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Culture Matters: 5 Challenges India Offshore Teams Face in Working with Americans By Karine Schomer As the foremost "hot

spot" for America's offshoring and offshore outsourcing of technology and business services functions today, India presents an important case study of differences in business culture. In the course of years of giving seminars to both American and Indian teams working together, I have found recurring themes and incidents that point to underlying cross-cultural differences in mindset, values and approach to business interactions. Once you get past the more obvious mutual adjustment issues of time zones, logistics, work and holiday schedules, accents, names and language (American vs. Indian English), there are five elements of American business culture that pose special challenges for Indian teams interacting with their American counterparts -- whether in the ITO, BPO or call center environment. --> 1. Mindset about Management Hierarchy In American business culture, rank and title aren't as important as they are in India. Hierarchical forms of behavior are frowned upon. The expectation is that subordinates will speak up, offer suggestions, push back and take initiative rather than just do what they're told. Decisions tend to be less top-down, authority is more delegated, and managers expect team members to take responsibility and assume ownership of results. --> 2. Attitudes Towards Appointments and Deadlines For Americans, strict adherence to time commitments is seen as a basic principle of professionalism and courteous behavior. Because everything tends to be strictly scheduled, delays in one appointment or deadline can have a serious ripple effect on a colleague or customer's other work commitments. The more flexible and open-ended approach to time of Indian business culture can create tensions and unfavorable impressions on American counterparts. --> 3. Meaning of Agreements and Commitments Americans have a preference for clear, detailed agreements and are uneasy with vague expressions of general commitment. In business interactions, commitments are taken literally and seriously. Failure to follow through on them precisely is viewed as a sign that a person isn't trustworthy. Indian business culture tends to view agreements more flexibly as intentions and guidelines for future action. --> 4. Results vs. Process Orientation In Indian business culture, following the rules and implementing correct processes is highly valued, but in American business culture, it's all about results. There is impatience with individuals who come across as more concerned with following established processes correctly than with achieving the desired goal. Americans don't like to be told all the procedural reasons why something can't be or hasn't been done. --> 5. Directness -- Especially in Addressing Disagreements

The American style of communication is characteristically direct, candid and relatively unconcerned with face-saving or the avoidance of conflict. The expectation is that questions will get answered with a clear "yes" or "no," and that disagreements will be dealt with openly and straightforwardly, in a "tell it like it is" manner. Indians and people from other cultures that tend to avoid conflict and loss of face often find it hard to say "no" or raise problematic issues effectively with their American counterparts. Cultural awareness and the ability to adapt effectively to another culture's way of doing things are complex skills -- whether you're a programmer in Bangalore or a project leader in Sunnyvale. Everyone tends to take their own cultural ways of doing things for granted and to assume they are self-evident to others. In recent years, American companies offshoring or outsourcing to India have shown growing awareness of the hidden costs of cross-cultural mismatches in work-related behaviors. They have been willing to invest in general and region-specific crosscultural training for their onshore employees and those who are asked to travel to India. They have also learned to devise process accommodations to circumvent the negative effects of certain cultural tendencies in their offshore teams. What these companies seldom undertake to address directly is the need to seriously educate their offshore teams in the fundamentals of American business culture -- the attitudes, thought patterns and behavior norms that Americans expect. They're missing a golden opportunity to improve the productivity and experience of their onshore-offshore teams. Useful Links CMCT India Cross-Cultural Training and Management Practice http://www.cmct.net/india_practice.html About the Author: Dr. Karine Schomer is President of Change Management Consulting & Training, LLC, and leads the CMCT India Practice, specializing in cross-cultural training, change management, communication and management consulting for doing business with India. She has been involved with India for over 25 years, including 8 years living and working in India. She is fluent in Hindi and has in-depth understanding of Indian culture, values and business and social customs. She has been a University of California-Berkeley professor, dean at Golden Gate University, and Chief Operating Officer of the California Institute of Integral Studies. Contact Karine Schomer at schomer (at) cmct.net or visit http://www.cmct.net/india_practice.html.

Investigating Outsourcing and Offshoring Research


by Carol Ginsburg , Willem Noorlander The question of whether or not to outsource research is hardly new. A hot topic of discussion in the early 1990s, it seemed to be the new direction for large U.S. and global companies. Some companies have been actively involved in various levels of outsourcing or offshoring for more than 10 years. Fifteen years on, you would think that questions around outsourcing would be resolved. However, today we have more questions than answers. Experience has taught us that some of the initial questions were not the right ones and that a number of original assumptions were wrong. NOT CRAZY, JUST A LITTLE UNWELL The current points of view on this subject are well-depicted in the song "Unwell" by Matchbox 20 (www.matchboxtwenty.com). The chorus, "But Fm not crazy Fm just a little unwell," followed by, "Fm not crazy, Fm just a little impaired" sums it up well. The concept of outsourcingresearch is not "crazy," it is actually based on several solid business concepts including workflow maximization, operational efficiencies, and cost optimization. In its present format, however, it is definitely "not well" and "impaired" if issues such as quality of work, staffing, attrition levels, cost/benefit analyses, and the required levels of administrative and management time are examined. The terms outsourcing and offshoring mean different things to different people, and many regard them as synonymous. As background, and in order to understand the concepts that we will present, please note the following definitions: Outsourcing takes place when the company chooses nonemployees, who will perform research for the company's employees. The outsourced companies are generally located in another country (usually India), but there are numerous options. This may be done either directly, having company employees reach out to the outsourced firm through an internal process or workflow tool, or through the information services department of the company. In an ideal situation it would be transparent whether the research was performed in the corporate information center or by the outsourced researchers. Offshoring takes place when the research work is sent to another country (again, usually India) to a group of researchers who are employees of the company. This is also referred to as a captive. Offshoring describes the relocation of business processes from one country to another, while being totally owned and managed by the company itself. Company employees can interact directly with the offshore employees, or the information services department can be the "go between" for the research assignments. KEY SUCCESS FACTORS The critical question in the success of any outsourcing or offshoring project is determining what should be outsourced. This may vary from company to company. Following are three key factors that influence what work can be outsourced: 1. The skill level of the outsourced staff-This is the most critical factor and is often the reason for failure. Experienced researchers in offshore/outsourced companies are scarce. Complicated requests should not be sent to new, untried researchers. Routine, easily codified requests (company descriptions, credit reports, government [SEC] documents) can be sent to offshore staff. However, even that work must be carefully vetted before passing the results to the requestor.

