Entrepreneurship - Avoid the following hiring mistakes

In last 3 years I have seen several startups set up shop in Bangalore. Over this period of time, I have seen several hiring disasters. These hiring mistakes are specific to Indian culture and are common in many startups. But these disasters could have been avoided. I am therefore documenting them here.

1. Hiring from big name organizations for experience

Business was expanding rapidly, the company had lots of orders and to deliver them, there was great need for experienced project managers. The company hired three experienced project managers. These new employees had the right credentials and experience on working on complex projects at IBM, Accenture & Philips. The new employees had no experience working in a start up, the start up lacked systems to support its new employees - as a result the new project managers quit within few weeks putting the project in jeopardy. The founder had to scramble in the end to get the projects completed.
Experienced project managers were used to working in large well established organizations and could not adjust to the new working environment. As a result new project managers and the start up never got along. Project managers wanted a lot in terms of systems and reports to monitor the project which the company could not provide. There was absolute mismatch between the new project managers style of functioning and the company.
Hiring people based only on their past experience will not work for startups. It is essential to hire people who have experience working in startups or in a startup like environments, and there should be a cultural fit between the founders and experienced employees.

2. Hiring friends and family members

Founder of one company had hired his friend after two years of operations. By then the company was doing quite well, and was cash flow positive. He was hired on social pressure - to help his friend. The new employee often flaunted his friendship with the founder, would often bypass the organization hierarchy, and soon began to boss over other employees. This led to fall in morale and productivity in the organization. Over a period of time, the company started loosing its existing customers and only then the founder woke up to the reality. He now had to make a difficult decision of firing his friend to save the company.
Hiring friends or relatives is acceptable only if they can perform. In a startup, the hiring costs have to be minimized and founders like to hire people whom they know. But when these friends/relatives do not perform, then the founder must take swift action - either to correct the errant employee or by firing.

3. Hiring some one to please others

In India, there can be lot of undesired political advances on any organizations. One of the common tactics is to request a startup to hire persons recommended by the local politician. This leads to an uncomfortable situation for the entrepreneur. He cannot afford to antagonize the politician & often succumbs to hiring the "recommended" candidate. This new hire soon becomes a liability to the organization - thus bleeding the company of its valuable resources. Startups which have faced this problem eventually will end up firing the errant employee and thereby facing the wrath of the local politician or end up creating a constant drain on their resources.

Founders must make a clear decision on the terms of hiring such "recommended" employees - and workout an agreement with various stake holders - including the "recommended" employee & his sponsor on the terms of employment and termination criteria. Smart entrepreneurs turn this bad situation into an advantage - by seeking out favors from the politician/sponsor to grow their business.

4. Hiring house wives or students to cut costs

Many people are willing to take a lower salary in return for having the flexibility or opportunity to work from home. For a startup, this represents a significant cost savings - but such savings typically come with several hidden costs.

In India, housewives & students seek part time or full time employment - for tasks that they can do from their homes. Hiring such employees creates lots of management overheads and introduces risks to projects - in terms of delivery timelines and quality. Often times house wives and students are driven by different priorities and may not be in a position to complete their tasks in a timely manner. This could potentially upset the delivery timelines and project schedules. So for critical projects, such part time or work-from-home employees are best avoided.

Hiring house wives or students is not necessarily a bad thing. But for a startup, it can create several overheads in terms of management - that the cost savings are often washed out by management overheads. Once the company has established a process to manage house wives or students, then only it makes sense to use such resources. But this takes both time and management expertise - which many startups do not possess.

5. Hiring rapidly to scale up operations

A startup got an order to setup a media BPO operations. This project required getting 20 people hired and trained in screening cable TV channels for particular advertisements and creating reports in a predefined format. The task was simple enough for high school graduates. So the company put out advertisements in local paper and hired the first 20 people who accepted the offer. Many of the new hires had no experience working in a regular 9AM-5PM job. As a result many of the new employees quit within few weeks. Company was now desperate to staff up the operations to avoid slippage on delivery. Again the company hired few others - who too were fresh out of school, and they too quit. After a few cycles of hiring, company learnt its lesson and in next hiring cycle, the company hired the right set of employees. In the process, company wasted money, and time - but could prevent loss of customer.
Hiring rapidly for a project is mandatory, but do not cut short on the required due diligence - do not trade quality of hires for lack of time.

Closing thoughts

Hiring is a critical activity in a startup - which can make or break the company. Startups should be very careful in hiring. Getting a wrong hire can cost a lot for the startup and if the mistakes are not corrected quickly, the business can be severely damaged.

A Looming Threat for Global Retailers in India

By now most people who read my blog would be aware that Wal-Mart is finally entering India via a 50:50 Joint Venture with Bharti. Very shortly, TESCO will also be making another big splash on entering India with another tie-up. While this bodes good news to Indian economy and increases foreign investment in India, there is a looming threat to all the organized retailers: A severe talent shortage.

Talent Shortage in India

I had briefly mentioned about this talent shortage in my previous article. But the crisis is really BIG. Global giants really have a big problem on their hands - when it comes to rapid expansion in India.

This is a surprising challenge for Organized retailers - especially global retailers in India is shortage of talent. Yes, for all the population that exists in India and for all the shops, India has a serious shortage of experienced people resource for retailing. Number of people experienced in managing complex supply chain, people who have basic merchandising skills, people with store planning skills are very few. As a result, most of the existing retail stores have poorly organized merchandise, inadequate inventory, and excessive inventory - leading to lost sales and increased capital requirements. (see: Increasing Sales in a Retail Store - An Indian Context ) Global retail giants will have to spend substantial resources in terms of time & money to train local workforce and bring them on par with their global standards.

If finding store managers is a challenge, the bigger challenge is to find the adequate workforce for store clerks, cashiers, sweepers, helpers etc. The problem here is not that of availability - but that of availability of the right kind of people - and the cultural divide that exists between the potential employees and their employers.

To understand the talent crisis, take a look at the demand for workers. Currently the Indian retail sector - both organized and unorganized employees close to 40 million workers. Of which only 1.8 million workers are employed in the organized retail sector. Most of these workers are also shop owners - India has an estimated 30 million shops & kiosks. A vast majority of the people who are employed in the stores lack the skills to work in an organized retail sector.

Retailers Association of India estimates that an additional 2 million workers will be needed in next two years - this is to meet the requirements of the existing planned expansion in the retail sector. Hiring and training in such large numbers in such a short time will be a challenge for even the biggest retailers.

Hiring the Right Talent

Most people who work in retail shops are school dropouts from mainly rural background, they do not speak English nor do they understand the sophisticated IT systems. Added to this there is a social stigma for working at a shop. Indian society does not give respect for such professions.

All this implies that global retailers must develop a unique strategy to hire and train their shop floor staff. As a result most workers treat working at a retail outlet as a temporary job - till they find a better one in an "office". This implies that employee turnover will be very high - as much as 40% per year. At such rates of turnover, people management becomes a big challenge. Global retailers will have to develop unique organization development strategies, employee retaining strategies and also have a plan to improve the image of working in shop - i.e., remove the stigma of working in a shop.

Global giants will also face a challenge when it comes to recruiting the quality talent in India - as most of the shop floor workers are not well educated, they will not be aware of companies such as Wal-Mart or TESCO or Target. On the contrary - every villager in India has heard of Reliance, Tatas, and the likes. Thus the battle for hiring the right talent will be doubly difficult for global retailers.

Cultural Divide

MNC’s have the tendency to hire the best talent. In India they will do the same. So the companies will hire the top MBAs to manage their operations. But these people often tend to come from the upper castes and they have a social stigma when it comes to dealing with people from lower castes - the shop floor workers. This social barrier will cause a lot of operational problems. In addition, people in the corporate headquarters will have cultural barriers when it comes to dealing with their local managers in India. Thus this double cultural barriers can deliver a knockout blow to any global giant.

Global retailers will have to cast a wide net to get the right kind of talent. In urban areas, most of that talent will come from school dropouts and are slum dwellers. Making a good salesmen out of them will involve intensive training and above all extraordinary management skills. Retailers need to invest a lot in soft skills training, behavioral training, customer orientation, sales training, etc. And at the end of the day, these workers who live in slums or shanty houses without basic facilities - will have to dress up and come to work in sparkling air conditioned retail outlets.

