Comparative Human Resources - Assignment Example

Comparative Human Resources Location: India Project By Here) Table of Contents 3 The purpose of Offshoring Operations 3 India: A potential location 4 Overview: Some useful facts 4 Industry analysis: Call Centres 5 Strengths: Where India scores 6 Indian Education System 6 Cost-effectiveness 7 Labour Availability 8 Governmental Policies 9 Weaknesses: Where India Falters 9 Poor Infrastructure 9 Data security breaches 10 Corruption and Bureaucracy 11 Challenges in communication 11 Human Resource Issues 12 Recruitment 12 Training 12 Attrition 13 Cultural Differences 13 Recommendation 16 Sources 17 Recommended Outsourcing Location - India Abstract As a consultant of a multinational US telecommunications firm, I have been entrusted with the responsibility of recommending a suitable offshore location to opening call centre operations, with sufficient scrutiny into the human resources perspective. Globalisation and the growth of the technology have made it easier to tap the potential undeterred by geographic boundaries. Outsourcing has been widely adopted by multinational firms in the recent past and more and more companies are being lured by the success of these ventures. India, China, Philippines, Ireland and Mexico are some of the most popular outsourced locations. As with any strategy, there are benefits to be realized and risks to be mitigated. After careful analysis of the associated pros and cons, based on the strength of the analysis I conducted with special emphasis on looking at it from a human resources perspective, I have decided to recommend India as suitable location. The purpose of Offshoring Operations To stay competitive, keeping operating costs low makes a significant difference. Similarly when in the midst of a recessive economy, firms cut costs in order to survive the downturn. Labour costs that is a key component of the cost structure, is really low in developing nations like India, China, Philippines etc. Offshoring operations to these countries, allows these firms to reduce costs drastically for the same operations when compared to doing it at the home country. Therefore firms may contract their operations to a third party in a low cost country which is called outsourcing, or the firms may set up operations by transferring the work to their own local company that is called offshoring. Notwithstanding the differences, outsourcing and offshoring are used interchangeably often. Regardless of the benefits, the IT service industry puts the worker and the customer in direct contact so outsourcing is not devoid of some challenges. The human resources component has be to carefully assessed before embarking on this endeavour. India: A potential location Overview: Some useful facts The economy of India is the fourth largest in the world as measured by purchasing power parity (PPP), with a GDP of US $3.36 trillion. When measured in USD exchange-rate terms, it is the tenth largest in the world, with a GDP of US $691.87 billion (2004). India was the second fastest growing major economy in the world, with a GDP growth rate of 8.1% at the end of the first quarter of 2005-2006. (Source from website http://en.wikipedia.org/wiki/Economy_of_India) The Rupee is the only legal tender accepted in the India and is pegged to the US dollar and the current exchange rate hovers around INR44 to 1USD. India is the world's largest democracy and has a population of more than 1 billion. The liberalisation reforms of 1991 opened up this conservative country and its growth has been fuelled by it, making it an attractive potential to be tapped. Foreign investors were benefited by the ability to make investments in business and this has made India an appealing offshoring destination. USA is the largest foreign investor in India. A number of MNC like GE, Dell, IBM, Honeywell all have huge operations in India. Doing business in India is all not smooth sailing though, and they are risks and roadblocks to conducting business in India. India is steeped in tradition and its people are by and large conservative, but hospitable, in the interiors while the metros are filled with more modern population which is friendly and IT savvy. It is a melting pot of numerous languages and cultures, and has preserved its traditional flavour through it growing westernisation. Industry analysis: Call Centres India's call centre industry accounts for a quarter of all software and services exports from the country, according to industry association Nasscom, and Indian call centres employ 160,000 professionals. Daimler-Chrysler, British Telecom, Barclays Bank, HSBC, Honeywell, Aventis, and several others have come to India while the old timers of GE, British Airways, Citigroup, Amex, and others have been around for a decade. (Source from website http://www.bpoindia.org/research/call-centers-challenges-for-hr.shtml) The call centres function 24/7 and provide services ranging from the basic customer support to the highly specialised and technically knowledgeable assistance to client queries. The call centres may be inbound or outbound and serve to process information and provide back office support as needed. India has top call centre vendors who have moved up the value chain by their diligence and ability to scale to client requirements. Indian call centre vendors have the advantages of the local knowledge, the familiarity of the prevailing culture and the ability to understand the method of doing business in India within its constraints. Strengths: Where India scores Source from website http://www.ilr.cornell.edu/depts/cahrs/downloads/PDFs/WorkingPapers/WP05-07.pdf Indian Education System The medium of instruction in schools is English and this emphasis has been a great