2. Research request review process-The amount of time it takes the information services staff to review each request to determine if the task is suitable for outsourcing should be considered. 3. Information suppliers' contracts-The level of contracts and their terms and conditions are important. Many information suppliers are unwilling to open their data contracts to either outsourcing companies or offshore locations. Each vendor's contract must be individually negotiated. Without access to the proper level of information sources, an offshore location cannot perform the research. The intent and benefits of outsourcing research is to move low-level and mundane research, often called the point-and-click-level research (or, as one person described it to us, the "the plain vanilla and boring" research), to off-location staff. This allows the onshore research staff to focus and work on interesting, challenging, and deepthought research. The biggest challenge is the time necessary to determine if the research task should be outsourced, to monitor the quality of the work, and to mentor the offshore/outsourced staff. This is not always successful and often leaves the requestor frustrated with lowquality results or a feeling such as "I could have done this request myself in the time it took me to explain it, review it, and send it off to the researcher." OUTSOURCING OPTIONS There are several options for how a company can outsource or offshore research and other business processes. The most common approach is to hand off the process to another entity, which performs the work on the requesting company's behalf. The location of choice for outsourcing has been India, which has a long list of companies offering these services, the major ones being Intergrent, Copal Partners, Evaluserve, Intergeon, and Office Tiger. Choosing the right company, one that is compatible with your company's business approach and culture, is central to how successful your outsourcing experience will be. We know of one global bank that developed a test pack of 500 research requests. They gave this pack to four India-based outsourcing firms and made their choice based on research results. Other companies have picked their outsourcing firms based on general market research. Some firms have changed companies several times, or are now dealing with two or three Indian partners. A number of large global companies are offshoring and have built and staffed a complete organization and infrastructure in other countries. In general, offshoring results in a higher level of control as compared with outsourcing. The staff is employed by the firm, and the firm controls the infrastructure with appropriate backups for power grids, telephone service, internet connectivity, and other similar factors. Our research tells us that companies that offshore are more satisfied with the quality of the work and have better results than companies that outsource. However, captives are also more expensive, with costs roughly 30% higher than outsourcing. The higher cost is now getting close scrutiny and is causing companies to rethink what they will do going forward. In a Watt Street Journal article from Feb. 11, 2008, called "Rethinking the India Back Office," by Jackie Range, it was reported that global firms with large captive operations are "looking to get out of part or all of the business by selling either to Indian companies that specialize in outsourcing services, to private equity firms or through initial public offerings." The reasons include a sharp rise in India-based costs, the slowdown in the U.S. economy, and the weak U.S. dollar. There are numerous options beyond India. In the last 5 years, companies have been outsourcing and offshoring to the Philippines, China, Eastern Europe, and, more recently, South America. The primary reasons are cost and a better cultural mix with U.S. and U.K. companies.

And last, but certainly not least, there are options within North America. A number of firms are now building research centers in lower cost locations with access to good labor pools in the U.S. Or, they are "in-sourcing" functions to U.S.-based firms, who have a staff of U.S. employees in low cost locations, an example being Fargo, N.D. BREAKING DOWN OFFSHORING MODELS A global firm considering offshoring numerous research tasks and functions recently engaged BST America to perform a market study of other companies that have been involved with, or are considering, outsourcing or offshoring. The results of the study will be used to determine the model the firm uses for offshoring. The study group covered 11 companies, including global financial institutions, large consulting firms, and global accounting firms. These are the specifics on the study group: * All of the companies were currently outsourcing or offshoring some level of research functions. * A majority of the firms were also offshoring other services, beyond research, at the same locations. Some firms had a very significant presence in India. * Five of the firms were doing this with their own staff, five were using local outsourcing firms, and one was using a combination of its own staff as well as external staff. * The majority of the firms were offshoring in India. Other offshoring locations were the Philippines, China, Czech Republic, and Chile. * Offshore staffing for research ranged from five to 150. * The majority of the firms had offshore facilities that were operational 6-7 days a week, 18-24 hours a day. A few firms had more limited hours, for example, those that mirrored U.S. operations. * More than half of the firms were using a single location; the others had various locations. * Several of the firms were looking at new and alternative locations, with a focus on Eastern Europe or South America. The study required interviewing companies that outsourced or maintained a captive research facility, with the objective of getting good cross sections and permutations of current usage patterns and habits. The study group included U.S.- and U.K.-based global companies. WHAT WE WANTED TO KNOW We used a list of around 25 questions as a baseline for the interviews, with the objective to learn and gain insight as follows: * Countries most often selected for offshoring * Partners deemed as delivering quality work * Types of activities typically done offshore * Workflow models used * Satisfaction with staff

* Satisfaction with the quality of work * Attrition rates * Management issues, both within the U.S. and in offshore locations * Costs and savings * Organizational issues * Does the offshoring meet objectives, both as a valid resource and for cost optimization or containment WHAT WE FOUND Following is a summary of key findings that were common across the study group: * For those firms using outsourcing, it is critical to do an indepth review of firms in order to obtain a good fit relative to goals and business practices. Several firms have changed or expanded the number of local outsourcing firms being used. * All firms used workflow management tools. The tools were internally developed for this function or were modified from other tools already in place within the firm. * The level of research actually done offshore varied from firm to firm. Factors impacting this were the complexity of the research, assessment of the quality of local staff, and whether staff was captive or outsourced. This was a critical part of our discussions-what and how much research should be done offshore while still maintaining acceptable levels of quality. * Quality of staff and work performance is a major issue. We heard a wide range of commentary on quality, which was generally seen to be below the levels delivered within the U.S. and the U.K. This has an impact on the amount and the complexity of work that can be assigned. Further, it appears common that local staff have a higher perception of their value than their U.S. management believes. This leads to problems with local staff accepting work assignments that are beyond their capabilities. As a consequence, results can be below-standard. Most firms noted that they continually monitor quality. * Local staff needs more attention, reinforcement, and reward motivation than staff in the U.S. or U.K. There are many cultural issues that become factors in assignment of work, the quality of work, and the required level of supervision and management. * Staff attrition is well above that within the U.S. and U.K. The average term of employment was 9-18 months. There was one exception-where a firm has its own staff and limited hours of operations that mirror U.S. hours, the attrition rate was in the 2-year range. * Level of management involvement and support was a major topic of conversation, both at the local level and in the U.S. and U.K. It was unanimous that there were greater requirements for U.S. management than what was anticipated. This needs to be considered when doing cost/benefit analyses. * There are numerous issues with support for infrastructure, including problems with power grids, internet connectivity, and telephones. These problems were encountered less with firms that had their own buildings and staff. * Content usage and vendor management is a key area of concern. About half of the firms negotiated with their vendors for offshore usage, others were of the mind-set that they