Global retailers will have to expand beyond the metro cities - to tap into new markets and hire the right talent. Here in second tier cities and towns, English is not a primary language. It is always the local language of the state: Kannada, Tamil, Telgu, Marathi, Hindi, Gujarthi, Punjabi, and 20 other languages. Global retailers must build the capability to carry out operations in multiple languages, train its staff to speak in both local language, national language (hindi) and if required in English. Even though the shop floor employees need not know multiple languages, the store managers definitely need to know.

Closing Thoughts

Global retailers may be eyeing Indian markets eagerly and few are hustling for that elusive first mover advantage - but they face a huge challenge in India. Success in Indian retail segment will be a hard won battle - battle not against competition, but a battle against the business environment. This implies that success in India will depend on prudent leadership and their ability to overcome the cultural differences to create a talented workforce.

Also see:

Global Retail Giants are Eager to Enter India
Increasing Sales in a Retail Store - An Indian Context
Wal-Mart is in Trouble in UK too!
Trans-cultural Business Failure - Wal-Mart Exists Germany
Partnerships for Increasing Business Opportunities

Externship - A Real life Example

A few months ago I had written about Externship. Today I saw an article which talks about externship is some format. Accenture, E&Y are now encouraging its former employees to return. Ex-employees are now being seen as tomorrow’s employee.

See: http://biz.yahoo.com/ap/061212/business_of_life.html?.v=1
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Bosses to Ex-Workers: Let's Be Friends
Tuesday December 12, 1:25 pm ET
By Ellen Simon, AP Business Writer
Companies Court Former Employees to Return or Refer New Clients.

NEW YORK (AP) -- The old view of corporate exes -- employees who leave for other jobs -- was that they were deserters and traitors who must never be spoken of again.

The new view: They're a fantastic network.

"Either they're our clients, or potential clients or referrals to other clients," said Jill Smart, chief human resources officer at Accenture Ltd. "They also help as teachers and mentors for our people."

Particularly in a fields where the labor pool is tight, today's ex-employee is seen as tomorrow's current employee. The message: We'll keep a light on for you in your old cubicle.

Children's Healthcare of Atlanta sends former nurses the hospital's employee magazine, Careforce Chronicles. The Principal Financial Group sends former employees letters twice a year saying, "We're the same company you enjoyed, consider us again."

Departed employees are courted with official employee alumni networks that offer electronic directories of former colleagues, job listings, continuing education, even discounted group insurance. Microsoft's alumni group rented the entire Seattle Aquarium for its after-the-holidays party last year. Accenture toasted its alumni with drinks and appetizers at New York's Museum of Natural History.

Some departing employees are singled out for a charm offensive.

Audit senior manager Danica Dilligard left Ernst & Young LLP in 2003 after six years with the company. E&Y's courtship began almost immediately. The E&Y partners she'd worked with called, saying, "Just wanted to make sure you're happy. There's always a home for you here." She was invited to E&Y golf outings, where she played in a foursome with the partners. She was included in professional certification courses and welcomed at networking events.

One of the partners' calls came after the hectic run-up to a budget meeting at her new job, where she was a controller overseeing a $300 million operation. She hadn't seen her family all week. She said, "It's time. Can we have lunch?" she recalled.

He promised that if she returned, she'd have more flexibility than she did before, including the time to coach her daughter's cheerleading squad of 45 seven- and eight-year-olds. She returned to E&Y after three years on the other job. Her team at E&Y pushes her out the door on Tuesdays and Thursdays so she can make it to cheerleading practice and the squad has won two local competitions.

The way E&Y's partners tended to their relationship with her is a far cry from how corporations used to see departed workers.

Vandy Van Wagener, who became brand manager of Ivory soap at Procter & Gamble Co. in 1977, remembers how departing executives were viewed then. The day he started his new position, he went to the personnel department to find a photo of the brand manager he'd replaced, who had left for another company. The man's photo was already in the waste basket.

Jerry Stevenson, now a director in the communications practice at Buck Consultants, tells a similar story about Electronic Data Systems Corp. "When I left EDS almost two years ago, all formal communication with the company ended." That was an element of the company's culture, he said. "An old joke within the company went, 'When you leave EDS, they scrape your car off the parking permit.'"

David Arcemont, vice president of global recruiting at EDS disagrees, saying the company has always welcomed back former employees. In 2006, roughly 7.5 percent of hires were returning employees, he said. Gordon Curry, an executive speechwriter at the company, said he was welcomed back as a freelancer four months after he left and was quickly given his old job back, full-time.

Corporate views of past employees may have softened partly because the waves of layoffs that started in the 1980s meant the number of former employees was legion. Many former workers hadn't jumped; they were pushed. When the economy got better, some returned to their old companies as consultants, temps or "boomerang" hires.

In law, accounting and consulting, where relationships are as important as credentials, companies have realized an updated phone, e-mail and title directory of former employees may be one of their greatest assets. Silicon Valley powerhouse law firm Wilson Sonsini Goodrich & Rosati's alumni network hammers that point home at the top of its Web page, which says, "Powerful contacts. Powerful resources. Staying connected."

Law firm Latham & Watkins LLP gives lawyers it is interviewing access to the alumni directory before they've been hired, so they can start networking with former employees before they even start work. McKinsey & Co.'s employee alumni database has long been viewed as one of the keys to the consulting firm's power.

At some companies, the equation is much simpler. The Principal is based in Des Moines, Iowa, which is now the sixth-oldest state in the nation, as measured by the percent of the total population 65 or older, and finding workers in a shrinking labor pool is a constant challenge. To court its retirees, the company welcomes them at the company gym and wellness center.
Principal worker Macil Hiatt, 72, officially retired in 1998 after a 38-year career, took less than a year off, and has worked there in temp jobs almost ever since.

Hiatt, who remembers when the company got its first coffee machine in 1979, was recently finishing a project in the company's pension department.

"I'm hoping they'll find me something else I can learn to do," she said. "Working keeps you on your toes, keeps your mind alert."

Ellen Simon is a national business beat reporter for The Associated Press, covering labor and workplace issues. Write to her at esimon(at)ap.org.
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Also See:

Externship – Vital Tool in Strategic Human Capital Management
Retaining People in Technical Jobs
Retention of top managers
Use Marketing to Hire and Retain Talent
Accenture Experiments with Rural Outsourcing
Employee Churn is here to stay
Soft Skills For Global Managers
The Value of Talent
Giving Your Top Performers a Reason to Stay

Externship – Vital Tool in Strategic Human Capital Management

In today’s business world – employee attrition has been viewed as a BIG problem. A common reason for star employee to leave is often in search of better job opportunity which is other wise not available in his/her current organization. This forces them to look at opportunities outside the company.

In most small/medium sized firms employees often reach the ceiling in their career growth. Few employees will be content with this status quo – and settle down for a mediocre work; hardly progressing in the organization. Ambitious employees will always seek ways to break this status quo – either by recognizing their weakness & improve their skills or work in areas which complement their strengths. When this fails, they seek gainful employment elsewhere – even outside the current organization – which places a greater value on their abilities.

Attrition is thus becomes dangerous for a small/medium sized firm – as it loses valuable employees and those who remain loyal are mediocre performers. To solve this problem, a few innovative firms are developing a concept of “externship”.

What is Externship?

Externship is similar to internship – but it works in the reverse way. As with internship, a student (usually) is employed for a pre-determined short period. The company gains by maintaining good relationship with the university and has the first choice to employee that candidate. Similarly, an externship is a technique of placing a company employee in another firm – for a short period of time, and enabling that candidate to return (often with a promotion). The employee actually leaves the company (A) – works at another firm (B) and then returns to the original firm (A). And in this process, the employee learns on the new job, gains meaningful experience, and enables him to grow within an organization – which was otherwise not possible. To explain, consider this hypothetical example:

Vijay, a star engineer at a silicon valley based start up company - Nova Systems. He joined the company straight from the college. After three years Vijay has become a senior design engineer and aspires to become a project manager. But all the project managers at Nova Systems have PMP (Project Management Professional) certification and have experience in developing cutting edge technology at other fortune-500 firms. Vijay cannot be directly promoted as he lacks wider industry experience and Nova Systems lacks a formal training system to train Vijay for the PMP certification.

