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A comprehensive talent strategy for

services outsourcing
by Pravesh Mehra, Managing Partner and Navnit Singh, Partner

As the strategic sourcing of services has become an integral part of companies’ global strategies, the outsourcing industry has grown exponentially. As a result of this explosive growth, outsourced services operations in India, China, and other developing countries face a war for talent that will ultimately determine their competitiveness. Savvy outsourcing operations can win this crucial contest by pursuing a comprehensive talent management strategy uniquely suited to the demands of these locales and the industry.

evaluating and developing talent. these recruiting problems often result in severe mismatches of candidates and jobs. many people are hired and promoted into positions that are beyond their capabilities. Cultural and company differences hinder the assimilation of senior level executives into a new company. with the right competencies to succeed in complex and challenging business environments. because of the shortage of talent. However. Many candidates are also hired for new positions and hence cannot demonstrate previous success that can be used as a benchmark. creating high performance organizations. it is often difficult to obtain reliable references. At the same time. to individual employees. and managing in a matrix environment. to managers and team leaders. China. Around the globe. most large multinationals use off-shore providers for a large number of back office functions. Managers and team leaders may lack understanding of market dynamics or customer needs or experience collaborating with overseas colleagues. with the Philippines. An executive accustomed to hierarchy at a previous company may find autonomy at the new job unsettling. a proprietary tool validated by the firm’s experience of assessing thousands of executives around the world against the requirements of senior-level positions. but also a shortage of employees who have the key competencies and subsets of those skills to fill positions throughout outsourcing operations – from senior executives. consider these statistics. all of the major IT services companies. and Russia joining India in the competition for market share. Critical strategic. operational. For many of these companies. due to cultural differences and attitudes. Individuals may have little experience in working a multi cultural environment. Separately and together. Nevertheless. selling. Business process outsourcing has also flourished off shore. Many outsourcing operations lack sophisticated. customer service. Recruiting problems have led to high turnover. strategic global sourcing of services has become a major determinant of financial performance. Moreover. The Heidrick & Struggles competency model (figure 1). Many have set up their own off shore operations as captive centers. hiring their own workers and running the operation without relying on third-party suppliers. The executive may have come from a corporate culture that valued teamwork over independent action or vice versa. both captive and thirdparty providers of outsourced services face significant challenges across a broad spectrum of human capital issues: Performance challenges exist at every level. and cultural differences at an executive’s previous employer often make it difficult for senior executives to acclimate to a new work environment. some of the most important of those competencies – such as visionary leadership. IBM. Infosys. typifies the competencies valued by global multinational companies. leading to high turnover either because frustrated employees leave or the company terminates them due to poor performance. an intense war for talent has developed throughout the outsourcing industry. in many of the regions where outsourcing operations are located. including Accenture. The leaders of outsourcing organizations must do nothing less than create a cadre of top leaders. Our research on leadership in China1 indicates that when someone takes a new job at a new company 2 Digital Marketing and Revenue Growth: It’s About the Talent . and market penetration. have one or more delivery centers off-shore. the ability to create organizational buy-in. Although adaptation and adjustment might appear to be easily achieved. and transforming services at an incredible pace. as well as the next tiers of executives and professionals. Today. Efforts to recruit the right employees with the requisite skills have run into a variety of obstacles. and they may have difficulty balancing competing organizational demands. Critical leadership competencies will take time to develop. Senior executives may lack experience managing growth or businesses over US$50 million in revenues. and results orientation – are the hardest to find. Capgemini. The acute talent shortage is not only a shortage of people. scientific assessment processes. Creating these competencies will take time.The challenges of human capital Fortune 1000 companies are buying. customer orientation. As a result of this rapid growth. and Wipro.

intensifying the already daunting challenges of human capital. For example. action-oriented culture can unwittingly try to duplicate that culture in an off shore. when an existing team gets a new manager.figure 1 The most vital leadership competencies Heidrick & Struggles competency model the probability that he or she will remain more than two years is about 50%. In India. successful outsourcing providers will move Heidrick & Struggles 3 . development. Moreover. outsourcing operations will face acute challenges in recruiting. The ‘employer of choice’ criterion varies by country. compensation has been rising at the rate of 16% annually in the IT services industry. Due to significant differences in cultures and values from country to country some outsourcing operations. in cultures where top-down leadership is the norm. These large annual increases in employee compensation have forced companies to pay more for less value and to face an uphill battle for retaining employees who may be lured away by competitors offering even more money. but when someone who has been at one company for ten years takes a new job at a new company the probability of remaining more than two years plummets to 20%. With competition for talent among outsourcing providers increasing. only 20% of the team will remain after two years. American owners accustomed to an aggressive. In the desperate search for talent. and retention – and in acquiring the appropriate competencies for their business environments and their specific companies. As a result. these conditions will only worsen. for example. particularly captive ones. fundamentals of business conduct are not fully developed and ‘gold rush’ conditions make building organizations more difficult. captive operation in a locale that values humility and obedience and thereby fall far short of becoming the employer of choice there. may have difficulty understanding what kind of company culture is likely to attract employees at all levels. many companies are overtitling positions and increasingly offering extremely high compensation. Hence off-shore operations must try to create a unique culture that combines the best of both cultures and creates a desirable experience for employees. Compensation continues to escalate unreasonably. Moreover.