could fit this usage within existing contracts. Some of the vendors are more difficult than others when discussing this issue. COST EFFECTIVENESS In addition to the findings listed above, there was a lot of commentary about cost/benefit analysis and finding answers to several key questions of cost effectiveness. Have companies met their cost reduction or saving objectives? The answer, like every other aspect of this issue, is mixed, vague, and in some case not determinable. We can clearly state that the large cost reductions that were projected in the '90s have not been met. When we did our research, no one told us that they were saving as much money as they had planned. Some firms indicated that they were not sure if they were actually saving any money, and several others told us that, at this time, it was not their objective to reduce costs; they were looking to keep costs fixed. A few firms indicated that they thought they were saving money, citing an example that the cost of one person in the U.S. or the U.K. funds three to four staff members in India. There are several factors that are clear and unarguable. 1. Operating costs in India are rising sharply; salaries are increasing by 12% to 20% per annum, as well as a general upswing in other operating costs. 2. Management and administrative costs are much higher than initially projected. 3. It can be very difficult to capture all associated and soft costs, which, if fully accounted for, would further reduce any savings. Our research told us that there was a wide difference of opinion in savings and ROI between the senior management and/or partners and the middle/administrative/ operational management who are actively involved in over seeing offshore operations. Generally speaking, we found that the more senior the person, the higher their perception that outsourcing was effective and resulting in cost reduction. Interestingly, one middle manager told us that it would be a career damaging act to oppose outsourcing, even though she had financial information that clearly showed that it would not meet the cost reduction goals of her firm. Her statement was, "This is what senior management wants, and either I get on the bandwagon with them, or someone else will." INDIA LOSING ITS LUSTER Just like sheep following each other across the road, most financial and consulting firms went to India to obtain lowcost, educated, and motivated research staff. Outsourcing companies that already handled technology and call center functions eagerly jumped into the business. It seemed like a win/win proposition for all involved. However, things have changed. "Low-cost" is a relative term. One of our interviewees was told that having a staff of six in India making mistakes and repeating the research over and over was still cheaper than the cost of two research staffers doing it locally and getting it right the first time. Getting it cheap was more important than getting it right. We know that not every company feels that way. Multiple companies competing for educated researchers in India results in high turnover and escalating prices. Often, by the time researchers are trained in the preferred methods of the employing company, they are ready to move for a pay raise. Loyalty to the outsourcing company seems to be missing. Attrition rates for the captive employees are lower. Training also takes a lot of resources, including travel to India to provide on-site training to the research staff. In addition, the "hand-holding" that is required is more than what would be needed in a face-to-face situation in the U.S. or U.K. Often the company mentors are on the phone with the India staff several times each day. In fact, some companies have a

function which requires one (or two) staffers to monitor all of the requests that are sent offshore. They manage the workflow and review every completed request before it is sent to the requestor. Culture is another critical factor in evaluating the India outsourcing results. It is difficult to instruct or correct the India staff at a distance. Managers have also found that Indian researchers do not want to refuse any type of work, even if it is beyond their scope. This results in excessive back-and-forth discussions and time wasted at both ends. One interviewee told us that when she corrected one of the staff inIndia the individual called in sick for 3 days, upset at being corrected. This represents a large cultural gap. Has India lost its luster? This is probably the only point where we can give a clear answer: Yes, it has. Is this a good time to outsource or offshore research? We know of several companies that are planning to revise or revamp their current operations and others that are investigating starting up new or larger operations. One key recommendation that we would make is to look beyond India. There are now a wide range of options on where and how to outsource. A company should evaluate all of these to be sure that they build an environment, or find a partner firm that meets business objectives and is a cultural fit with the firm. WOULD YOU DO IT AGAIN? In February, the New York chapter of the Special Libraries Association sponsored a panel called "Outsourcing Five Years Later." It was a lively function with a high level of participation from audience members. Most, if not all, of the points discussed in this article were validated by the commentary from the panel as well as the audience, many of whom worked for firms that were currently outsourcing various functions and business processes. At the conclusion of the discussions, someone asked the panel members the question, "If it were up to you, would you do it again, has it worked?" The answers from the panel, as well as some follow-up commentary from the audience, were again mixed. Some of the positive commentary focused on the fact that outsourcing improves the work environment in the U.S. and the U.K., leaving better and higher-quality work for the staff in those locations. The negative commentary focused on the facts that there were issues with the quality of the work, high levels of management were required, and that they were not meeting cost reduction objectives. During our market research we asked similar questions of the firms. The responses were very similar to those discussed at the SLA panel. We received a wide range of answers. Some indicated that it was a good idea. Others said, "In the long run, it was not worth it." Some firms are still figuring it out. STARING AT THE CEILING However, in almost every case the mandate for offshoring came from the most senior levels of management. Many of the individuals that we spoke with told us they did not have a choice, that this was the wish and direction of the firm. There were a great many "lessons learned" from those who were several years into the exercise. The general tenor is that if asked to do so, most would certainly do it again, but they would look at a broader range of locations and set a different level of expectations. In summation, let's go back to that lyric from Matchbox 20's "Unwell" song, "But Fm not crazy, Fm just a little unwell." As we stated at the outset of this article, the concept of outsourcing or offshoring research is not crazy, but there are still a number of unwell, impaired factors that should be addressed and redefined.

As long as firms make their decisions based on sound business practices, analyze their options, and set reasonable expectations,outsourcing and offshoring will continue to be used by global companies.

Employee Motivation and Empowerment in Hospitality, Rhetoric or Reality - Some Observations from India
by Venkatesh Umashankar , Akshay Kulkarni "An individual without information cannot take responsibility; an individual who is given information cannot help but take responsibility." Jan Carlzon, CEO, Scandinavian Airlines It is a universally known and well-documented fact that when we talk of customer satisfaction it takes effective and motivated service (encounter) personnel at the delivery end to make the difference. All the product design, operation planning and other associated efforts will come to a nothing if the delivery end personnel fail. Earning profits through delivering customer satisfaction is one of the philosophical underpinnings of service businesses (Dawn et al., 1994). Therein comes the concept of the 'service profit chain' enunciated by Heskett et al, (1994), where in the chain consisting of profits earned through customer satisfaction, employee satisfaction precedes customer satisfaction and hence profits. One needs winners at the front lines and not just warm bodies, thus a key problem for managers is how to ensure appropriate behaviors on part of front-line workers at the point of the service encounter (Bowen and Schneider, 1988; Carlzon, 1987). But most service companies perpetuate a cycle of failure by tolerating high turnover and expecting employee dissatisfaction (Schlesinger and Heskett, 1991). It is easy to expect employees to be uniformly reliable, responsible, empathetic, assured and ready to serve (Parasuraman et al., 1991) during and between service encounters. There are situations wherein a shift stretches to ten or twelve hours quite frequently. It becomes difficult for the employees to cope up with such situations on a continuous basis. In the same vein, it is also relevant to note that a number of studies have established, empowerment or employee involvement as a TQM related dimension as well (Berry, 1991; Dean and Evans, 1994; Hofstede, 1984; Lawler et al., 1995; Ross, 1993). Due to the potential impact that employees have on the business, it is imperative that management understands the specific dimensions that help shape employees' attitudes toward their jobs. It is generally agreed that the hotel workforce has a high level of temporary workers, substantial female employment, low levels of training, low wages, high labor turnover and gender segregation (Charlesworth, 1994; Deery and Iverson, 1996; Riley, 1991). Over the past several years, considerable attention has been given to role conflict, role clarity, job tension and job satisfaction as four very important determinants of the performance of individuals and their impact on the operational effectiveness of the organization (Kelly et al., 1981; Lusch and Serpkenci, 1990). Increasing job satisfaction among service personnel has the potential of generating higher customer satisfaction with the service, repeat purchases by current customers and positive word-of-mouth communications to potential customers. Research has indicated that job satisfaction of service personnel can be increased by hiring individuals who tend to be highly empathetic, by training current employees how to be empathetic, by providing employees with clear job descriptions, by empowering employees within the customer/employee dyad to make decisions that will result in higher customer satisfaction with the service, and in establishing a clear unity of command for each employee (Rogers et al, 1994). Spinelli et al. (2000) found that in the case of hospitality sector workers, pay and benefits are strong considerations in employee satisfaction, and most employees feel that they are underpaid for the job they do, irrespective of the compensation they get. Pay and benefits were however found to be just one factor among many. Research has indicated that the absence of these economic factors will lead to discontent, but more