One fine morning, Vijay’s manager Parag drops off a copy of the ‘Appointments’ section – highlighting job opportunity for Vijay at a Fortune-500 firm - ADS. Vijay is uncomfortable with this offer, later he and Parag discuss this offer. Parag encourages him to tryout for opportunities at a Fortune-500 firm – as that company can offers a wider experience and has extensive training program which will help Vijay get PMP certification. Vijay takes up this offer and joins ADS.

Vijay and Parag keep in touch over next few years, and during this time, Vijay grows in his career at ADS, he gains valuable experience working in US & Europe, gets his PMP certification and grows rapidly at ADS. After two years, Parag encourages Vijay to join back Nova Systems as project manager – now that Vijay has the requisite experience and qualifications for that role. Given the friendship between Vijay & Parag – Vijay jumps on this offer and returns back to Nova Systems.

Benefits of Externship

For small & medium sized firms, loss of high performing employees has become inevitable. But such losses also long term impact. Having an externship system enables all the former employees to remain in touch with the company & its managers – and former employees can bring in referrals to their previous employer – thus lowering the cost of recruitment. The company also gains when the employee returns after gaining meaningful experience.

Small firms can also gain by lowering their recruitment costs when they recruit their former employees. The company now has an employee with expanded skills and experience without having to pay for it. Start up firms can also gain from networking with its former employees – who might help the company to discover newer markets, win new clients and get more business.

Closing Thoughts

When a high performing or a valuable employee leaves a start up or small/medium sized firm, company loses, but such a situation can be turned around with an “externship” program. By having a well defined process in place to recruit a former employee, former employees can be encouraged to rejoin the firm. Some managers maintain an informal friendly relationship with their former subordinates – and this network becomes handy for people at difficult times. When the former manager is in trouble, the former employee can help either by rejoining the firm or by using his/her connections to get new business to his/her former employer or by referring an promising candidate and helping out in recruitment.

Though companies have not developed a formal “externship” programs, a few managers and employees are developing an informal externship program. The newer social networking websites help in keeping employees in touch with the managers and colleagues – and people build this informal network which comes handy in the future.

In today’s fast paced world, externship program may become more common. The shortage of talent and lack of training abilities will force a few small/medium sized firms to tryout innovative HR practice called “Externship”.

Also See:

Retaining People in Technical Jobs
Retention of top managers
Use Marketing to Hire and Retain Talent
Accenture Experiments with Rural Outsourcing
Employee Churn is here to stay
Soft Skills For Global Managers
The Value of Talent
Giving Your Top Performers a Reason to Stay

Accenture Experiments with Rural Outsourcing

World’s knowledge economy is growing – and this economy needs talented people. The success of Indian IT services companies hinges on talent, Internet and connectivity. The current shortage of talent has driven companies to look at different sources of talent. One of the sources available in the US and yet rarely tapped is the rural population. This population can be tapped via remote connectivity – to provide IT Enabled Services (ITES) to the local markets.

Accenture’s Managing director Randall L. Willis is experimenting with a new model of ITES service delivery by the Native American Indians who live in American Hinterland at Umatilla Indian Reservation area of Oregon. (see http://www.businessweek.com/magazine/content/06_45/b4008053.htm)

In my opinion, this is a bold experiment – to integrate American Indians into IT based economy and tap into a talent pool which promises to offer 10%-30% savings in wages (when compared to US urban areas). The innovative nature of this proposal – is something which other companies can learn from.

On October 6th, Accenture announced a 5 year agreement to manage Cayuse Technologies, an IT services business owned by Umatilla tribes. Cayuse Technologies will offer Call centre, document preparation and software development services to Accenture – which Accenture will resell to its customers.

Though it is advantageous to outsource to low cost economies, The value of offering services from a near-by location by a local population offers tremendous advantages if such service is price competitive.

Main Benefits

The idea of rural outsourcing is nothing new, for decades, people in rural areas were offered options to work from their homes. But what I liked about this initiative is the idea of how Accenture can get monetary benefits and at the same time help integrate rural Indian communities into the main stream economy – without physically relocating people.

Accenture is gaining brownie points with the American public – which is a major PR benefit. At the same time Accenture is getting a head start (w.r.t competitors – IBM, HP, EDS) into tapping this talent pool.

Accenture can tap into this talent pool to win lucrative US government contracts which mandates that the work be done in the US, and at reap the financial savings from the low cost. The cost of living in reservation areas are low, which keeps the wages low (when compared to US cities) Companies owned and operated within American Indian Reservation areas are exempt from US corporate taxes – thus lowering costs.

Accenture will use this experience to learn how to deliver low cost IT/ITES services from near by locations – so that it can offer viable alternatives when compared to Indian/Asian competitors.

Lessons to Indian IT companies

A recent (November 2nd 2006) article in Financial Times reported that Indian IT companies (TCS, Infosys, Wipro) are setting up development centres at locations near their customer locations – Also called “Near-Shore” locations. TCS is setting up centres in Mexico, Costa Rica, Caribbean Islands, Ireland, and Eastern Europe etc. The development centres in these countries is driven by the need to serve customer’s better – have multi-language service delivery, and build a truly multi-cultural organization.

Indian firms are still in their infancy when it comes to building a multi-cultural organization. Only 2-3% of their total work force is non-Indians. As a result, Indian IT firms have a steep learning curve and a tough challenge when it comes to building a multi-cultural workforce.

Closing Thoughts

As the competition for talent increases, companies need to be innovative and find newer sources of human capital. Accenture has demonstrated one such innovative approach which is both also profitable. Accenture benefits through improved corporate image, a lower cost, increased ability to serve local US markets and created a learning opportunity in managing multi-cultural workforce.

I have campaigned for the need to create a multi-cultural workforce via my articles, and this experiment by Accenture shows that global IT giants are committed a truly multi-cultural and a global organization.

Also See:

Building a Diverse Workforce
Global Manager
Managing Diversity for High Performance
Encourage Diversity to attract top talent
Distinguish Yourself As a Culturally Diverse Candidate

How to Run an Interview

Every senior manager or a top level business executive will have to interview another peer or a middle level manager. In the knowledge driven economy, hiring the right manger is crucial for the organization. But given the current shortage of talent, companies cannot afford to lose a good candidate.

Here is a set of guidelines that will enable you to get the right candidate.

• Know what you want
  
  Before you meet the candidate at an interview, clearly understand what you want. Define the post, define the role, have a clear set of expectations from the candidate. This will save everyone’s time and help you plan decent questions.
  
  
• Be prepared for the interview
  
  
  Many managers are so busy that they don't prepare for the interview - and hope to ‘wing it’. Sharp & intelligent candidates will figure out that you are unprepared for the interview and may be put-off by the shoddy interview. Preparing for the interview will also help prevent the mistake of hiring the wrong candidate.
  
  At a manager level, the interview is a two way process. The candidate is also interviewing you and your organization. If your preparation is sloppy, it will create a negative impression on the potential candidate.
  
  
• Get the room ready
  
  
  Ensure that the room is ready for the interview. This means booking the room in advance, having arrangements for water, coffee/tea during the interview, getting the white board and flip charts in place etc. The quality of the room and the facility can create a good impression on the candidate. This impression helps the candidate choose your organization if selected.
  
  
• Be consistent but flexible
  
  
  When interviewing a bunch of candidates, it is a good practice to level the playing field by asking questions of equal difficulty. I often start off by investigating their resume and building on it. This allows me to frame questions which are relevant to their past experience and how that can be applied to the job for which they are being interviewed for.
  
  
• Let them shine
  
  
  The main point in an interview is to let the interviewee do most of the talking. The best way to ensure that is to ask open ended questions such as: "What was the toughest challenge you faced in your current/previous jobs?", "What was the toughest decision you had to make in your work?" Etc. The idea is to let them speak - and then you can pickup from what they said.
  
  
• Keep a record
  
  
  Maintain a record of the interview. Note down the answers, main points etc. during the interview process. The recording process must be objective - to the point that it should help you choose between different candidates, help you filter out unsuitable candidates and most of all, it will help you defend your decision - when explaining it internally to your organization.
  