or second-level management positions become sought-after in the talent marketplace. thoughtful communication based on a factual understanding of conditions. leaders need to model 4 Digital Marketing and Revenue Growth: It’s About the Talent . ability and willingness to learn. Moreover. individual progress reviews that go into detail about areas for improvement but that do not control the ‘hows’ of improvement can help create a culture in which individuals continually practice self-development and value the opportunities for professional growth in the company. it is more effective to communicate big-picture objectives relentlessly. (2) ensure that these strategies are translated into goals and tasks for individuals. the required behaviors visibly and communicate them exhaustively. To keep everyone aligned and accountable. volatile market almost always come from open and active debates among a group of individuals that include people with a range of relevant experience and expertise. knowledge of key processes. For example. talent reviews can be used to track the career goals and development of high-potential leaders and to provide career guidance to strong performers. Leaders need to develop approaches for the more important business and ‘soft’ skills for their organizations. recognize and reward behaviors that matter most in the business. Leaders can also make a conscious strategic choice about how to acquire the talent they need – either through developing it internally or hiring from other companies – and prepare to invest significantly either way. The strongest companies have articulated the capabilities they need and have created rigorous screening processes to ensure that they find them and thus avoid mismatches of personnel and tasks. Instead of micro-managing. Leaders can identify the underlying capabilities that are most important for success (such as intelligence. performance culture An organization’s leaders must do three things to drive results: (1) define strategies and adjust them over time. 1 Build a results-oriented. not simply handing down instructions from above. however. These principles. intended to address the specific challenges of the services outsourcing industry. and (3) promote alignment and accountability to continue to generate results even under changing conditions. Any approach to retention needs to address both employees as a group and those employees who show the most promise as leaders. motivation). They’ve also communicated their ‘employment brands’ to university audiences and in other venues in order to ensure a large pool of interested applicants. Skills such as effective communication. At the same time. to ensure that there is talent to lead the company in the future. measurable goals tied to those objectives and delegate responsibility for achieving them. include: 2 Manage the talent pool actively The cornerstone of a successful talent strategy is having a very clear picture of the kind of talent that an organization needs to be successful. technical skill). leaders must set clear. as well as skills needed to do jobs immediately (such as English language ability. leaders must make extra eff orts to retain them. A comprehensive talent management strategy Based on our experience working with leading services outsourcing providers. translating strategies into goals and tasks for individuals. the best results in an emerging. flexibility. high-potential employees in a competitive talent market. The common element in all of these activities is open. is even more challenging because in order to translate larger plans into specific tasks employees must apply judgment to determine what tasks will get the desired results. Developing good work plans demands real effort and dialogue.beyond a tactical approach to human resources and adopt a more strategic approach that sees talent as the key to competitive advantage. In defining strategies. Because employees who have been promoted into first. The next step. and align compensation with results. we recommend a comprehensive talent management strategy consisting of five proven principles for addressing the entire spectrum of human capital issues from recruiting to development to retention. systemic thinking. The talent shortage is exacerbated by the challenges of managing and retaining young.

In many cases. roles and responsibilities can also be combined to provide exceptional opportunities for personal development. companies face difficult decisions about what kind of leadership their operations require for their stage of growth. Key talent can also receive additional developmental support through mentoring. in which individuals get unstructured feedback and guidance along the way. Because precisely the right mix of competencies in individuals may be in short supply for filling roles in classic. In some cases. Ultimately. Points marked A and B show the critical leadership skills transition points. Other leaders prefer when possible to hire almost strictly from the local talent pool to avoid tensions between local employees and returnees. but instead what talent management strategies will best enable the organization to get results with the available pool of employees. and project management are likely to be part of the agenda. the key issue is not which cultural background offers the best ‘fit’ for operating successfully. developmental assignments. In others. 3 Rethink classic organizational models Instead of adapting the talent to the organization. organizations may train an entire cohort of employees together. In addition. adapt the organization to the talent. however. an apprenticeship approach works best. innovative companies can combine business units and functions in ways that fully leverage the competencies that those individuals possess. taking ownership of projects. and integration into the larger company’s global talent management process. functionally-structured organizations. Many organizations seek to leverage the distinct capabilities of returnees and native talent. and combining natives and returnees is one way to achieve this mix. management teams should be assembled carefully.figure 2 Critical leadership skills transition points As the outsourcing industry and individual companies grow. with an eye to ensuring that executives with responsibility for operations are capable of building a results-oriented culture. who often must be compensated at higher levels. In either case. The best leadership teams have some productive tension in viewpoint and experience. the ideal management team may include returnees in roles that are significantly linked to the world economy. Heidrick & Struggles 5 .

