Thursday, November 30, 2006

Launching Kottolli-investments

I am starting a new blog is dedicated for analysis of investments. Mainly stock investments, mutual fund investments and other bank instruments. In this blog I will mainly write about financial analysis and how my investment decisions are based on these analysis. The analysis are based on my learnings during my MBA studies at University of Texas. I will be writing about the stocks I own, stocks I buy and stocks I sell. These trades will be based on market analysis based on annual reports and market trends.

Initially my analysis will cover only Indian stocks and Indian investments as these are the only once I will be investing in. However, I will cover few US stocks too - namely Intel, IDT, Oracle and Accenture.

See regularly: http//

Challenges of Working Across Cultures

In the last several articles I have written about benefits of cultural diversity, the need for cultural diversity and how to manage cultural diversity in an organization. Today, almost all companies in Silicon Valley have embraced cultural diversity and have learnt to thrive in a culturally diverse world. But outside the silicon valley, American companies are yet to understand the impact of cultural diversity - let alone manage cultural diversity.

Recently, I was talking to a senior executive at an American company based in Austin, Texas. This company has drawn up ambitious plans to expand operations in Bangalore, India. Few months ago, the company setup an office and started staffing up its Indian operations for a major R&D project. Within months problems arose - managers were unable to resolve the conflicts between its Indian team members and their American counterparts. The collaborative work environment collapsed into a battle zone. The CEO was then informed about this problem rushed into Bangalore to take stock of the situation. But even his intervention would probably fail to stem the rot and the company may have to start its operations all over again.

The problem here was mainly of cultural integration issues - I had briefly touched upon it in my previous articles titled "Offshoring Requires Better Collaboration", " Challenges in Offshoring to India"& "Challenges of Multi-Cultural Teams". In this case the problem was much deeper and was deeply rooted into the "Texas Style" of business. Since I lived in Texas for a long period of time and also in Bangalore, I was quickly able to root cause the problem as the one caused by cultural conflicts that can be attributed to:

  • Ethnocentrism
  • Parochial Attitude
Ethnocentrism and Parochial attitude is the result of interaction with a different culture. Managers who are often sent abroad have little knowledge or experience in dealing with a foreign culture. As a result, these expat managers tend to respond to cultural differences which can be called as "Ethnocentrism" and "Parochial Attitude"


Ethnocentrism results when managers recognize the differences in cultures - but have a tendency to think that their culture and their way of doing things is the right way, their way of doing things is the only way and their way of doing things is the best way. Any deviation from their culture or from their way of doing things is seen as "distortion" or as a "mistake" or as "Wrong way".

Most people have the tendency to follow ethnocentrism. Americans, Japanese, Chinese, Germans, French, Scandinavians, and Russians are more prone to ethnocentrism than other cultures - when compared to other Asians, Latin Americans, British, Australians, Africans and Indians. ( I do not have a scientific evidence to prove this - but the above statement is based from my experience.)

Ethnocentrism is often ingrained into almost all cultures. Every dominant culture tends to think of itself as the center of the world. For example, the word "China" means the middle kingdom. At the height of the Chinese empire, China truly believed that China was indeed the middle kingdom and even the Japanese, Koreans and Cambodia - all referred to China as the middle kingdom. The British empire drew the modern world maps with the Zero longitude passing through London - thus making England as the center of the world. US today refers to non-Americans as "Aliens" - a term which shows the ethnocentric attitude.

Parochial Attitude

Parochial attitude refers to a persons inability to see cultural differences. This is exactly the opposite of ethnocentrism.

Managers who are sent abroad often meet people who are also dressed in suits and speak their language - this prompts them to ignore all other cultural differences and make them think that all others are "just like us". In today’s business world, most people tend to dress similarly - in suits or other formulas and talk in English, But this does not mean that all people have the same culture - but people often only see the surface and assume that the other person shares the same cultural values.

Expat managers from US/UK often tend to display a strong parochial attitude - mainly because the people with whom they interact on regular basis can speak English and are dressed similarly in suits or western dresses.