  
• Don’t Discriminate
  
  Discrimination of any sort can be dangerous. Legally your decision to choose a candidate over another (from different race/religion/sex/age group etc.) may be OK, but if any candidate files a discrimination case, then the reputation of your organization and your personal reputation within the company is at grave risk. The best policy is the let meritocracy win!

Closing Thoughts

For many managers, interview is a regular business process - some have acquired the art of interviewing, but in today’s busy world, even the best of the interviewers are prone for mistakes. Having a plan for the interview, getting the questions in place and conducting the interview with an eye for hiring the candidate is essential for the organization. In my past experience, I had heard one manager telling that he wanted to hire people who are smarter than him - this was an indication of his seriousness, his preparedness and his modesty. All these factors help in selecting a right candidate.

Strategic Outsourcing

In 1990’s outsourcing IT services was a mere cost saving operation. But by 2005, outsourcing has become an important element in creating a winning strategy. For example, in 2004 Barthi Airtel of India outsourced all its IT needs to IBM in a $750 Million deal. In 2006, Airtel signed another $100 million deal with IBM to manage and deliver services delivery platform.

"The implementation of SDP will enable Bharti Airtel to have an integrated environment that will incorporate all of Airtel's content and applications services under one platform," said Mr Manoj Kohli, President, Bharti Airtel.

The above example shows how outsourcing has grown from a mere tactical solution to that of a strategic solution.

Global Sourcing Strategy

Until now, outsourcing has been considered by most companies, particularly in the telecom services industry, as little more than a tactical form of reducing the cost of acquiring ancillary services. However, enlightened telecom services providers have come to focus less on achieving incremental cost improvements (10 to 20 per cent) and are evaluating all their capabilities to define a winning global sourcing strategy.

Global sourcing strategy can be defined as:"Acquiring the right competency, at the right cost, from the right source, from the right shore."

Specifically, it stands for sourcing operational and technology activities and resources from global "competency" centers. For example, as part of its global sourcing strategy, a Barthi Airtel may turn to Siemens/Nokia for network maintenance, IBM for IT services and 24x7 customer for customer service. Global sourcing also means sourcing the best services from the best locations. For example: Bank of America uses India for getting IT services and market research, England for Derivative analysis, and Ireland for customer services.

In these situations, sourcing needs to become a strategic process whereby companies accept the idea of unbundling their value-chain and focus on operating it in the most optimal way to achieve transformational cost savings (30-60 per cent) and transformational revenue growth. For many organizations, this type of analysis will often lead to the adoption of a global outsourcing strategy.

Sourcing Strategy relies on Control

It’s control, not ownership that matters - The need to define a comprehensive sourcing strategy is rooted in relatively recent geopolitical, macro economic and technology developments. These developments have fundamentally changed the world by making business capabilities portable on a global basis. Leading organizations realize that what matters most isn’t the ownership, but the control of business capabilities.

Approach

Look at all the organization's capabilities and only keep captive those unique capabilities that offer competitive advantage and are critical to revenue growth. All other capabilities, as core as they may seem, can be considered for outsourcing.

The financial services industry has been at the forefront in taking advantage of the global sourcing opportunity. Led by pioneers such as GE Capital, Deutsche Bank, HSBC and Citigroup, almost every financial services firm is engaged either in using global sourcing or in planning for it actively. The high tech industry for years has exploited global sourcing for its manufactured processes. Led by giants such as Dell, Texas Instruments and Intel, the industry has begun to utilize globally dispersed locations for R&D, customer service and related business processes as well. Other industries increasingly taking advantage of global sourcing include retail, telecommunications and media.

Which sourcing model is right for me?

On-shoring, near-shoring or off-shoring are the various ways companies can implement their captive sourcing and outsourcing strategy. Off-shoring and near-shoring bring the well-known opportunity to reduce costs.

Moreover, in many cases, the decision to offshore or near-shore is also driven by a quest for better quality, access to specific skills and reduced cycle times (via 24/7 work shifts), all critical to support revenue growth and reduce time to market for new product and service initiatives. Leading firms will consider a mix of these three sourcing alternatives based on the optimal balance between rewards and risks.

Off-shoring or near-shoring is not to be limited to the well known IT or contact center functions. Business Process Off-shoring (BPO) is showing considerable growth particularly in the areas of finance & accounting, transaction processing (i.e. credit cards and claims), data and customer order entry, customer service, collection and sales and marketing. Furthermore one can see emergence of Knowledge Process Off-shoring (KPO) in the areas of financial research, competitive intelligence, Market research, engineering R&D, etc.

Implementing a successful strategy

Defining a comprehensive and successful sourcing strategy is not easy. The key obstacles that most firms have encountered when developing it are workforce resistance, concerns about reliability, security, a loss of control, and communication difficulties, particularly when the strategy involves a near-shore and/or offshore element that comes with linguistic, cultural, distance and time-zone barriers. To overcome these various obstacles, it is critical to link the sourcing strategy with a well established overall operating model. Defining this new operating model is the first step in implementing the sourcing strategy.

The next step is to re-engineer the various processes across the company and to ensure that they properly integrate with and support the new global sourcing framework.
Technology augmentation (not replacement) can facilitate this process considerably and further improve the newly defined processes from a cost, control and service level perspective. Workflow, self-serve portals and digitization integrated with the legacy solutions are typical examples of non-intrusive technology augmentation.

To obtain the optimal capabilities mix when outsourcing, it is critical not to shortchange vendor due diligence and to not hesitate using multiple vendors.

Over-investing in program management and proactive change management will allow mitigating risks to achieve a successful implementation. A successful global sourcing strategy will provide cost reductions, improved controls and better service levels to internal and external clients.

Rewards are significant

When properly implemented, global sourcing strategies offer significant benefits. Leaders in global sourcing enjoy unparalleled competitive advantages by way of lower costs, improved quality and responsiveness. According to Deloitte, financial services firms in the developed world could save $138 billion over the next five years from off-shoring. However, more than cost, it’s the quality and other benefits that are providing further fodder to off-shoring. According the 2003 TPG/Baruch offshoring Survey, two-thirds of the businesses surveyed reported gains in quality, Access to skills, reducing cycle time, etc., were other key benefits.

Closing Thoughts

Its time to reconsider traditional outsourcing approaches that focus on incremental cost savings. While it requires more careful decision-making and coordination, strategic sourcing, effectively implemented, offers tremendous benefits that simply cannot be overlooked.

Also See:

Virtual Scale - Alliances for Leverage
Cutting Edge R&D in India
Global R&D Network
Managing Outsourced Projects
Developing a Global Mindset
Managing in the Global Organization
Leadership for a Global Enterprise
Global Product Development Teams

Organization Development in High Tech Startups

Silicon Valley is home for thousands of high tech startups. Most of these companies started in the valley and blossomed into Fortune-1000 companies. The success of several startups can be traced to several common traits one of them being their HR policy. This article is about the HR practices followed at these startups - and how such practices helped them succeed. The lessons we can learn are: How one can reduce attrition, How to select employees and Means to control & guide the energies of these people.

Silicon Valley startups typically do not tend to have a strong HR departments - at best HR department will be staffed by one or two persons, yet the founders of the company have usually incorporated the best HR practices - this is done by sheer experience of the founders or is driven by venture capitalists or lawyers or consultants who are deeply involved in any startup. It is this ecosystem which gives Silicon valley companies a better chance for success. The HR policies and organization development practices at these startups makes them "built-to-last".

Blue print for a High Tech Startup

At the very beginning, the founder’s have to present a 'blueprint' for their company to powerful brokers (Financiers, Venture Capitalists etc.). Every CEO in the valley will tell that their company is built by their elite employees. It is therefore no surprise that the organizational ‘blue print’ must contain strategies for hiring the right people, retaining them & compensating them. This can be broken down into three distinct strategies:

• Employee Selection
• Employee retention
• Employee motivation
  

Employee Selection

How to companies select employees. Founder’s of these startups are deeply involved in hiring the right people for their company. Founders often take it personal when it comes to hiring for key posts. They are involved in every step and personally call on potential candidates, interview them and even negotiate salaries, stock options, performance incentives etc. before hiring them. Time and money are of paramount importance to the company - this makes the founders look for the right skill sets, right attitude and experience in the potential candidates. The objective is to bring the new employee onboard as cheaply and as fast as possible.