importantly, their presence will not add to long-term employee satisfaction (Bruce et al., 1992). It therefore seems to come back to job enrichment factors, such as recognition of employee contribution, participatory decision-making, open communication channels, along with the factors identified above that account for employee satisfaction. EVOLUTIONARY PANGS In the light of Fisher (1935) and Clark's (1940) division of the economy into three sectors (agriculture, industry and services), it could be argued that the 'service or tertiary society' is the stage towards which all countries are moving. As countries move from being industrial societies to becoming post-industrial societies more and more contributions to the national income will emanate from the tertiary sector of services. An increasing share of services and a diminishing share of production of goods in their economies characterize highly developed societies. This changing pattern is also reflected in employment where there is growth in service employment and reduced employment in the production industries. A further feature of this changing pattern is one brought about by rapid technological change in the economy, which results in the work content within industries also rapidly changing. There is an increasing emphasis on occupations delivering services rather than being involved with the physical work to produce the goods. This means that not only is employment increasingly skewed towards service industries, but in the production industries also, the activities within them are increasingly oriented towards service activities (Sarossy, 1996). The occupational structure of postindustrial society is therefore increasingly dominated by employment in which professional groups grow rapidly in number and thereby increase their overall importance. Education levels of the workforce are high and increasing. The socio-economic system tends to become increasingly technocratic, with skills and education increasingly overtaking family background and property as the determinant of individual's social position. This basically is symptomatic of higher levels of professional aspiration in the new generation entering the job markets as a whole, characterized, among other things, byneed for faster career growth curves; preference for informal, team-based work environment; lack of preference and impatience with hierarchies; direct entry to managerial positions rather than working one's way up through the ranks; desire for higher compensation levels/disproportionate pay hikes based on performance rather than anything else; stronger need for affiliation and overt recognition; different definition and perception of loyalty; etc. The demands therefore on the workplace in terms of - culture, environment and potential is different, and employee retention is a commonplace concern. Traditional organization structures based on Weber's formal rationality and Taylorian work organizations have been referred to as 'dis-empowering' by van Outdshoorn et al (1993), with traditional structures, which create feelings of powerlessness (Johnson, 1993) amongst employees leading to a resultant lack of commitment and motivation. Normann (1982/1984) and Grnroos (1982) have shown how a traditional management focus (based on the principles of scientific management) overemphasizing cost reduction efforts and scale economies may become a management trap for service firms and lead to a vicious circle where the quality of the service is damaged, internal workforce environment deteriorates, customer relationships suffer, and eventually profitability problems occur. Growing marketing and sales budgets may slow down the negative trend for some time, but as this normally only means increased persuasion and over-promising, in the long run it only leads to unsatisfied and defecting customers (Grnroos, 1994). The above discussion when combined with the definition given by Albrecht (1988) that-"service management is a total organizational approach that makes quality of service, as perceived by the customer, the number one driving force for the operations of the business", presents a case for a different approach to people management to be effective in the service organization. Another concern is that even large sized companies have to increasingly fight harder to attract and retain executive talent. A McKinsey study of 77 large US companies suggests that executive talent has been the most under-managed corporate asset for the past two decades. The study by Chambers et al (1998) indicates that large companies face three

qualitative challenges. First, a more complex economy demands more sophisticated talent with global acumen, multi-cultural fluency, technological literacy, entrepreneurial skills and the ability to manage increasingly de-layered, disaggregated organizations. Second, the emergence of efficient capital markets has enabled the rise of many small and medium-sized companies that are increasingly targeting the same people sought by large companies. Small companies exert a powerful pull across the whole executive spectrum, offering opportunities for impact and wealth that few large firms can match. Third, and not surprisingly given the above, job mobility is increasing. A war once conducted as a sequence of set-piece recruiting battles is transforming itself into an endless series of skirmishes as companies find their best people, and in particular their future senior executives, under constant attack. All this boils down to the fact that high employee turnover hence poor retention is a reality irrespective of the hierarchy level that one is talking about, right from the managerial echelons to staff levels. Therefore it is imperative for survival that organizations have strategies in place to attract and more importantly retain employees at high levels of knowledge, skills and motivation. THE INDIAN EXPERIENCE This section has drawn heavily, for statistical data, on the latest published results compiled by the Federation of Hotel and Restaurant Associations of India (FHRAI, 2001), and the authors are grateful to the FHRAI for granting permission to use and present their findings as a part of this paper. The study included hotels from India, China, South Korea and Singapore belonging to the following seven categories of - Five Star Deluxe, Five Star, Four Star, Heritage, Three Star, Two/One Star and Unapproved/ Approved Hotels. The hotels from the countries apart from India were also included for the sake of comparison as well as for benchmarking. Areas of Concern Some of the results from the FHRAI study are being presented, which indicate the problem areas that confront the Indian hotels. Staffing Ratios The results indicate that room to staff ratios in the hotel industry has wide variations, ranging from 0.88 to 5.12 staff to a room (See Appendix 1). Even in the same star category many hotels employ 100 percent more staff than the better managed hotels, and some even go up to the level of 300 percent more staff than hotel with low room to staff ratios. Although some of these hotels may have reasons like large farm/garden areas or large number of Food and Beverage (F & B) (including banquet) areas, the research data shows that this is not a justifiable reason for the high levels of overstaffing, which exists. Although no two hotels are same in all respects, most hotels in the same star category have very similar facilities and services and fair comparisons can be made in their staff requirements and organizational structures. The results also indicate towards a glaring difference between India and other countries studied, where the average room to staff ratio in Singapore in Five Star hotels, with Five Star Deluxe facilities and services is 1.07 while it is 1.22 for India. For Hong Kong this ratio was found to be 1.06. Another relevant fact is that of the ratio of managers/supervisors to staff. This ratio ranges from 1:3 to 1:4 for the 5 Star Deluxe hotels inIndia, to 1:10 for the 3 Star categories. In the survey of General Managers' opinion on overstaffing in Indian hotels (Appendix 2), on an average across all hotel categories, view was equally divided on the reasons for overstaffing. The most important determinant of overstaffing was reported as lack of