Impact on Businesses

Often times, expat managers tend to display both parochial attitude and ethnocentrism at the same time. Problems in the organization are often blamed on cultural differences or on the culture of the local employees while successes are attributed to the culture/practices at the head office.

The inability of the managers to recognize the benefits of cultural differences puts these expat managers in a constant state of cultural blindness which at first seems to have no negative impact on the organization. On the contrary, by failing to recognize cultural differences, organizations and managers initially succeed abroad. This initial success is often due to the fact that the local employees tend to play the role of a gracious host - and accommodate the demands of the expat manager. But over a longer period, local employees tend to settle down to their usual practices and that's when the expat managers find it difficult to manage.

Parochial Attitude and Ethnocentrism together tend to pull off a 1-2 punch on the expat managers. The problems/failures are often blamed on the local culture while successes are attributed to the expat’s culture. This demotivates local employees and trouble starts in the local operations. Parochial attitude forces the expat managers to ignore local culture and in the process his/her behavior would have offended local sensibilities - thus creating discontent among the local staff.

Companies - especially MNCs tend to openly display their Parochial Attitude and Ethnocentrism. Examples of this are:
  1. Use of common company wide HR policies
  2. Use of common operating procedures
  3. Use of common posters, advertisements and other PR material

Closing Thoughts

Companies which are newly going global or expanding into a new country have to be on the guard against some of the common management mistakes - Parochial Attitude and Ethnocentrism. The problems faced by expat managers are often blamed on the local employees - without fully understanding the true situation. This results in several false starts, misguided efforts and wasted resources.

Even established global companies tend to suffer from Parochial Attitude and Ethnocentrism from time to time. This is mainly because the expat managers who are sent to manage the local operations are not fully briefed or aware of the impact of culture on business operations.

The best solution to this problem is to create awareness among all managers. Both expat managers, company bosses in the head offices, and local employees must have a good understanding of each other’s cultures and have a working plan to benefit from this cultural differences. Often times, the managers and top executives are so busy working on operational issues - that they might be better off hiring external consultants/coaches who can guide them though this maze of cultural differences and bring out the best from that organization.

Also See:

Thursday, November 16, 2006

Offshoring Requires Better Collaboration

In my previous article titled “Challenges in Offshoring to India”, I had discussed about the five major challenges in setting up a captive development centre in India, The main challenges are:

  1. Office Infrastructure Challenges
  2. Recruitment Challenges
  3. Employee Training & Skill enhancement Challenges
  4. Team Coordination Challenges
  5. Maintaining Service Level Agreement

Of these five challenges – the last two challenges are the toughest. Maintaining team coordination goes hand in hand with guaranteeing SLA. Over coming these two challenges involves improving inter company collaboration: formal collaboration between departments; formal collaboration between individuals; and Informal communication between members.

Challenge of Internal Collaboration

Most big companies – even MNCs find it more difficult to collaborate internally. Company executives often talk about improving “networks”, but in reality these companies often tend to run up against a wall: The natural tendency or the human nature to ignore what other colleagues in other business units (often out-of-sight) are doing. This “out-of-sight & out-of-mind” tendency of people makes collaboration between disparate teams difficult – almost impossible. Different departments tend to act in silos and tend to operate under a formal structure.

Company management first has to identify different departments within the organization. (There will always be more departments in reality than that declared on the paper) Next step is to develop a formal structure: A formal organizational hierarchies, leadership roles & titles, and communication networks. The logic of a formal structure is largely based on the predictability of how an organization should work. But in reality, organizations do not work that way.

The truth is that companies can create an environment for collaboration, but the actual collaboration happens between people. People must connect with other people – for collaboration to work. For this collaboration between people to happen, people need to understand the work cultures of their colleagues, understand the relationships, know the network, and must be emotionally motivated to work together.