Founders play a direct role in selecting employees having the skills and experience needed to accomplish the immediate tasks. Entrepreneurs also look deeply at the long term potential, values and cultural fit - emphasizing on how the new employee would connect with others in the organization.

Employee Retention

Employee retention in startups is ingrained into the organizational DNA. Most founders envision creating a strong family-like feeling and intense emotional bond with the workforce. This has a deep impact on the employees - they are motivated for superior performance and reduce chances of attrition. Imagine if the CEO is a friend of the employee - say director of engineering, then it will be very difficult for him to leave the company.

This emotional bond between founders and employees is carried out at levels of the organization. Director of Engineer - will in turn create a bond with his managers & it flows downwards. When I worked for IDT, I had a great bond with my immediate supervisor.

Employees are compensated adequately for their efforts - even startups pay a competitive salary to attract talent and sweeten the deal via stock options. The possibility of making it big via an IPO is a strong retention tool. Even when a company has gone public, the money value in the non-vested options make it attractive for the employees to stay on.

Once the compensation is taken care of, highly skilled employees - especially engineers and scientists seek challenges. In Silicon Valley - the competition for highly skilled people is so high that every startup must pose enough technical challenges to attract and retain these talented employees. Founders of these companies are often highly skilled and have a futuristic vision - which implies that a vast number of challenges must be overcome inorder to succeed. Since founders are passionate about technology and are personally involved in hiring, they will be the ones who set the work standards and performance metrics at the very beginning.

Employee Motivation

Talented employees are motivated by the work environment and work challenges. This means that efforts needed in employee guidance and control are minimized. Most startups rely on informal control through peers, friendship and organizational culture. Formal control structures are not usually used - instead organization culture of highly committed employees becomes a key motivational source.

Work related challenges and business objectives are tightly coupled with the emotional bond between founders and employees - this acts as a major motivation factor.

An Example

In an interview to Fortune Magazine, CEO of a startup said:
"We worried about the IPO a lot because from the earliest days that was a clear corporate focal point. Get to the IPO point, get the company public. It’s the big payoff for people who have stock. Every person in our company is a stockholder. We grant them options when they join. Everyone worked very hard for six years to get to that point. Our concern was, after the IPO and after the lockups expire [so that] people have the ability to sell stock, we were concerned what the motivation levels in the company would look like [and] what we could do to influence that motivation level. One thing we are working very diligently on right now is identifying what the next corporate milestone will be. 25% growth isn’t the kind of corporate objective or singularity of purpose that gets people riled up. We are looking for something a little more specific, like that $100 million benchmark. We’re in the process of making a final decision of what that overall, superordinate goal is going to be."

By articulating enduring overarching goals from the outset and by creating a powerful sense of belonging, the Commitment model can help companies avoid or minimize the "Post partum depression" syndrome that sometimes accompanies an IPO, release of the first product, or achievement of other key corporate milestones.

To paraphrase what one prominent venture capitalist said: "I automatically ding anyone who comes in here pitching their business plan. If they tell me that their goal is the IPO. If that’ s their goal, there are going to be huge organizational problems down the line. An IPO might be a means to an end, but it shouldn’t be an end in itself."

Corporate Philosophy

Startups often adopt the highest standards. Google, Yahoo or Redback etc. openly & proudly announce that they hire only the best. Most of the companies make statements such as:

• "We recruit only top talent, pay them top wages, and give them the resources and autonomy they need to do their job."
  
  
• "We wanted to build the kind of company where people would only leave when they retire."
  
  
• "We make sure things are documented, have job descriptions for people, project descriptions, and pretty rigorous project management techniques."
  
  
• "We were very committed. It was a skunk-works mentality and the binding energy was very high."
  
  
• "You work well, you get paid well"

These statements are followed up in action as well. Companies rigorously follow-up on these statements, As a result the credibility and the company image is high among the employees.

Change is Disruptive

In today’s high tech industry - change is the only constant, and high tech startups are the ones who are ushering the rapid changes. Yet in these startups, one can observe an ever enduring and unchanging value system. The company philosophy remains unchanged even after several decades. For example, look at HP or Intel or Oracle or Apple, the corporate philosophy of these companies have not changed even after so many years. These company follow the same high standards of recruitment, they are committed to innovation, committed to work on latest technologies, committed to having a highly skilled, highly motivated work force. These examples imply that many of the HR practices are deeply embedded into their organizational DNA - and that is reflected in their corporate philosophy - And it is unchanging.

Changing the basic HR blueprint is highly disruptive and destabilizes the high tech startups. Changing the blueprint significantly raises turnover, especially among the employees who have been with the enterprise the longest. The evidence of this can be seen in mass attrition - when a CEO or a leader leaves the company. In 1999, 45+ engineers left Motorola and joined Intel - when Intel hired Mark McDermott from Motorola. The attrition at Motorola’s chip unit continued for few more years - even after spinning off the semiconductor unit into ‘Freescale Semiconductors’.

Organizational Performance

Organizational performance is the bottom line. Founder’s early organization building choices, or subsequent changes in organizational blueprints, have a deep impact on companies.

A prominent and highly successful Silicon Valley entrepreneur, who argued founders to articulate a particular model of organizing in the early days of a new enterprise:
"Organizational models and culture are a source of failure for startups. . . . In order to have a successful company organization, one must first have a successful company. Companies that strive to put in place organizational norms and models, cultures from the outset have been successful"

Yet companies in Silicon Valley are reluctant to document and publish their core practices. Hewlett-Packard's written document of seven corporate objectives got written almost 20 years after the company was started, after more than 20 years of practice building a successful company to develop its norms and culture.

Lessons for Entrepreneurs and Managers

For many companies, the costs and risks of transitioning to a new organizational model might outweigh the advantages. Therefore, selecting an initial organizational blueprint that adequately suits the present and anticipated future strategy and environment is better than selecting one that is ideally suited to the current situation but likely to be dramatically mismatched in the future and to therefore necessitate disruptive changes.

An important implication for entrepreneurs: There might be a powerful tradeoff between risk and reward in selecting an HR blueprint for new enterprises. Companies that embraced the right HR blueprint managed to weather the inevitable crises and challenges of a young technology venture and then avoided the need to recraft the blueprint at a later date. These companies tend to survive and prosper.

For managers in established companies, being clearer and more explicit about the HR blueprint can also be enormously useful in dealing with two challenges facing most large organizations: balancing the need for global consistency against the need for local flexibility; and managing mergers and acquisitions.

As companies of all stripes fight the "War for talent," they would be well advised to devote as much careful thought to building a brand in the labor market as they do in the product market. The organizational blueprint seeks to brand the company as the "The employer of choice," a company that takes long-term development of its people seriously in a world is the one which gets the best talent.

Giving Your Top Performers a Reason to Stay

Right now, I am middle of resolving a thorny issue of making a team of excellent engineers to stay. The engineers are burnt out by sheer overwork in last nine months and have threatened to resign if the work conditions do not improve. At the same time, I am seeing a mass attrition at my previous company - the company I left few months ago. This made me look at the other aspects of employee retention. Since I have moved around different companies and have seen other people change jobs as well - there were several common things that caused employee attrition and is worth writing in this article.

Ambition and the Employee

When I look back in my own career - I can see that the most compelling reason for me to quit/change jobs was always to enhance my career. High performers often are capable of motivating themselves - and one thing that motivates them the most is ambition.

Ambition is a positive trait - that one looks for when hiring a person. Top performers achieve a lot because they are motivated by their ambition - but when the job no longer meets their ambition - employees start looking around for other venues to feed their ambition. Thus an employee’s ambition is an advantage when used properly and a threat if not handled properly.

Career Development

Today, companies are eager to hire accomplished employees - many companies even poach the top performers from their competitors. The scramble to attract top talent has led to fast growing industry of head hunters. In technology world - companies have become so used to the idea of hiring the right person to the job - that many a times managers ignore the prospect of grooming an existing employee to a greater role. The concept of career development within an organization is being ignored - see Hiring in high-tech firm: Build Vs Buying Talent

Career development is critical to keeping employees committed and engaged in their jobs. If they feel that their career growth is compromised they will change jobs. In another example, An employee had long wanted to move into a higher-level position, but he lacked the type of technological expertise that company policy required for that position. So when offered a similar job without that particular string attached, the employee jumped at the chance.