factor in the development of India as an IT hub. The curriculum also incorporates prominence to math and science and this has resulted in a large number of science and engineering graduates. In addition to the schools and formal institutions, there are numerous private colleges and computer training institutes that have contributed to the educated labour force. The output of trained human power at the degree or diploma level has been consistently increasing since 1985. Cost-effectiveness In a call centre operation, manpower typically accounts for 55 to 60 percent of the total cost. Currently the Indian BPO Industry employs in excess of 245,100 people and another 94,500 jobs are expected to be added during the current financial year (2005-2006) Comparing the cost of Call Centre Employees, USA US$ 19,000 annually, Australia US$ 17,000 annually, Philippines US$ 9,050 annually and India US$ 7,500 annually In India, manpower is available at a fraction of the cost overseas. (Source from website http://en.wikipedia.org/wiki/BPO_Industry.) With a high percentage of population that is proficient in English and skilled in computer usage, labour costs are low in India, contributing to the prime advantage of outsourcing operations to India. Source from website: http://www.interglobetechnologies.com/whitepapers/CallCentre-%20outsourcing.pdf Labour Availability According to NASSCOM " Every year, approximately 19 million students are enrolled in high schools and 10 million students in pre-graduate degree courses across India. Moreover, 2.1 million graduates and 0.3 million post-graduates pass out of India's non-engineering colleges. While 2.5-3 percent of them find jobs in other fields or pursue further studies abroad, the rest opt for employment in the IT industry. If the flow from high schools to graduate courses increases even marginally, there will be a massive increase in the number of skilled workers available to the industry. Even at current rates, there will approximately be 17 million people available to the IT industry by 2008". Source from website http://www.nasscom.org/artdisplay.aspcat_id=36 Governmental Policies The Indian government has understood the potential of Information technology and its contribution to economic growth. Hence it has been supportive in its policies to the ICT Industry. The liberalization and deregulation begun in the 1990's have been beneficial and served to better licensing requirements and investment processes have been made more easy. The government has made FDI and investments from NRIs (Non-Resident Indians) more easy. It has brought in a new telecom policy that has opened up the field to private entities thereby increasing efficiencies. It has taken data security and Intellectual Property Rights seriously and has strengthened the IPR act. The mechanism of digital signature has been proposed to address the issues of jurisdiction, authentication and origination. The Information and Communication Industry has offered its absolute support in earnest to capitalize India's IT boom. Weaknesses: Where India Falters Poor Infrastructure India's economic development has been rising at a blistering pace but its infrastructure facilities have not kept up with it and still lag behind. A credible infrastructure of roads and railways interlinking major cities and second level cities do exist, but they are inadequate and absolutely overloaded, unable to handle the increase in traffic congestions and demands generated by being a Information Technology hub. Major cities like Bangalore, Chennai, and Hyderabad are all staggering under the onslaught of increased demands of the companies that have descended to utilise their potential. MNC companies are now moving their operations to second level cities to combat congestion. Railways though sufficiently networked, are crowded and often run late. Nevertheless, India has realized the invaluable asset infrastructure will be and has put in major investments into the development in both central and state government levels and is expanding rapidly. Power outages are common and this is definitely an immense drawback for the operations. The government has made significant attempts like privatisation to enable regular, reliable, uninterrupted power, a major necessity for running IT software and services businesses. Telecom services are being revamped too. Data security breaches Latest data security breaches in India involving a call centre employee obtaining bank account details from the client, and embezzling the funds sent shock waves across the industry and triggered questions of data security widely. Unfortunately, India has been a little laid back where Intellectual Property and rights are concerned. Pirated software and infringement of copyrights were not taken as seriously in the western cultures. India has now woken up with a jolt and is wide-awake and taken stringent measures to counter this. The IT Bill passed in 2000 provides a legal framework for the recognition of electronic contracts, prevention of computer crimes, electronic filing of documents, etc. The IPR Bill in 2005, has been passed to safeguard the rights and secure data transfer, and has been highly welcomed by the IT industry. Corruption and Bureaucracy As in developing countries, India has been battling with corruption and red tape, highly prevalent especially in government Institutions. The Right to Information Act (2005) and equivalent acts in the states, that require government officials to furnish information requested by citizens or face punitive action, computerisation of services and various central and state government acts that established vigilance commissions have considerably reduced corruption or at least have opened up avenues to redress