The next impediment to collaboration is the lack of communication tools. Even in the era of Internet, companies are reluctant to allow their employees to use Internet – due to security threats. On the contrary – companies tend to restrict the use Internet – and Internet based tools. Most companies rely on Email, Telephone and Intranet for inter-department communications. Organizations often fail to take full advantage of all the communication tools available to them.

( Shortly I will post an article on use of different technology and tools to improve communication and project collaboration. Also see: Managing Virtual Teams - Use of Collaboration Tools )

People Need to Meet Face-to-Face

Technology has facilitated all sorts of communication. But it is not a substitute for a face-to-face meeting. Meeting people is essential for building relationships. Raj Subramanian, senior VP for International Marketing at FedEx Canada says “I made a commitment to meet every single employee across the country at least once a year”. Such commitment is essential for one to build a network with other departments.

Project team members also must meet face-to-face at the beginning of the project. Even though the team members are diverse and scattered all over, they need to meet face-to-face during the team forming stage.

Meeting face-to-face is expensive when parts of the team are scattered all over the world. Companies often tend to avoid/minimize face-to-face meetings – but this has a serious impact on the team productivity. As an alternative, teams should have video conference meetings on regular basic. Seeing a face & associating a face with the voice and email is essential in building rapport between diverse team members.

Meeting face-to-face helps build confidence and trust between team members. This also helps break down departmental barriers and improve communication between members of the team. Having a team outing or a day out-of-office is a good way to build a team camaraderie.

Collaborate with an Objective

Having the right team, having all the communication technologies and having all the formal networks are useful but it is not enough. The collaboration is primarily driven by the need to achieve something. It is the goal that provides the coherence to the organization. The objective of the collaborative efforts must be clearly established and understood by all. Members must have a holistic view of the objectives and that will then drive the activities. It is this focus by the members that makes any collaboration successful.

Cross-cultural teams or departments often find it difficult to converge and agree on the objective. Multi-cultural teams tend to take a longer time to reach consensus. Management team driving this collaboration must account for this longer time frame to converge on the objective.

Closing Thoughts

Successful collaboration needs the right environment, communication technologies, and a focus towards the goal. Inter company collaboration is a constant challenge – that needs constant attention from all the stakeholders. Setting single, achievable goals, building formal & informal networks and enabling employees to create informal networks are a must for successful collaboration.

Also See:

  1. Collaborate to Innovate
  2. Challenges in Offshoring to India
  3. Challenges of Multi-Cultural Teams
  4. Managing Virtual Teams - Use of Collaboration Tools
  5. Virtual Scale - Alliances for Leverage
  6. Global R&D Network
  7. Global Dimension of Project Management
  8. E-Dimensions of Project Management
  9. Managing Outsourced Projects
  10. Global Product Development Teams

Wednesday, November 15, 2006

Collaborate to Innovate

At the beginning of the 19th century till 1930’s most innovation was attributed to single individuals – James Watt’s invention of steam Engine or Ford’s Car or Einstein’s theory were all individual efforts. But in 20th century – collaboration became a necessity. Solving complex problems, handling extreme challenges required collaboration: Manhattan Project, Hover Dam, Human Genome, Pentium Chip – all needed collaboration on a massive scale. In Silicon Valley, companies often are founded via collaboration between several creative individuals. Bill Hewlett and David Packard founded HP; Larry Page & Sergey Brin founded Google; Andy Grove, Robert Noyce and Gordon Moore founded Intel; Bill Gates and Paul Allen founded Microsoft; and the list goes on.

Initial Stages

During the initial times, most of the innovation was carried out through teams located in a single location. The initial challenges in collaboration were mostly inter-company collaboration: collaboration between different groups, departments within the company. A new product development required collaboration between Finance, Engineering, R&D, Marketing and sales. Coordinating development teams which had to cut across functional boundaries. This was a complex challenge for companies in 1950’s to 1980’s. Organizations such as ABB, Fuji, Honda, 3M developed a complex “matrix” organizational structure.