Why was his manager blind sided by the employee’s departure? Because he had never had any significant career-development discussions with the employee, and as a result had no idea what the employee wanted. If the manager had known the employee’s goal and what stood in the way, he could easily have helped the employee develop that skill.

Why tech workers get change jobs?

The reason they get antsy is partly in the nature of technical work itself. Many engineers feel they have finished their work when their project is functioning smoothly. Soon after that they need to find an interesting challenge. If they cannot find another interesting position internally, or if they want to continue developing software or projects, they have no choice but to look elsewhere.

Recent studies of high-tech employees suggests that three main factors affect IT employee retention:

1. Work environment (e.g. challenging work, atmosphere, physical environment)
2. Educational opportunities or Career growth
3. Quality of life
   

Compensation and benefits were mentioned but to a lesser extent. Most of them are aware of the demand for their services and know that all they need to do to get a salary increase of 12-15% is to put themselves on the job market again.

This study shows how crucial career-development communication is to retaining talent. People who feel they’re going to have a chance to grow are much more likely to stay with an organization, even if they get slightly more money somewhere else.

Despite its importance to retention, many managers give career development short shrift. Managers find it perplexing, even onerous task.

The fear factor

Why do managers have such a hard time discussing career development? For one thing, many managers have never experienced such conversations themselves and thus have no models for how to go about them. What’s more, in today’s fast-paced environment, many managers simply don’t want to spend the time. But the biggest underlying reason managers avoid these conversations is the fear factor.

Managers are fearful that they will have to deliver a message that will be met with resistance. For instance, having to tell someone hungry for a promotion that he is not yet ready for it.

What’s more, some managers fear that by helping employees grow, they may be helping them grow out of the unit. But if they resist the conversation because of the fear of losing the person, they probably going to lose them in any case. A talented employee who receives no encouragement from his manager to stretch and develop may believe that the manager does not value him or see his potential; indeed, leaving may seem the most sensible option.

What do they really want?

The first step is to meet with the employee and simply ask him/her what his/her goals are. Initially the employee may be less than forthcoming. If you are dealing with a highly talented and versatile member of your team, the employee may find it hard to identify a specific career path - because they don’t want to limit there options. At this point you as their manager can help identify the most promising possibility by using some probing questions:

1. What assignments have you found to be most engaging?
2. Tell me about an accomplishment in the past six months you feel good about.
3. What makes for a great day at work?

You can also give some kind of formal career assessment. Identify their strong points and give some pointers as to how they can develop it further. A manager in an R&D group discovered that one of his employees like to do marketing. And during the initial career-development conversations with that employee, the manager suggested him to do an MBA degree.

Once you’ve helped an employee uncover his goals, you can then help him put together a development plan. At this point, it’s especially important to set realistic expectations.

If an employee isn’t ready to take on certain responsibilities, you need to discuss the specific skills he needs to develop first. False promises won’t work. Most of the steps for developing skills will involve on-the-job activities, for instance, serving on a cross-functional task force or shadowing a colleague.

Once you have a plan, you need to meet regularly, at least once per month, to track the employee’s progress. At each meeting, go over the development plan and next steps.

Be frank and honest

In some cases, career-development discussions require the manager to say things the employee may find uncomfortable to hear the details about the employee’s weaker areas, for instance. To make these conversations most effective, prepare for them carefully by gathering as many specifics as possible. Cite examples of where the employee’s weaknesses worked to her detriment, and highlight the benefits to be gained from building particular skills.

This is especially important for successful employees on the fast track who might not respond well to criticism: ‘A high performer whose progress within his company was being impeded by his abrasive interruptions during meetings. To make his point, the manager described a specific example of when the employee’s interruptions stopped a colleague from taking his side. He was able to see that, while his goal in that meeting was to get people to listen to his point of view, he wasn’t able to achieve it.

Discuss more than just vertical options

If an employee expresses interest in a job he doesn’t have the skills for or the position simply isn’t open, there are lots of other possibilities. For example, you can add responsibilities to an existing job.

A key employee wanted to become a team leader at a time when there were no appropriate openings. So the manager suggested the man run a group developing a new Internet portal to give him the chance to try his hand at leading and developing something new. Or you can suggest making a lateral move.

A store manager who wanted to move to a corporate role but lacked the experience. The company reassigned him to HR for two years to help him develop more management skills.
Another option is to have an employee shadow someone in a job the employee wants, so the employee can learn more about the job and gain a clearer sense of what it will take to get there.

Give Guidance to their careers

You need to have different discussions with your employees. If you have a highly ambitious employee who wants to move too quickly - before he’s quite ready - you should help him establish a more strategic plan for advancing, one that will allow him to develop the strength he needs to go further in the long term.

If you have an employee not interested in moving up too quickly, you’ll want to guide him in improving specific skills while exploring ways to keep him engaged. In addition, consider each person’s preference for just how involved you should get. One person might want you to provide a broad sense of the targets to hit, while another might prefer you go over things step by step.

Closing Thoughts

In today’s hyper-competitive world, hiring and retaining quality talent is essential for any firm. Many companies have developed a successful plan in hiring quality talent, but most of them fail to retain their best talent. This trend is more common in high tech industry - where the management emphasis has been to get the right person for the job - rather than groom a person into the job. But there again are few exceptions - European firms: Unilever, Shell, Seimens, BT, BP, Alcatel etc. have a long history of grooming employees to leadership positions. This lesson must be followed in high-tech industry as well. Indian IT companies - mainly TCS & Infosys have developed a well defined employee training program - but are still learning on how to manage an employee’s ambitions.

Also See

• Retaining People in Technical Jobs
• Retention of top managers
• Use Marketing to Hire and Retain Talent
• The Value of Talent
• Hiring in high-tech firm: Build Vs Buying Talent

The Value of Talent

I have been writing several articles on hiring & retaining talent within an organization. Attrition rates in Indian BPO companies have reached 30% in some cases. Recently, I came across a case where an entire team of software developers threatened to resign if the work conditions do not improve. These engineers have been working more than 100 hours a week for last 9 months and the project does not seem to end anytime soon. Worse, they were not even recognized for their efforts. Most of this attrition is due to reckless use of human talent. Recent survey conducted by NASSCOM shows that about 40% of the employees who quit a BPO – leave the industry! This indicates a tremendous waste of human talent.

If these companies managed their financial assets as carelessly as they do with their human assets, then shareholders, auditors, and regulators would come down hard on them for inefficient use of funds. Although all CEOs and top management members tell "Our employees are the most important assets – or our employees are key to our success" etc., many companies cannot measure/manage their employees’ contributions to corporate value.

I have studied the Indian service industry very closely and based on my study and knowledge prompted me to write this article.

Causes of Inefficiency

Inefficiency in utilizing human resources stems from two fundamental mistakes by the company. Firstly the line managers are reluctant to categorize people based on their business impact, instead managers prefer to categorize into a larger buckets based on skills & experience. Secondly, the Human resource management policy is not aligned with the needs of the organization i.e., people are being classified by the roles or functions in which they work - but not one their experience or ability to perform the role. Often no attempt is made to map the person’s ability with the role he is supposed to perform. The ability of an individual to perform the assigned role has a huge value impact.

I believe that service providing companies need a far better understanding of the strategic value of employees; it is critical to success in the global marketplace. The company’s future growth and competitiveness depend more than ever on attracting qualified workers — an increasingly scarce resource— and helping them work efficiently together within the organization. In essence, companies which provide services to customers must think like theater troupes: Their success depends on timing and on every person executing his or her role, whatever it may be.

To cite an example: A large Indian IT company provides IT services to A British Telecom company. The Telecom project manager has huge project which needs to be executed carefully - i.e., the Indian IT company needs to understand the customer requirements in great depth. This implies that the person who should be sent to study the customer requirements must be experienced in conducting the study, must have excellent communication skills, and must know how to get the information he needs to conduct the study. But in reality, the person who is sent to London to study the customer requirements had never done that type of work before, had poor communication skills and was reluctant to ask questions. The result of selecting a wrong person to this task resulted in poor understanding of the customer requirement, wrong implementation of the solution, and a completely dissatisfied customer. At the end of the project, the person who conducted the requirement study was blamed - who got frustrated and left the organization.