trained staff, low wages, concern for quality service and union pressure. Absenteeism and lack of automation as well as interest on part of owners were also cited as factors leading to overstaffing but not by all categories. Crucially, lack of trained staff seemingly is the major factor causing overstaffing. Hierarchical Levels It has been reported that 5 Star Deluxe hotels have on an average four levels in managers, two levels in supervisors, and two to four levels in staff positions. However in best practice hotels these went down to 3-2-2 for managers, supervisors and staff. In hotels in Singapore this was found to be 2 - 1 - 2. It was also found in best practice hotels in India and Singapore that managers and supervisors work as teams with the staff and all had same uniforms. They also undertook some of the basic functions, particularly in restaurants and front offices, rather than just supervising. Multiskilling and Multifunctioning The report indicates a limited level of multi-skilling and multi-functioning being practiced in all categories of hotels although the best practice hotels have manifested this more than the others. In this regard it is also interesting to note that in the opinion of general managers of 5 Star Deluxe hotels, the most important means of controlling employee and wage cost in Indian hotels was reported to be through the route of multi-skilling, wherein more than 80 percent of the respondents averred to this. About 80 percent were also of the view that outsourcing and flattening of hierarchies are also important means of reducing employee cost. But for the same, less than 10 percent responded to Training also as a means of cost reduction. Although how their objective of multi-skilling could then be achieved, remains a moot question, as well as a seeming contradiction. Employee Training The statistics presented here are attributed to another report brought out by the FHRAI jointly with HVS International (FHRAI, 2000). An overall total of 1,131 hotels participated in this survey, categorized under 8 types. In order to increase the sample representation to higher levels, this report combines hotels, which are government-approved and expected to receive a star grading with those with existing star categories. Those that were unapproved have been put under the 'others' category. All figures are annual for fiscal year 1999-2000. The figures (see Appendix 2) reveal that about 55.4 percent managers in the 5-Star category have had some formal training (defined as a Certificate/ Diploma programme of minimum one year duration) with about 22.9 percent having short-term training (total 78.3 percent trained managers). Across the eight categories this was the highest figure. Similarly, in the case of supervisors, these figures for the same category was 46.5 and 21.5 percent (total 68 percent) respectively and for staff it was found to be 27.5 and 29.7 percent (total 57 percent). The surprising data is of the 5-Star Deluxe category where, against expectations, the percentage of average (including formal and short-term training) trained employees is 48.5 as against 58.6 percent for 5-Star and 56.8 percent for 4-Star category respectively. Annual Staff Turnover It was found for 5 Star Deluxe hotels that the highest turnover of staff including managers/supervisors, was in the area of Food and Beverage Service at 16.2 percent followed closely by Food and Beverage Production, Front Office and then House-keeping. The turnover in departments like Sales and Marketing, Maintenance, Human Resources and Finance were relatively low. This pattern was reported in similar percentage levels in 5 Star, 4 Star and 3 Star hotels. However the annual turnover of staff in 2 and 1 star was as

high as 27.9 percent in the Food and Beverage Service area. The pattern of turnover of staff was similar in South Korea, Singapore and China. EXPERIENTIAL EVIDENCE Besides the statistical data presented in the paper, in order to create a backdrop, the following issues have been identified through experiential learning. It is felt that all the above issues that are facing the Indian hospitality industry and the ones that are mentioned below constitute a vicious circle at the core of which is the human resource issue. Majority of the issues that seem to lead from one to the other, either originate or are focused in the handling of human resources in the Indian hospitality scenario. Some of these reasons are also cultural and thus may require greater effort on the part of the hospitality industry to change the perception about the industry. One has come to realize over the years that being a resource in the industry is not easy, added to which is also the cultural pressure, which has not really accepted hospitality as an industry. In a majority of the cases, 'Hotel Management' is still related to catering being done by caterers (say) in weddings and or family functions. Others seem to continue to believe that hospitality is an area, which must be chosen as a last choice. Hence, over the years people seem to have made hospitality one of their last career options. This has led to the basic motivation issue in terms of delivery. Since the individual has taken up a job in a hotel primarily because he or she could not take up his or her other options it is obvious that the motivation levels would not be at the optimum level. If motivation is to be enhanced by either internal or external sources then one would have to create an environment fit enough for the individual to grow. Growth leads to another issue wherein culturally we have been programmed to believe that growth is only in terms of position and only when one reaches a 'managerial' position is one able to be acceptable in society. This obviously is due to the lack of valuing the dignity of labor (high power distance cultures of Geert Hofstede), which creates an environment wherein one (belonging to higher social strata) is expected not to do the so-called 'menial' jobs. Also familial dignity and prestige is seemingly seen to be at stake (especially if one thinks in the context of food and beverage service, which is correlated with domestic servants at home, which is so very common in third world countries and prevalent inIndia) as well. Where as one has seen that growth can be in so many different forms and so many different stages, however, it would be unfair to blame only the social structure entirely. By design human beings seek some authority and power along with acceptance. In keeping with our psyche, it is imperative for one to have power to be accepted, whether socially or otherwise. Again, history is fraught with examples where feudalism has bred servility and humility manifest in the behavior of entire classes of the population1. It is thus quite possible that our entire industry has been traditionally based on feudalism rather than hospitality and today's industrial culture is a mix between understanding hospitality as a concept and this deeprooted philosophy of feudalism. This deep-rooted feudalism has led to a great deal of belief in hierarchies and their ability to deliver results. However, it must be noted that hierarchical structures deliver results that tend to satisfy only a few. Due to the dissatisfaction that is generated in the process of delivery through the hierarchical system, there are other side effects and one of the major issues already highlighted is that of motivation. Lack of motivation leads to lesser productivity and thus usually results in the need for greater number of people, to complete the same task or longer work hours for the existing workforce. It would then not be highly improbable that the organization is then looking at either reduced pay scales and/or lesser number of people. Some organizations even work towards providing external motivational stimuli to service encounter personnel in order for them to enrich the guests' experience or at least its delivery. This can lead to an extremely complex kind of work environment for the resource, which is explained diagrammatically below Keeping the above in mind, the resource who gets into the industry is looking to grow at a much higher level and pace than the others because that is what will bring to him/her