Managing a matrix organizational structure is complex because every employee reports to two bosses, and the potential for a role conflict is high. Given the level of office politics – long term sustainability of a matrix organization is always a challenge. Over a period of time – with lots of time & efforts and learning from mistakes, companies have mastered the art of innovation management in a matrix organization.

Paradigm of 1980’s

Intense competition led to more daring collaboration strategies for 1990’s. Companies started to collaborate with each other in order to innovate. Personal computer is a classic example of such a collaborative effort. IBM introduced the Personal computer which had Intel’s CPU, Microsoft’s Operating System, IBM’s Memory chips. This PC was a creation of multi-company collaboration. The success of PC demonstrated the value of collaboration across companies. The model was so successful that it was replicated in Cars – Ford, GM with Cummins & Deneb. The Japanese firms were masters of inter company collaboration. Their “keiretsu” network had given then the experience and expertise in managing large collaborative networks. This expertise helped them to create new “keiretsu” networks – depending on the need. The challenges faced by the Japanese and their solutions is well described in the book Knowledge Creating Companies by Ikujiro Nonaka and Hirotaka Takeuchi.

Then came the 1990’s …

The success of multi-company collaboration led to transcontinental collaboration: Sony & Philips joined hands to invent the CD. This opened the flood gates of multi-company, transcontinental collaborations. Playstation-2 was a classic example of collaboration between IBM, Fujitsu, Nvidia, Electronic Arts, and Sony.

Promoting a good international collaboration is not easy – in fact it is a massive challenge. In a study by Bain & Co, more than 95% of such collaboration fails to deliver the full value. The collaborative projects often slip on timelines, over run their budgets and deliver inferior results. Project managers often find that collaboration between multiple companies and across multiple cultures to be particularly challenging. The common reasons cited are:

  1. Communication Breakdowns
  2. Mistrust between employees of different organizations
  3. Unwillingness to share information
  4. Inability to converge on a solution
  5. Too much pressure to deliver results

Foster Creativity via Collaboration

By the year 2000, intense competition and recession (following the bubble) forced companies to create dynamic, multiple collaborative networks. Often times these networks of collaborators included vendors, customers, suppliers and even competitors. Sony joined hands with TDK, Samsung, Panasonic, & JVC to create the Blu-ray DVD technology. The companies in this network are fierce competitors in home entertainment electronics market.

In the book “Competing for the Future” Dr. C.K. Prahalad & Dr. Gary Hamel preach companies to consider collaboration with customers, vendors, and even competitors – to innovate. Innovation will be more fruitful and profitable when many companies join forces – thus augment their resources, knowledge and expertise to create truly innovative and exciting products. A collaborative network also reduces risks. Blu-Ray collaboration is an example of a network created to minimize risks.

Collaborate – Rather Than Acquire

Mergers and acquisitions are best avoided in face of business uncertainties. When entering a new market – say India or China, it is better for US/EU companies to collaborate with local partners. Local partners have the contacts, market knowledge and cultural skills needed for success. If the venture is successful, then Western companies have the option to acquire their local partner.

Venturing into a new market via collaboration is ideal for risk sharing, conducting a one-off project, learning the cultural skills, using assets more productively and leverages the combined skills to provide wholly new product or service. Collaboration with a local partner when entering new markets has become a preferred route to expand in India, China, Vietnam, and other emerging economies.

When collaborating with local partners in emerging countries, ensure that the partner has complimentary skills – which helps to build inter-dependence between two organizations and there is strategic fit between two organizations. Ensure that the people involved in this collaboration have a high level of commitment – but avoid a rigid implementation plan. It pays to have a flexible implementation plan due to the challenges inherently associated with cultural conflicts, technology adaptation, revenue slippages, power struggles, etc.

Closing Thoughts

The complexity of the technical and business challenges forces a strong need for collaboration. The complexity of current innovation has reached such heights that the team size has grown beyond a co-location approach. Companies now have to integrate teams across multiple corporate cultures and across multiple national cultures. For most companies this is still a major challenge and managers are still grappling with it.