companies face difficult decisions about what kind of leadership their operations require for their stage of growth (figure 2). At one time. training. However. and quality to processes like recruiting. Someone who successfully led a company at the more advanced multinational or transnational stage of operations is not automatically well suited to run a company at the earlier. Operating in a playing field that has been globalized and leveled by technology. finance. we have found that the most successful organizations elevate the human resources (HR) function to the highest level. They not only view the HR function as strategic but also report that top leaders devote far more time to talent issues than ever before. Such leaders are pragmatic and entrepreneurial. Further. and compensation that are essential to effective talent strategies. performance culture. the name of the game is sales. after more than two decades of globalization. Companies that fail to make those distinctions and hire accordingly can find themselves falling behind in one of the world’s fastest growing industries.Outsourcing organizations can also address the talent shortage by doing some outsourcing of their own by having non-core or non-market facing functions performed in other countries in the region. and other functional roles that require the advanced education and technical skills. leading companies customize these essential HR processes to align with business objectives and create a results-oriented. outsourcing providers could find themselves 6 Digital Marketing and Revenue Growth: It’s About the Talent . At the early or international stage of development. such operations evolved with the evolution of globalization itself – often moving almost naturally from international to multinational to transnational operations as global trade was gradually liberalized. it is necessary to understand the evolutionary stage of the operation and ensure that a CEO is hired who has the right skills for that stage. succession planning. Strong HR leadership can also reduce the executional risk for organizations by bringing rigor. to ensure that there is talent to lead the company in the future” at any of those stages of evolution – and saddled with leadership that is more appropriate to a different stage. consistency. with an ability to expand and build relationships. they hold HR leaders accountable for results and they don’t hesitate to leverage outside help if necessary. “any approach to retention needs to address both employees as a group and those employees who show the most promise as leaders. Staff located in other countries nearby where the talent situation is less competitive may best fill basic research and development. information technology. the question some companies often fail to consider is whether a candidate’s track record of success was built at a company that was at a similar stage of development. they know that people are the prime source of potential competitive advantage. 5 Constantly evaluate capabilities of the CEO and the leadership team As the outsourcing industry and individual companies grow. Now. Consequently. As with every other function in such a culture. 4 Innovate the Human Resources function In our experience working with companies of all kinds in regions where talent is in short supply. when the goal is often simply to establish a beachhead in a given region or strategically invest there. international stage. Outsourcing organizations at this stage of development quite rightly assume that they need a leader with a strong sales background in a similar market.

general management skills. and other developing countries need to integrate local talent aggressively into their global talent management processes to ensure that key employees are considered for global assignments that could help them develop the skills they will need. adapting global practices for recruitment. there is likely to be intense competition for talented leaders. will need to focus even more attention on managing talent. and the ability to operate effectively in a matrixed organization. legal. senior business leaders should ensure that they are accelerating the development of the rising generation of professionals – the mid-level managers and team leaders. In the past few years. who are mobile. Conclusion Multinational companies operating outsourced services operations in India. more than ever. strategy and business planning.  About the authors Pravesh Mehra Pravesh Mehra. has over 20 years of experience in the fields of human resources. it is crucial to evaluate the CEO and the leadership team frequently and carefully and to undertake a disciplined. corporate communications and managing large firms. when the operation is at the truly transnational stage as part of a seamless global organization. organization transformation. He has expertise in startup operations. Leaders of domestic companies. has more than 20 years of experience in managing consulting and a proven track record of managing and growing businesses. systematic search for talented leaders not just for outsourcing operations but for the particular stage of those operations. companies must resist the temptation to hire leaders who appear to be good candidates generally but who may lack the specific skills required for success at the company’s particular stage of evolution. He conducts executive level searches for major business and professional services organizations.As the operation makes the transition from strategic investment to major market player. +91 124 465 5300 nsingh@heidrick. including offshore outsourcing. Because the market is potentially so large and the stakes so enormous. +1 650 234 1500 pmehra@heidrick. and technology implementation. and valuable experience in working both with domestic and international clients. Managing Partner. compliance. as well as multinational companies. business restructuring. and retention to changing economic and cultural conditions. China. Partner India. Similarly. Heidrick & Struggles 7 . Under pressure to move quickly. local political Navnit Singh Navnit Singh. administration and facilities management. Above all. mergers and acquisitions. The success of the outsourced services sector may ultimately lie in the outcome of this generational story. development. he has helped large professional services companies build senior teams and taken them to the next level of performance through talent management and acquisitions. leaders should possess general management and global experience. Now. the leadership focus shifts to technical expertise. the ability to communicate across cultures. and may lack the skills needed to drive results. IT. He has worked with senior executives of major companies in the high technology industry in the areas of business and operations strategy. and has extensive international work experience. and the ability to manage large organizations with many employees.

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