power, authority, respect, dignity, social acceptance and perceived growth. These, besides money, will contribute to his/her personal growth. This phenomenal need of the individual entering into the industry, to grow is explained below. It is only natural for an individual to want to grow in terms of his/her working environment. However, as Maslow (1987) indicates, it is possible that the individual to be in different stages of the need hierarchy pyramid at the same time. As far as the hospitality resources are concerned, majority of them are constantly fighting for the social acceptance stage since they have not yet really received recognition as a profession and an industry. Only declarations of the hospitality sector being an industry cannot create this acceptance, as there is a more important aspect, which is social acceptance. For years, there have been people who did not make hospitality as their first career choice. Those who did so, did it either for the glamour associated with the hospitality or for other reasons. A telling statistics is that on an average about 65 percent of managers in Indian hotels did not get any formal training or qualification in this area (see Table 2, Appendix 4). Thus today when a lot of the students seem to make the hospitality sector as their first choice they are entering into an industry which is predominantly managed by people not technically qualified to run this business. To add to that, many of the resources coming in at the junior levels also joined up because they could do little else. Thus this industry has enjoyed the reputation of being an industry where, if you work hard you can do it', and you don't need to be 'intelligent' to be a 'hotelier'. This is an industry which may not require individuals with exceptional intelligence but certainly makes heavy demand on attributes like effective people handling, decision making and creativity. All these factors put together create a not so rosy picture for individuals looking to make a career in this industry. Add to that the fact that there seems to be this norm of long working hours and though a lot of hotels seem to talk about productivity, it is felt that these are mere lip services provided to sound "in-touch" with the global HR scenarios. Looking at the staffing ratios above and the productivity that these numbers are delivering, it is obvious that there are two missing links-one of them is the motivation to perform at the optimum level. Why there is no motivation is a question that finds enough evidence in the three points briefly described below 1. Over-work A normal day's cycle consists of three shifts of 8 hours each. If one were to take a random sample of the hotels in the capital (New Delhi) one would be sure to find that a majority of the resources invariably work more than that or substantially more. It is not difficult to come across industry 'professionals' who tell their new inductees that 12-14 hours per day is the norm. Due to the high percentage of dependence on the 'guest' needs there is little predictability about timings, it cannot be however overlooked that at other times there are no functions (say, at the banquet department). And yet immaterial of what time one managed to get off the shift yesterday, one is expected to come into work the next day at the same time. Given also that in an area like banquets there is a substantial amount of physical work involved, it may be expecting almost the impossible that the individual comes regularly to work in the first place and at the same time is motivated and productive at optimum levels. Should we begin to regulate the exact number of hours worked or should we focus on what has been achieved during these hours? 2. Hierarchical Tyranny Majority of the students that get admitted to hotel management programs in this country (and it is believed that are some 10000 graduates every year) need to go through some form of industrial exposure during their hotel management programs. When these students / interns do come into the hotels, it is expected that they will learn, practice and polish what they were told in the classrooms. These students have already been introduced to the hierarchy in most departments in the hotel through their courses. However, when they do go into the industry they realize exactly what these hierarchies signify and how they function. As an industrial trainee or an intern, one finds oneself at the lowest rung of the hierarchical ladder. Its not that this is a travesty or anything as one is expected to learn and move up in the hierarchy. Most Indian organizations however would

have anywhere from 10-12 levels at the least (see paragraph above on hierarchical data) above the industrial trainee level and the industrial trainee continues to get negatively stroked as his/her environment is constantly telling him/her that it is almost impossible to make it to the top. With such an environment wherein most non-executive/managerial resources believe that the manager does little than to sign a couple of papers and make a few decisions a trainee level resource begins to develop a two-fold thought process. Since it is extremely difficult to get to these coveted managerial positions especially if you start at the very bottom of the climb, the intern is hoping that the education qualification that they are receiving provides them with the necessary push and support that is required for entry at executive levels. However, in an industry whose academic partners are growing faster than the industry itself, the supply is huge compared to the demand for the managerial positions. The aspiration is to join a Five Star Hotel as that is where there is some social acceptance. But with limited avenues to do so, people then take on whatever jobs come along and that leads to a completely de-motivated employee, as the start has not been as per expectations. Once the resource is in the hotel/organization, he/she begins to realize how centralized everything is and in reality the executives could actually be performing enhanced supervisory roles. But this is true even at the staff/ line half of the hierarchy. One still finds the use of busboys and restaurant cashiers and maitre d'hotels or senior captains, whereas these positions should be highly redundant in today's food-service operations, which have the opportunity to use enhanced equipment and has the advantage of using honed and improved systems over the years. 3. Lack of Dignity of Labor Should one look into our cultural history it is not surprising to see why one is still caught up/entangled in giving respect to the position rather than the person who is performing a certain task. This is evident in more than one ways in the hotels in India. People working at the Steward/Bellboy/ Houseman level are looked upon as individuals who exist in those positions, as they could not do or deserve much else. It is unfortunate though that the same stewards' position in the western cultures is looked upon as a job and sometimes even a career and thus awarded its right degree of respect as a job and sometimes even as a profession. All the above constraints find an individual in a position wherein he/she has finds himself/herself with no other choice but to quit the industry and hence we find that our industry is then left with again those who could not make it elsewhere. This does not speak very highly of either the industry or the people who are working within this industry, but there are still some extremely motivated individuals out there. For how long they will remain or can remain so is the moot question. Employee empowerment therefore seems to be the necessity as the industry seems to be demanding for the implementation of such philosophy and practices. All the evidence points towards low employee morale leading to various ailments derivative to it. CONCLUSIONS AND IMPLICATIONS Frontline or service encounter personnel especially, who feel empowered at work, are likely to be committed to the organization, which provides this empowering experience. Kirkman and Rosen (1999) found that perceptions of team empowerment were positively and significantly related to organizational commitment. Effort is therefore required on building the four dimensions of empowerment, namely - meaning, impact, competence and choice. Thomas et al (1990) describe 'meaning' as how an individual compares the value of a work goal or purpose to his/her own standards and values, such that he/she perceives the task to be of value to him/herself. Impact is the belief of the individual worker that his/her work can or does influence the outcome (Ashforth, 1989). Competence refers to the belief of individual worker that he or she can perform an activity on-job with skill, wherein the individual concerned knows that he/she can do the job if they make an effort (Gist, 1987). Finally, choice indicates that individuals have the autonomy at one hand, in making work