Successful companies in Silicon Valley and elsewhere have realized the benefit of having a dedicated team to foster these collaborative networks. The members of this team are dedicated to tackle all cross-cultural and cross-organizational issues. The lesson here is that companies have to collaborate in order to be innovative and thus maintain their competitive advantage.

Also See:

Virtual Scale - Alliances for Leverage

Global R&D Network

Monday, November 13, 2006

Challenges in Offshoring to India

Today it is common for IT companies to announce a major expansion or setting up new operations in India. Companies are investing valuable time, resources and have even deputed key managers to manage things on the ground. Top management at the headquarters often do not have a complete picture of the challenges that needs to be conquered to succeed in India. Expatriate managers are often tied up grappling with the enormous challenge of setting up operations: Legal challenges, Location choices, recruitment challenges, managing workforce effectiveness etc.

Often times these challenges are not accounted to in the initial planning. As a result, the operations in India will have a series of false starts – which causes anxiety, stress and frustration throughout the organization.

It has been observed that the most common challenges facing American/European firms when expanding in India are:
  • Office Infrastructure Challenges
  • Recruitment Challenges
  • Employee Training & Skill enhancement Challenges
  • Team Coordination Challenges
  • Maintaining Service Level Agreement

Office & Infrastructure Challenges

Selecting a suitable workplace in view of the current and future requirement is a major challenge. It is a common practice of US/EU firms to lease an office space – rather than own it. The demand for office space is so huge that companies are forced to book office spaces even before the building is completed – and companies are forced to lease out a larger space in view of future expansions. And when the current office space runs out, companies are forced to look at other locations. In the end, offices are scattered all over the city (and country) and this creates a major coordination headaches.

HP for example has rented out more than 20 office spaces all over the Bangalore and this is still not enough. HP is currently building it own campus in Electronic City. The challenge of office infrastructure is forcing companies to get involved in real estate development business – which was not their original intention when entering India.

Locational choices are also restricted by the fact that Internet Connectivity and utilities are not available in all areas of the country. India has identified few Industrial townships where all infrastructures are made available – thus forcing companies to operate from those areas only. Choosing a right location – in view of all the future requirements poses a significant challenge. The best solution is to partner with a real estate developer who can offer best services – e.g.: ITPL, GTP, DLW etc. Or to own and develop a large piece of land in designated software parks which provide adequate space for future requirements.

Recruitment Challenges

Recruitment Challenge is a more recent phenomenon. India has the largest pool of English speaking professionals in the world. India graduates ~260,000 engineers a year and about 2 Million graduates; there is a shortfall of talent. With India becoming a centre of all IT/Software/Services industry, the competition to attract the best talent has heated up. The demand for talent is estimated to reach 4 Million by 2008 (according to McKinsey), the quality of college graduates vary greatly.

This forces companies to develop complex recruitment process to reach out to this vast pool of talent. Infosys for example receives 1.4 million job applications and interviews 67,000 candidates and hires 26,000 per year. Often times, US/EU based companies have to develop a completely new recruitment process that is tailored for India. The recruitment process is so competitive in major cities (Bangalore, Delhi, Hyderabad, Mumbai etc.) that companies often have to interview 50 potential candidates before getting one employee on board. In addition, companies will have to spread out the recruitment process across the country.

In addition to initial recruitment, companies have to work on employee retention as well. Attrition rates in India are far higher than in US/EU. Given the demand of talent, almost all companies are going after the same set of people – this implies that every employee in a company will be approached by a recruiter from another company. The retention policies and practices have to be uniquely developed for India. The policies of the home country (either US or EU) are rarely applicable in India.

Employee Training & Skill Enhancement Challenges

A trained workforce is a more productive workforce. This implies that the company must have a planned training program. One needs to have a planned training program. Many employees in India may be good in written English, but they may need training in verbal communication skills. BPO operations or call centres need to provide voice/accent training programs. Even software engineers have to be trained in basic business etiquette and the standard business communication skills.

