a result there is a clear first order prevention, if you will, of many of these issues
that people are concerned about.
In this case outsourcing is not always about working with this mysterious team 6,000
miles away that cannot speak the language or does not understand the culture, but
rather it would include a team that span the ocean with, what we call, the front-end
team to be completely culturally intone with the customer and is, in fact, part of the
team.
We have found that to be very effective for many of our clients.
The cost advantage is there because for one person working on the client’s site,
there are a lot more of course in China, and it is still very, very attractive.
49:36 Tom Floyd That was an outstanding example.
Another thing that the HBR article brought up was around, and we touched on this a
little bit, differing attitudes to hierarchy and authority as another challenge that came
up.
Susan, any examples that you can share around that in terms of how you have
helped multicultural teams through issues of that nature?
I know what one of the Harvard business Review articles, off the top of my head,
shared was around where a consultant with one company actually was trying to work
with local folks on the team and was not getting a response and she went to their
superiors.
She said something which almost dissolved the entire relationship.
One of the actions, I think that was mentioned was that the trust plummeted as a
result of that and less information started getting shared.
Anything that you can share around that?
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50:31 Susan Yes.
Schwartz
A lot of the work that I have done has been with European companies, which I think
that was the incident you might have been referring back to, is that culture.
A lot of times people hesitate to make a decision.
What I have found is often people might wait a day or two, their decision timeframe,
not necessarily that they have to go up their ranks, but they are working within their
own peer group to make a decision that they like to get a lot of different input to the
thoughts.
I have found working with other cultures that people might reference, for lack of a
better descriptor, dumb Americans.
They feel that Americans can be too pushy.
We tend to have a much broader sense of urgency than European or Asian cultures.
Our sense of urgency is not necessarily their reality.
It goes back to, I think everything that everybody has been saying, is establishing
strong communication, establishing a good trust factor so that if your main contact if
you are not getting the response back from them, pick up the phone and—
51:58 Tom Floyd [Interposing] And talk about it.
51:59 Susan —and talk about it.
Schwartz
A lot of times people are hesitant to put things in writing.
You have to know sometimes their English might be hesitant so they prefer to put
things in writing.
So that’s where IM or other web chat is wonderful.
IM is also real-time and just like a casual call.
You don’t have a recording machine on and people understand that you are just
trying to understand.
That you are asking questions and that you are open.
I think that is the most successful when you are open to learning how they do
business, and you are open to understanding their challenges.
If you offer to change something, do you need to reword your request, is there one
piece that is difficult to deliver.
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52:51 Tom Floyd Got it. We have got a couple of minutes left before the end of our show.
Just to quickly recap in thirty seconds or less, if you had something to say to our
listeners out there or folks who are currently involved in offshoring and outsourcing
engagements, what’s the “bottom line on top” in terms of best practices, best
principles, things like that to keep in mind?
Dan, let’s start with you.
53:14 Dan Mummery I think it is really what I said in the beginning, which is you have got to make sure
fundamentally there is a good match between what you think you are buying and
what you think is being sold.
Obviously if there is a disconnect, I mean if you think I am doing this deal because I
am going to get the 50 to 70 percent savings, that you mentioned Tom at the
beginning, that is one thing.
If I think I am doing this deal because it is going to enhance my ability to increase the
speed to market, as Robert said, that is another thing.
It obviously may be some combination of those things.
What I find to be the biggest challenge with outsourcing deals is that you have got to
be able to reconcile sometimes competing priorities within an organization.
You have got to please the finance group, they are obviously focused on cost.
You have got to please the IT group or the technology group, they are focused on
solution. Y
ou have got to please the legal department, they are focused on risk.
So how do you reconcile all of those priorities and come up with an acceptable
transaction as a whole?
That is hard to do, but you have got to take the time at the very beginning to
understand what those drivers are and make sure that those are really well
communicated internally and then get buy-off.
54:23 Tom Floyd So it is really looking at the big picture?
54:24 Dan Mummery Yes.
54:25 Tom Floyd Really making sure you understand all the stakeholders involved?
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54:28 Dan Mummery Absolutely, and make sure that has been vetted and there is buy-in from the top,
there is a sponsor who is going to be behind that and ultimately will own that when
there are questions as things get bumpy, because there inevitably will be.
54:41 Tom Floyd Great. Huge thank you to the four of you today, and, as always, a big thank you for
our listeners as well for tuning in today.
For more information about our show, you can look us up on the Voice America
Business Channel, and you can also visit our website at www.ieconsulting.biz.
And don’t forget, you can also access the podcast version of this show in Apple
iTunes.
Just go to the iTunes store in iTunes, click podcast on the left side of the screen, and
just enter, “Insight on Coaching” in the search field.
Thanks everyone. We’ll see you next week.
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