related decisions and changing or modifying their work behavior on the other (Deci et al, 1989). Using the above stated four dimensions it should not be too difficult a task for the industry in India to start on the path of employee empowerment, provided the industry is willing to actually get down to implementation. Given below is an attempt to use the four dimensions using real operational examples. Meaning: In the present context of the Indian hotel industry, it is no secret that many a hotel professionals, who either enter the industry or exist in the industry today, did not choose to take up hotels as a first career choice. This is not only substantiated by the fact that a lot of the professionals seem to take on other service industries readily as compared to hotels. However, a part of the responsibility that the industry is not ranked amongst the top professional choices not only rests with the work environment and the long hours but also with the professionals themselves. Unfortunately not enough importance or meaning has been assigned to the tasks that are being performed by the industry. It is not difficult therefore to see that if "Managers" cannot find meaning in what they do, then the dishwasher (given the existing hierarchies) definitely does not find any meaning or pride in what he/she does. It is thus going to be important for not only the managers but also the dishwashing team to find meaning in what they do. Having said that, the next obvious question is "how". Use of simple logic would make it evident that no food (however delicious and tasty) would be edible, were it to be served on a dirty plate. It is thus going to be imperative for the dishwashing person to be doing his job just as well if not better than (say) the Chef. Impact: Using the definition of the authors, it is evident that any and every individual needs to feel that his/her work is part of a fuller, bigger picture and each piece of this jigsaw puzzle is just as important, however small it may seem either in size or magnitude. Using the above example, if the dishwasher understands that his/her role in getting the guest to go back happy is just as important as that of the "Sommelier's" or that of the Maitre d'hotels, then that individual is going to feel that much more empowered to complete their tasks and thus improve productivity. The task therefore at hand is one of inclusion and communication such that the individual concerned clearly realizes that she/he is an important part in the customer satisfaction delivery chain. Competence: Majority of the workforce today in the hotel industry, who suffer from some sense of disillusionment and /or lack of motivation seem to do so because they do not believe that the task they perform requires any skill or competence. It is a firm social belief that there aren't too many skills required to perform the tasks that hoteliers perform. However, one would contest that in order to send a majority of guests with varied tastes and needs back home satisfied and to meet, nay but to exceed these various expectations need more than one set of special skills. Thus, it is our opinion that hoteliers need to believe in themselves and the tasks that they perform and build their own place in the arena of competency. It is also essential to realize that no task is mundane and that all tasks in order to be completed to their optimum need a high level of competencies even if it means cleaning crystal and producing a sparkling result. For instance, detailed manuals for various operational processes at departmental levels are traditionally not to be found, especially in smaller hotels and establishments, although this may not be the case with larger chain hotels. This reflects an overt dependence on young workers to 'learn' on the job by either emulating their seniors at work or by asking them for instructions. Obviously this does not augur well for setting-up professional standards of quality or provide a standardized basis of learning. Choice: If one is to take the above three components and make it possible for them to be implemented in any working system, then the fourth component of choice cannot be left out. It means providing every individual with a choice of either a system or a set of procedures or a way of working which works best for them, as long as the end result is not compromised upon.

Other than this, one of the key areas of improvement is that of controlling the stress levels of employees. What this implies for management is-clear roles, unambiguous instructions, sufficient resources and information to effectively complete tasks and less overtime. It also means that management needs to improve communication with staff (Deery and Shaw, 1999). At a very operative level, what is also evident is that there is a need for organizational restructuring both at the structural and process levels. Work therefore needs to be reorganized around flatter, team oriented structures with performance linked compensation, reward and succession systems. This study has been an attempt to identify some of the bottlenecks that hinder the Indian hospitality industry and looks at it from the employee empowerment perspective. Basic directions have been delineated for possible improvements and effort now needs to be focused on these individual components such that operational guidelines and strategies are evolved.

Getting the Global View


by Igor Reichlin How can a food and beverage company that wants to sell 8,500 brands in 86 countries become all things to all customers yet maintain its focus and keep its identity intact? Nestl CEO Peter Braheck-Letmathe says it all hinges on the talent that his company nurtures. "We want to make sure that employees at all our regional companies maintain their original cultures, but follow the same Nestl principles," says the Austrian-horn Brabeck. "We don't want to transform a Chinese into a Chilean or au American into an Australian. All we're asking for is that he or she embrace the common values that we have." The company's Management and Leadership Principles stale that "people are Nestl's most important asset." It seems to work. "Nestl puts its money where its month is," explains Robert Hooijberg, professor of organizational behavior at the International Institute for Management Development (IMD) in Lausanne, Switzerland. He says the food giant spends heavily on its high potential managers by putting them through a rigorous program of executive development at Nestl's training center in Rive-Reine, not far from the corporate headquarters in the small Swiss town of Vevey. There, nearly 2,000 junior executives selected from all over the world undergo a monthlong induction into Nestl's corporate philosophy, work together on team projects and meet the company's top brass in groups as well as one on one. Brabeck, 60, spends at least four weeks a year at the training center. He sees it as his key task. "Leadership development," he says, "is perhaps one of the most important duties that T have." It was Nestle's commitment to developing leaders that led a panel of judges, including Hooijberg (see list, below left), to conclude at a five-hour meeting in New York that the Swiss company deserved to be cited as the Best International Company for Leadership Development. After two years of examining U.S. leadership development practices, Chief Executive this time cast a wider net, focusing on European and Asian companies. Judges found European practices particularly impressive. "The Europeans have a leg up on their American counterparts," says Michael Mankins, a judge and managing partner of Marakon Associates in San Francisco. "These companies recognize that developing 'bench strength' is the key to unlocking future performance and value." Are the Asians Coming? This year's Best 20 span the globe from Finland to South Korea and from France to India and Japan. What unites them is the acute understanding that companies based outside the huge U.S. market can compete only if they learn to create different faces to present to a wide range of constituencies. One key point of difference is that some American CEOs think of leadership development and diversity as different objectives. But the European experience, in particular, suggests they are inseparably intertwined. "We are confronted with diversity because there's no such thing as a united Europe," says Benoit Potier, chairman of Paris-based Air Liquide, whose company is ranked No. 15. "Diversity has to become a manager's policy." Potier, whose $10 billion company has adopted English as its official language, says that training leadership is so important for a company that operates all over the world because far-flung executives have to understand how to take risks, and when. "We coach people on how to take risks," he says. "But risk-taking is culture specific. That's why we need diversity in management. At the same time, not the same kind of management is required

in all business environments. So we create an environment profile and match the management profile to it. My task is to place the right kind of people in the right kind of environment." Air Liquide has clearly been making the right choices since it's been around for more than 100 years, says Rakesh Khurana, associate professor at Harvard Business School and another juror on the Best 20 panel. If a company has survived that long, he says, "there's something in the DNA that's good." Asian-based companies are younger than European multinationals and are therefore different animals. Founding families at Asian companies tend to play stronger roles. Samsung Electronics, for example, is controlled by the Samsung group, which is dominated by the second generation of the Lee family. Yet Chairman Lee Kun Hee "has really placed a huge amount of emphasis on professionalizing talent and bringing in the best and the brightest," says Kyung Yoon, vice chairman of Heidrick & Struggles and a judge. As a result, CEO Yun Jong-Yong, a professional manager, has used the various divisions of the company to breed talent so strong that one of his managers, Chin Dae-Je, became Minister of Information and Communications, and Chief Marketing Officer Eric Kim has just been tapped to join Intel. There is, in short, an external market for Samsung talent, which is one of the factors the judges cited in assessing a company's leadership development. Toyota, too, is dominated by a founding family, the Toyodas, yet the company has groomed and trained a series of top managers, including current CEO Fujio Cho, who have worked their way up by rotating through a scries of international assignments. Perhaps the most surprising appearances on this year's Best 20 list are Infosys and Wipro, the burgeoning outsourcing companies in India. These are young companies and are still managed by their founders, yet their embrace of General Electric-style management development techniques has catapulted them into the top tier in a short period of time (see sidcbar, left). Successful internal CEO successions appear to be a hallmark of success. Nestl has been in operation since 1866 and has had relatively few CEOs over the years. Little wonder, since the average duration of employment at the $70 billion conglomerate is more than 27 years, while the 12 members of the executive board have worked for Nestl for a combined 349 years. Brabeck himself joined 36 years ago in ice-cream sales and has run the group since 1997. Nestl puts such a premium on an orderly succession, says Brabeck, mat "on the day I became the CEO, I started grooming my successor. And there are several people who are capable of succeeding me one day." At Air Liquide, Potier, 47, is young enough that he hasn't identified a successor. But he says he'll need to know "at least three to five years in advance" of retirement. Judging by the low turnover rate at the company-at some divisions it's less than 2 percent-Potier might run Air Liquide for quite a while longer. He's already been at the company for 27 years. Potier spends between 20 and 25 percent of his time dealing with human resources issues and tries to get to know as many high-potential leaders as possible. On the whole, Air Liquide's executive board tends "to have good knowledge of 400 to 450 people at the top level," he says. "And then we cascade it down to the HR level, where they know everybody in their country." European Fault Line Having the right mix of home-grown and acquired talent is a key factor, says IMD's Hooijberg. He believes the ratio should he around 70 percent home-grown versus 30 percent imported talent. That way, he says, a company can both maintain its corporate culture and make sure it has benchmarked its talent against the best in the