The training programs have to be tailored to address the deeper cultural issues that enables new employees in India to communicate effectively with their US/EU counterparts. The training programs must be tailored by experts who understand the local Indian work culture and work culture of the parent organization.

In addition, new employees have to be trained in technical tools – to make them productive in the actual work environment. Often times, training in specialized tools (eg. Kramer, SIMMS, Chronology etc.) is not available in India. This might imply that trainers have to be flown into India or employees need to flown to US/EU.

Team Coordination Challenges

Teams working across geographies working across different time zones, drawn from different cultures will take time to integrate. During this time, there will be lots of coordination issues. Teams will spend lot of time “stroming” rather than performing. In this phase, management should take care to minimize the mistrust, miscommunication, and minimize work stress among team members. The challenges of coordinating cross-cultural teams are complex and cannot be easily dealt with company policies. Often times companies need to resort to cross cultural consultants – to help build more productive teams.

Maintaining Service Level Agreement

Companies have built their reputation with their customers over the years and have established processes and standards to measure and maintain customer satisfaction levels. Adding an “India” centre has the potential to upset this carefully crafted customer relationship. During the process of team integration, there is a possibility of dropping service level agreements (SLA’s). Moreover, there will be cultural differences – which tend to give different interpretation to SLA.

Management challenge here is to setup the appropriate benchmarks and monitor the performance during this process. The monitoring & enforcement policies must be transparent to employees. Top management should build reasonable expectations of time lines for the India centre to achieve the same levels of performance as that of the US/EU centres.

Also See:

  1. Challenges of Multi-Cultural Teams
  2. Leadership & Diversity
  3. Building a Diverse Workforce
  4. Soft Skills For Global Managers
  5. Managing Diversity for High Performance
  6. Encourage Diversity to attract top talent
  7. Distinguish Yourself As a Culturally Diverse Candidate
  8. Leveraging Diversity-Use Brainstorming Session
  9. Common Mistakes in Recruiting a diverse workforce
  10. Making Multicultural Virtual Teams Work

Friday, November 10, 2006

Challenges of Multi-Cultural Teams

I have written extensively on benefits of diversity for an organization. Yet, I have observed that a vast majority of companies or organizations do not have a diverse workforce – and many do not encourage diversity in their organization. Organizational leaders – CEO’s, Presidents are willing to talk about diversity – but the managers are reluctant to increase diversity in their organization. The reason for this reluctance is very simple – diversity within an organization is tough to manage.Most front line managers do not know how to manage a diverse workforce. Managers are afraid that they may fail or the team’s productivity will drop if they introduce new (diverse) members into their current teams. As a result, most managers do not encourage diversity within their organization. In my experience, I have seen most managers agree that business is difficult to manage when they have team members who are from different cultures.

Diversity can Lower Productivity

Cultural diversity can have both positive and negative impact on team productivity. While diversity can vastly improve productivity via increased creativity, better understanding of the problem, better solutions, better decisions, and increased effectiveness. However, the challenge of managing a diverse team leads to faulty management process – which reduces team productivity. Thus, the actual productivity can be expressed as:

Actual Productivity of diverse team = Homogenous team productivity + Gains due to diversity – Losses due to faulty management process.

Managers of culturally diverse teams must therefore understand the problems caused by cultural diversity.

Cultural diversity causes problems

Cultural diversity causes management problems. For most managers would like to be “Culturally Blind” – i.e. do not acknowledge cultural differences. When managers see the cultural difference, it of often for the wrong reasons.Having worked extensively in multi-cultural work environment, I have seen that most of the problems caused by diversity. The problem is often noticed during decision making times. The diverse teams often have difficult to reach consensus and make a common decision. These teams often suffer from:

  • Ambiguity
  • Lack of Preparedness
  • Confusion caused due to miscommunication
  • Over complexity – Add complexity to the existing problem
  • Inability to reach an agreement
  • Endless debate on the possible solution
  • Disagreement on specific action plans

These problems often make the manager and team members frustrated. Endless debates and arguments result in time overruns and cost overruns. As a result, the manager may become forced to take a wrong decision amid all that confusion.