The above example shows how inefficient mapping of the task to the person’s ability resulted in such a mess.

Understand the Business Impact

A strategic approach to managing the value of employees first requires a definition of the roles that must be performed on the corporate "stage." This means creating a taxonomy of jobs within the company that is consistent across business units and is separate from the individuals working at these jobs. This implies that an employee is expected to fulfill a function, with a number of tasks for which a number of skills are required. Some of these tasks are technical and some are related to the employee’s relationships with customers, coworkers and other outside agencies.

Line managers must first define the roles that needs to performed in that business unit. For example in an IT industry, the roles are: Business Analyst, Project coordinator, Technical Analyst, software developer, Test engineer, systems integrator, Customer assistance executive etc. Note that these roles are defined independent of the technical skills definitions.

A business analyst, for example, must be able to understand the business requirements of the customer, analyze the solution and communicate effectively with customers and coworkers. A project coordinator must be courteous, manage customer expectations and coordinate various activities on the customer side as well as service provider side. A test engineer must know how to perform the required technical tasks and meet the various quality standards.

Once these roles are defined, the next stage is to map the employee competency with that of role. Line managers must identify the various competencies of their employees - this includes technical skills and soft skills as well.

Understanding the Value Impact

Once the different roles have been defined, management is in a position to determine how important each is to the company’s ability to create value for customers and shareholders.
Certain jobs have a greater value impact on an organization; there is a substantial risk to financial performance or reputation if these tasks are not performed well. In some cases, but not all, these jobs merit higher compensation. Other roles carry a significant cost impact, because they require a good bit of training, development, and skill complexity to be performed adequately.

The roles which have the highest value impact These roles almost always command the highest salaries in the organization. See figure-1



On this basis, we can classify an organization’s roles into four broad segments, each of which requires a significantly different talent management approach.

• Innovators
  These people devise and implement an organization’s distinguishing value proposition or business model. They include principal engineers, chief architect, scientists, etc., in a technology company. This also includes visionaries leader - CEOs, COO, CTO etc., who can innovate new business models and processes. Innovators are scarce resources with skills that take a long time to acquire and are costly to develop and maintain. As a result, they are paid very well and hence have higher cost impact.
  
  
• Ambassadors
  Ambassadors represent the organization’s public face and are responsible for customer experience. Ambassadors can work in all levels of an organization. From the entry level position to that of a CEO. In an IT industry, the common ambassadors are: Project managers, project coordinators, Application support engineers, salesmen, account managers etc. The value impact of these ambassadors is very high - because if they don’t do their job well, the business can suffer significantly. Consequently, these people are paid according to the value impact they have on the business - i.e., CEO, Client partners, Account Managers are highly paid. Whereas front-line employees who are easily replaceable and their skills do not have to be particularly specialized are not highly paid. As a result the overall cost impact if fairly low.
  
  
• Craft Masters
  Craft Masters ensure the quality, timeliness, and cost-effectiveness of an organization — the essential ingredients for the faultless execution of a business strategy. These are the design engineers in a high-tech business, the project managers, the marketing managers, etc.
  
  
• Drivers
  Drivers keep the business running. They are back office operators, programmers, developers, IT support staff, administrative assistants etc. Although they are neither crucial to the success of a venture nor hard to hire, in most companies they represent the largest category of human capital, and bad management of this group can lead to operational disruption or quality problems.
  

The differences among these four segments are expressed in terms of talent valuation — such attributes as knowledge, experience, skills, and personal interaction capabilities — and not in terms of organizational structures (such as business units) or in human resources management terms (such as age, education, seniority, or compensation).
This concept for strategically managing the value of employees brings human resources approaches to a new level. Basic management processes — sourcing, development and training, compensation, retention, and separation — are conceptually the same for all four employee segments.

However, since each segment differs in how critical it is to an organization’s success, the practical tools used in applying these processes will also differ. Take sourcing, for instance. Depending on a company’s business model and operational plans, employees in some segments, such as Innovators and Ambassadors, are generally hired and trained as part of the permanent corporate head count. In other instances, however, Craft Masters and Drivers are brought on as temporary or contract staff or engaged as independent consultants.

People Management

Once the right people are cast in the right roles, they must be managed according to those roles. For example, consider two training officers, Tom and Dick. Tom is highly professional, and his training efforts are almost always successful; he is a Craft Master. But Dick is more creative and is expected not only to train staffers well but also to improve the quality of the teaching materials. He was hired through a headhunter, is paid more than Tom, and knows that he is depended upon to expand the limits of the training organization. Dick is a Creator. Tom and Dick have the same job title and, in general, do the same work. But Tom and Dick are in separate business critical categories, thus their salaries, evaluations, and promotions must be handled differently.

Closing thoughts

Dealing with employees based on their skills and the roles can be a complex balancing act for management. But it is exactly what every should do. For example, the manager of an opera house must continually handle a number of distinct segments of people: the singers, the conductor, the casting director, the cast, the musicians, the bartender, the box office cashier. To do this, he uses varied sourcin techniques, compensation principles, and motivational approaches in a relatively instinctive way.

But in many cases, the management rules and procedures of an organization can be obstacles to segmentation and a force for "averaging" the treatment of individuals’ roles. This tendency is a dangerous handicap that makes it impossible to measure the value of employees and, ultimately, to compete successfully in the global marketplace.

Also See

Retaining People in Technical Jobs
Retention of top managers
Use Marketing to Hire and Retain Talent

Improving communication with Indian Engineers

"Today, India is one of the most exciting emerging markets in the world. Skilled managerial and technical manpower that match the best available in the world and a middle class whose size exceeds the population of the USA or the European Union, provide India with a distinct cutting edge in global competition." Discover India

Today India dominates the world of IT services. Indian software engineers are now working on various projects for different clients - mostly international clients. Being an engineer myself and having worked in the USA and currently in the UK, I have seen engineers communicate - especially Indian engineers. Based on these experiences here are some tips for foreigners, mainly customers of Indian IT services, to communicate effectively with Indian Engineers.

Tip-1: Be Explicit

Almost all engineers who go abroad have few things in common: They are smart, intelligent and lots on new ideas. They carry considerable experience and have certain assumptions of the host country and its people from their past experience and other sources. If you are dealing with them for the first time, then you will also have certain assumptions and impressions about Indian Engineers.

The first essential step is then to check if those assumptions are correct. Both parties must quickly pick up clues on what aspects of their assumptions are wrong and what needs to be corrected. As a foreigner, the engineer may not be aware that you, as his customer, may be assuming things. It therefore helps to explain rather than imply about what your expectations are.

Remember that you are the customer or the collaborator - and your success is also dependent on their success. This means that you need to be explicit in all your communications with Indian engineers. It helps if you ask the questions:

"What does he understand about the business requirements?"
Engineers in general start working with a set of assumptions & guess works. They may not necessarily have a deep understanding of the customer’s requirements. It is therefore essential to ask the question and listen to the answers - And correct them where ever necessary.Never Assume that the other party understands.

"What do they (Indian engineers) need to be successful?"
Indian Engineers in particular do not have a habit of demanding things - if they do not have access to a particular resource, they will either find a work around or just ignore the problem. Rarely they demand for resources or information. It is therefore to your advantage to explicitly ask them of what they need during all phases of the project.

Document and explain your requirements in plain simple English. Often times I have seen American and British managers send a diplomatic statements. These diplomatic statements maybe misread by Indian engineers - it therefore helps to be straight forward when it comes to setting expectations or establishing the requirements.

Use templates for all reports and communication. As a customer, you can setup the template in which the project reports have to be submitted. I would encourage use of templates for emails as well - especially for routine emails such as weekly status, transfer of responsibilities, change requests, etc.

Tip-2: Time Management

Any visitor to a new country or on a new assignment will initially take more time than the locals to produce the same amount of work. It will be much better if you can tell the important dates and the expected deliverables on those dates. In addition, tell them how they might use your time - Give your office timings, what's the best time to reach you, and how to reach you. In short set the rules as to how your IT engineers can utilize your time.