class. Air Liquide has narrowly missed this mark: According to Potier, about 80 percent of the company's mid- to top-level managers rise from within the ranks. But the company is very aggressive in seeking new talent. "We're on permanent lookout for very young people," the chairman says, "taking them from universities to train them to become managers." If there is a fault line in Europe between those CEOs who manage leadership well versus those who struggle with it, it would appear to be this: The Scandinavians, the Swiss and the Dutch-in short, nationalities whose home markets are small-do a better job than those Europeans whose home markets are much larger, such as Germany, Spain and Italy. It's noteworthy that four French companies -L'Oreal, Air Liquide, Sehneider Electric and Schlumbcrger-made the Best 20 list while only two German companies did-BMW and Siemens. Siemens, based in Munich, which is ranked No. 16, in many ways has just carried out a textbook case of GEO succession planning: On January 1, Heinrich Von Pierer is stepping down as GEO of the company, which has more than 400,000 employees, and Klans Kleinfeld, most recently GEO of Siemens' North American unit, will be elevated to that job. The company does, in fact, use most of the traditional development tools, such as 360degree oral reviews as well as written reviews of the top $00 to 600 managers. But although Siemens is a global company in terms of sales, its management makeup remains very German. All of its executive board members are German, a situation that Jrgen Radomski, management board member responsible for human resources, says "will have to change." The company fears that high potentials might start looking elsewhere if they see their non-Germanness hampering their career chances. At the moment it docs, acknowledges Radomski. "It would be very hard for a Spanish or a French manager to run this company," he says. "He would have to be intimately aware of all the German cultural constraints." Such corporate monoculture cost Siemens ground in the Best 20 ranking, with jurors pointing out that diversity in the top executive echelon helps attract more and varied talent. At Air Liquide, only half of the executive board is French. At Nestle, only one of 12 board members is Swiss. Siemens has been working doggedly at making its corporate culture more international. It has institutionalized country rotations and made sure that all of its top managers have been through several overseas tours of duty. The company runs a large number of training programs, including executive MBAs, at several top U.S. and European business schools. But its development base would have a hard time matching Nestl's formidable training ground at IMD, which it has helped found and which it finances generously. The Swiss simply have refined leadership development practices. According to Brabeck, Nestl "has three levels of relationship with IMD: first, regular courses for Nestle employees; then partnership programs where some top IMD professors and Nestle top executives from one of our business groups work together on a project; and finally, IMD acting as an outside consultant to Nestl on a specific issue." He says that at its Rive-Reine International Training Center Nestl offers "myriad coursesin finance, marketing at the highest management level and so on. But the most important, fundamental reason for having this center is to use it as a platform for conveying the values and the principlcs of Nestl's leadership." To do so, Nestl doesn't use outside professors or trainers but rather brings in company management to be the instructors. "We all get involved in these courses," Brabeck says, "which allows people who come from all over the world to have direct contact with the top management." Brabeck is against using headhunters to go after external talent. "Our policy is to have home-grown top management," he says. "But we're constantly benchmarking against onr competitors," such as Unilever and Danone in Kurope and P&G, Kraft, Coca-Cola and PepsiCo in America."

Jeff Sonnenfeld, a judge who is associate dean at Yale's School of Management, disputes Brabeck's view that all European multinationals are more culturally sophisticated than their U.S. competitors. "In his case, that's trne," says Sonnenfeld. "But you can look at an awful lot of companies that have taken a European colonial power view of the world with very centralized decision-making." And he notes that very few non-Europeans are CEOs of Enropean companies, in contrast with the U.S. experience of allowing non-Americans to run such icons as McDonald's and Coca-Cola. The Europeans, it would appear, do not have a monopoly on global leadership.

After finish this weeks reading Strategic Sourcing, from Periphery to the Core, the first thing appeared in my mind is the NBC comedy TV show Outsourced that talks about this lonely American manage work in this call center in Mumbai, India which outsourcing its order processing and must explain American popular culture to his employees as he tries to understand Indian culture at the same time.

With globalization rapid technology innovation, more and more companies are moving every single activity in their value chain to someplace else in the world where the labor cost is much lower in general, like India and China. According to the author of the reading, The question is no longer whether to outsource a capability or activity but rather how to source single in the value chain, and this is the new discipline of capability sourcing. [1] The drive behind the outsourcing is a very simple economic theory called Competitive Advantage where people try to gain an advantage over competitors by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. And one way to lower the price will be to lower the cost associate in the production process. However, lower labor cost is no longer the sole reason for American company like Nike and IBM to outsource their activities. It is about how to use strategic outsourcing to improve companys competitive position in the industry. And to achieve that, company need to concentrate on their resources on a set of "core competencies" where it can achieve definable preeminence and provide unique value for customers. After the company go through those analysis, it should have an outline of a comprehensive sourcing strategy. What will happen after that? Will a company get to enjoy all the benefits of outsourcing as long as they figured the comprehensive outsourcing strategy? I doubt it. Because there is cultural issues involved. There are lots of stories out there about failed efforts that involve offshore development (off shoring), and fail in global communication is one of the real reasons. The fact they came from high PDI (Power Distance Index) countries made it impossible for the proper communication to take place when it was most necessary to be plain and step outside the traditional power roles of these cultures. [2] So here comes my question, after figuring out the outsourcing strategy, what can a company do to make sure the implementation of this strategy goes well under the inevitable cultural issues? [1] Mark Gottfredson, Rudy Puryear, and Stephen Phillips, Strategic Sourcing, from Periphery to the Core, Harvard Business Review [2] Dave , The Real Reason Outsourcing Continues To Fail, http://www.lessonsoffailure.com/developers/real-reason-outsourcing-fails