In addition many organizations are unprepared to deal with cultural diversity. I have seen organization which implements policies, strategies, business practices and procedures without taking cultural differences into considerations. This often happens because managers are not made aware of culturally sensitive issues.

Often times managers are able to describe the problems caused by diversity – but most of them fail to root cause the problems. Essentially all problems caused by diversity occur during convergence phase of decision making – diverse teams find it difficult to converge on a problem statement and agree on the solution.

Diversity Creates Lack of Cohesion

Multicultural teams often have different views of the problem. Team members often go on debating about the problem statement. In the process, a diverse team will gain a rich insight – but fail to agree on the problem definition. This problem can be root caused to three basic factors:

  1. Mistrust
  2. Miscommunication
  3. Work Stress


Culturally diverse team members often tend to have lower levels of trust when compared to homogenous teams. A natural human tendency is to work closely with members of their own culture and not to trust people who are from different cultures. This mistrust is often reinforced by inaccurate stereotyping.

While working in Intel several years ago, new members of the team were added to the project. These were engineers working out of Puerto Rico. Engineers at Texas initially had low level of respect to their Puerto Rican counter parts. This was caused by the fact that the American Engineers had a low opinion of the quality of education in Puerto Rico. This generalization was a false stereotype – because all the engineers working on Puerto Rico were educated in the USA and had worked on complex projects before. Yet it took sometime for the American engineers to acknowledge the engineering capability of their Puerto Rican counter parts.

Another factor which adds to this mistrust is the tendency of team members to communicate more with members of their own cultures and avoid communicating with members of different culture.
Recently, I was interacting with a team of Indian Engineers who were working at a client location in London. During a meeting, a few members of team started talking among themselves in Marathi – a language which their British counterparts did not understand. This type of behavior leads to suspicion and destroys the trust between team members.


Multicultural teams are forced to communicate in a common language – its usually the language of the dominant group. It can be either in English or Spanish or Mandarin or Hindi or French etc. This implies that there are members in the team for whom the communicating language is not their native tongue. This often results in miscommunication between team members – where one member meant one thing, but said something else or it was understood differently. The problem can occur in translation errors.

In addition people tend not to describe all things explicitly – assuming that the other person can understand the implicit meanings. The net result is a lower accuracy in communication – which forces the team to reconfirm all communication between members that results in greater time lost during communication process.

Work Stress

Miscommunication and mistrust can create significant work stress on team members. Once team members are aware that there is a possibility of error in inter-team communications, then all decision making, problem analysis and deductions are at risk. This creates an enormous stress on employees.

In mono-culture teams, members can openly discuss problems and issues. Whereas in multicultural teams, members are afraid of offending other members – thus forcing a “polite diplomatic” approach to sensitive issues. This creates an artificial or a superficial behavior which increases stress on the organization. This forced politeness leaves team members frustrated and disengaged which effectively lowers work productivity.

Closing Thoughts

Diversity causes problems – but then diversity creates competitive advantages. Few global firms have realized the advantages of cultural diversity and have fully embraced it. US based firms such as Intel, Cisco, HP, Microsoft, Oracle, etc., have become truly multicultural – these companies have learnt to overcome the problems of diversity. But for companies which are just starting out in this workforce diversity path, the challenges are daunting. The solution is not easy – frontline managers and top management must embrace the need for diversity and have policies, procedures and practices to manage it.The best solution is to initially hire business consultants or senior managers who have experienced these challenges in the past. Business consultants – especially trans-cultural consultants, cross-cultural business consultants or organization development consultants.