Tip-3: Increase your cross-cultural sensitivity

Remember that both you & Indian Engineers are likely to start with certain assumptions. Some of these assumptions will be rooted in standard stereotypes based on the person’s nationality, religion & culture. Stereotyping a person tends to lead you into false assumptions - and can be dangerous. While stereotyping has its benefits, it is always better to know about the person’s culture and behavior instead of relying on stereotypes. Asking questions and listening to the answers allows you to check out assumptions and generalizations and to increase your cultural awareness.

Exploring what others think and do will help you to identify your own rules, assumptions and conventions. Because our own cultures are so implicit in all we do and think, we can only become self aware by getting to know how others’ cultures deal with the same matters. This will help you to be explicit in the way described in Tip-1.

Tip-4: Teach ‘Western’ business communication skills

Most Indian engineers that you meet might have been working in your country before - and few will even have substantial work experience as well. But if you are managing a large IT project, you will see several engineers who are either fresh out of college and are traveling abroad for the first time. It is in these situations, you need to play the role of a "teacher" and help them learn the standard business communication techniques when dealing with you, your colleagues and your company.

In my experience, I found it to be mutually beneficial. As a teacher, you will learn their communication styles - and also help you know them better & overcome the drawbacks of stereotyping. And for engineers, they will learn to communicate better - thus saving time & efforts for everyone.

Some of the key points Indian engineers must know are:

• Expressing their personal opinions
• Ability to paraphrase and summarize others’ words and ideas
• Use of referencing rules and conventions in business communication
• Structure and order an Business/Technical argument
• Analyze and evaluate different arguments and positions

Note: Do not be over-enthusistic and impose a strict learning regime either. Use your judgment and don the "teacher" role only when required. At the same time do not shy away from teaching others the basics of business communications - as it will cost you in terms of wasted time & wasted efforts due to miscommunications

Closing Thoughts


A normal trend in Indian IT companies is to train their engineers on certain business etiquette before they are sent abroad. But often times, engineers skip these training sessions due to various compulsions. And even when these training are held, the training program is inadequate - Usually a half-day session is provided. So I recommend American & European managers not to assume things and take a proactive role in improving their communication with Indian engineers.

Also See:

Teaching an Engineer how to Write

Nature of Virtual Teams

In my earlier article I had written about Managing Virtual Project Teams. Few people asked me a question - "What is a virtual team?" , " How do you define a virtual team?". This set me off to write about the nature of virtual team and what are the characteristics of a virtual team.

Virtual team is a recent phenomenon. The mega factor which led to raise of virtual teams is globalization. Globalization meant that companies must coordinate their global activities in order to compete effectively. For example, Accenture developed a globally integrated marketing communication strategy to orchestrate the name change from Anderson Consulting to Accenture. ( Read "Globally Integrated Marketing Communications" )

The need to compete & collaborate globally led to the creation of virtual teams. But with the advent of low cost telecommunication technology, and discount air fares has enabled widespread use of virtual teams in almost all organizations. Companies - both large & small, even startups have virtual teams. ( Read "Global R&D Network ")

In addition, shortage of talent has forced companies distribute their resources globally, and also collaborate with other agencies, companies, individual contractors, consultants etc. This has created a new version of virtual team - which spans across the globe, across cultures, and across multiple organizations. This loosely knit team is also very dynamic in terms of its team members, and even its objectives. ( Read "Virtual Scale - Alliances for Leverage ")

As a result, Virtual teams can be found everywhere. Organizations have learnt to master collaborative work in a dynamic work environment. The new virtual team can be characterized by:

1. Dynamic Team Membership
   
   The team members - both in terms of numbers & members are constantly changing. Members move into a team & move out of a team based on the business requirements. Members rarely remain in the same team from the start to finish. In a virtual team, a member is expected to his/her bit of the work for that project/task - and once the task is accomplished, they move on to another team & perform another task.
   
   Even the team leadership will change hands in the process. A complex project requires different type of leadership skills at different stages of the project. This implies that even team leadership will have to be dynamic.
   
   All this implies that the team is always in a continuos state of formation. The old theory of team forming, norming, storming, performing, and disbanding do not hold good anymore. Today in a dynamic virtual team - all the stages of team formation (forming, norming, storming, performing, and disbanding) happen simultaneously.
   
   
2. Team members can include people from outside the organization
   
   Today’s virtual team consists of members from other organizations as well. For example in my earlier company, we had to collaborate with multiple vendors, partners in order to deliver to the client. So the team consisted of members from multiple organizations and from multiple countries.
   
   In one of the projects, we had members from US, India, Israel, & Taiwan & members were from six different organizations.Today there is an IT project being implemented at BT. For this project, Accenture, Tech Mahindra, Converges, TCS, Siemens, and HP are involved. Members of this team are dispersed in UK, USA, Spain, Germany, and India.
   
   
3. Members of the team are also members of other teams
   
   In an era of ultra specialization, members of the team need not dedicate all their time on one project. This means that their time will be divided among multiple projects. For example, a DBA ( Database Analyst) would work 1 day a week for team-1, 2 days a week in team-2, 1 day a week for team-3 etc.
   
   This implies that members of the team will have multiple reporting relationships with different parts of the organizations at the same time. Typically there will be multiple project managers, his line manager, and other managers to whom a person would report to.
   
4. Teams are at the center of the organization.
   
   Organizations have transformed the way they work. Projects have a definitive goals & objectives, which makes it easier to manage. As a result, work in any organization has been divided into series of projects - even routine manufacturing has been split up into projects. This implies that the old pyramid of organizational hierarchy is slowly coming apart. Instead of the earlier hierarchy based command-and-control based management style is being replaced by "collaborate-and-cooperate" management style.
   
   
5. Soft-skills is the key for success of a virtual team
   
   For a virtual team to succeed, team members should have excellent soft-skills. In a virtual team, members are ever changing, the reporting structures is unclear, members may even be from other organizations, members may have different culture (both work culture & organizational culture), and members may not even have enough time to build a rapport.
   
   To collaborate in such a dynamic work environment, team members need to have excellent soft-skills: communication skills, persuasion skills, negotiation skills, cross-cultural sensitivity and work etiquette. Technical skills alone are not enough for the team to succeed.

There are several types of virtual teams too.

1. Executive teams
   
   Executive teams are made up of managers who are on the team because of their position in the organization. These teams are usually semi-permanent teams with responsibility for specific divisions or functions in the organization. Executive teams do not work on any specific project - instead they will be involved in multiple projects.
   
   
2. Project teams
   
   Project teams are created for a task. Members of the team are selected based on their role and expertise in relation to that task. Membership of such teams will be dynamic based on the roles the members are expected to play. Once their role is over, members move on to other project teams.
   
   
3. Support Teams
   
   Members of support teams work on common tasks and support other teams in the organization. The team members are based on skill sets and members are interchangeable i.e., if one is absent on one day, the other can take up his/her tasks. Members in such teams usually have identical skill sets and are in the same professional field. These teams do not have any specific end targets - instead their role is on a continuous ongoing basis. For example, IT support teams, On-call customer support teams, nurses in a hospital, etc.

Closing Thoughts

Virtual teams are everywhere today. Managers of small and large organizations have learnt the importance virtual teams, but most are still grappling with the issues of team facilitation and issues of trying to manage teams that are disconnected by distance, cultures, and time.

Increasing use of modern communications systems (Internet, Intranets, telephone, video conference, groupware , etc) has helped to manage these virtual teams. But the real success of a virtual team depends on soft skills: Communication, negotiation, cross-cultural sensitivity, persuasion, and work etiquette.

PS: This article is all about defining a virtual team. In the coming series of articles, I will talk about various soft skills needed to succeed in a virtual team.

Also See:

1. Globally Integrated Marketing Communications
2. Global R&D Network
3. Virtual Scale - Alliances for Leverage
4. Managing Virtual Project Teams
5. Global Product Development Teams
6. Global Dimension of Project Management
7. E-Dimensions of Project Management
8. Role of Leadership in Teambuilding
9. Managing Outsourced Projects