Also See:

  1. Leadership & Diversity
  2. Building a Diverse Workforce
  3. Soft Skills For Global Managers
  4. Managing Diversity for High Performance
  5. Encourage Diversity to attract top talent
  6. Distinguish Yourself As a Culturally Diverse Candidate
  7. Leveraging Diversity-Use Brainstorming Session
  8. Common Mistakes in Recruiting a diverse workforce
  9. Making Multicultural Virtual Teams Work

Sunday, November 05, 2006

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

China’s Globalization Plans off to a rocky start

“Going global is a must, rather than a choice”

Chinese manufacturers are eager to go global – their gargantuan market share at home, their deep expertise in large scale (contract) manufacturing, and their nascent (but world class) R&D capability has given the Chinese companies the confidence to go global.

Chinese firms feel the urgency to go global – and want to expand rapidly. But their early steps seem to be faltering. In the last 2-3 years, three Chinese firms experimented with acquisitions as a path for globalization – and are struggling.

BenQ’s Loss Making Acquisition

BenQ experimented with the acquisition of Siemens’ cell phone unit. BenQ wanted to piggyback a ride to become a global brand on Siemens brand image via acquisition. The mounting losses in the handset unit forced the company is shut down Siemens cell phone unit – BenQ realized that Siemens unit will not take it global. (see:

TCL’s Struggle

TCL was hailed as China’s answer for Sony. TCL is a home grown manufacturer of electronic goods, which started out as a contract manufacturer and commands a large market share for Televisions, Audio players, DVD players etc. in China. In 2003 TCL purchased Thompson’s television and DVD player operations – along with the right to use Thompson brand name for four years. In 2004, TCL purchased Alcatel’s cell phone business. With these two acquisitions, TCL became one of the first Chinese manufacturer to go global.

TCL’s problems started immediately after the acquisitions. These loss making brands had to be turned around rapidly else it can drag TCL’s image and cash down the drain. TCL struggled to make its cell phone division profitable, and in 2005 TCL ended its venture with Alcatel. A similar fate now hangs over its Thompson branded television business.

Lenevo Takes a Hit

Lenevo purchased IBM’s personal computer business in 2005 – along with the right to use IBM’s brand name and it’s “Think Pad” brand name. In 2006, Lenevo’s profits were down 85% - and the IBM’s unit (global) is still making losses – which is wiping out the profits Levenvo makes in China.

Globalization Strategy that Went Wrong

In a previous post on why it was a bad idea to buy a global brand. The problems faced by the three biggest Chinese manufacturers are similar. Their rush to go global – by acquisition of well known (but struggling) brands was not a well thought out idea.

Buying a brand – without understanding the cultural issues associated with the brand can be lethal. Companies must understand what they are buying. A brand name is also a promise which the seller makes to customers and that brand promise must be fulfilled to attain brand value. If a company is buying a famous brand name, then the acquiring company must fully understand the brand image and the brand promise – which can vary significantly from cultures to cultures.

Chinese organizations seem to have purchased the brand names – without understanding its cultural significance, without understanding its brand promise. As a result, these acquired brands fell from customer grace very rapidly.

Chinese firms were also buying the operations – these operations were loss makers to begin with. These firms underestimated the challenges of managing a global organization, when they did not have a global operations and supply channel experience to begin with.

Closing Thoughts

In a stark contrast to Chinese experience, Indian companies seem to make rapid progress in their global acquisition strategy. Tata Tea has successfully gone global with the acquisition of Tetley. Tata Motors has successfully acquired Daewoo’s truck division. Tata Motors has successfully expanded into South Africa. Ispat steel (now called Mittal Steel) has been extremely successful in global M&A strategy. Wipro, Videocon, Ranbaxy, Wockart, and others have been making global acquisition – and their profits are soaring.

The key difference I can observe here is that the acquiring company must know the markets, the customer and the consumer in the global context. Marketers must understand the cultural nuances of their global customers. Company managers must fully understand the challenges of running and managing a global supply chain and distribution channels.

Chinese businesses which were built ground-up: Haier, ZTE & Huawei are thriving. While hurried up acquisitions are struggling. This is a good learning example for other Asian firms which are now planning to go global via the acquisitions route.

Also See:

When Brand Buying is not a Good Idea
Brand Management
Developing a Brand Position
Selecting a specific brand position

Saturday, November 04, 2006

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

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