grievances. India still ranks in the bottom quartile of developing nations in terms of the ease of doing business, and compared to China, the average time taken to secure the clearances for a start-up or to invoke bankruptcy is much greater. Challenges in communication India boasts of an English-speaking multitude, but Indian English is highly accented and there are a number of communication issues when the customer and the agent are unable to understand each other's conversation completely. Although extensive training is given, and accents are carefully cultivated, and voice modulations taught, cultural incompatibilities create gaps in knowledge that lead to confusion. Call centre agents have been accused of adhering to "scripts" dictated by the company and customers feel frustrated when they get standard answers to specific questions, or are made to wait long periods to get their queries sorted out. Call centre operators are even criticised by customers for giving out names like "Mike", or "Brian" to induce familiarity, when their accent simply gives them away! Human Resource Issues Recruitment With a large available base, ideally recruitment should not be a problem. But there is immense competition due the call centres emerging everywhere and often, valuable resources need better remuneration to be lured away from the competing firms. The call centre jobs demand a different kind of endurance that may not suit every candidate. Since these call centre "agents" being in direct contact with the customer, need to have a desired level of quality. To attain this, organisations seek well-educated and qualitative candidates and this may be prove more demanding than expected and require greater effort if a desired level of customer service is required. Training Call centre work calls for particular skill set, and this agent acts as a liaison between the customer and the company and therefore training the agent becomes a prerequisite for good customer service. Sufficient efforts have to be put into the training of resources in procedures, greetings, voice modulation and accent control in addition to technical knowledge like basics in computer knowledge, Internet browsing, e-mail, chat, typing, networking etc. Training has to be ongoing and supervised to fill in gaps due to cultural differences. Attrition Call centre industries in India are stigmatised by the highest turnover percentages ever seen and may be as high as 50%. This is one of the biggest challenges. The reasons for this are that call centre work is considered monotonous and often do not offer a credible career path in the organisation. Also cultural differences make it more difficult for Indian employees in terms of understanding processes and queries. Call centre agents also work graveyard shifts and odd hours that create fatigue after being on the job for while. It also interferes with familial and social commitments and some employees quit unable to take the pressure. Due to the high turnover in the Indian industry, good resources are always in demand. Attrition also occurs when dissatisfaction in one firm induces the employee to be attracted to a competing vendors firm offering a hike in salary. Firms try to reduce attrition by offering loyalty programs, tuition support as well as benefits and pension which encourage a long-term career. Encouragement from supervisors and a conducive work environment may help offset these issues and improve retention. Increased retention avoids wasted expenditure in recruitment and training, in addition to losing productivity due to the learning curve of a new employee. Cultural Differences In India, managing Human resources definitely will take some adjustments when compared to the USA. Cultural differences have to be understood in order to strategise. As a national culture, India is very vibrant and multi faceted. It is poised between the traditional citizens with little global exposure and the more westernised population due to exposure to a more cosmopolitan culture. English bridges the communication gap, but is heavily influenced by the native language and dialect. Also, sometimes the sentence construction may more literal translation of the message to be conveyed rather than be grammatically correct, which may be hard to comprehend if not used to it. Also, connotations may be different; for example, in India, people raise their voice while talking that indicates recognition or excitement, while to the western counterpart it may signal anger and cause a misunderstanding. While using the first name and addressing them is considered friendly in the west, using the first name is considered a mark of disrespect in India, and generally they are addressed as Mr., Mrs, etc. as a token of respect. Using first names is no longer a surprise in the corporate circles though. Even a customary handshake has to be initiated with caution to women, because folding palms together and saying "namaste" is the accepted form of greeting here as a mark of respecting their dignity and is greatly appreciated. However, women in the metros and working in the corporate culture understand this and therefore at ease with a handshake. Family is the most important for the Indian society and holidays and festivals are earmarked for family get-togethers. Elders are held in high regards and their praise is treasured. This extends to work environments where supervisors are held in high esteem, regarded with respect and their encouragement is a great motivational tool. While independence in working assignments are appreciated, supervisors asking questions or giving instructions are not considered as intrusion by the Indians unlike their western counterparts. When the holidays set by the US companies, do not coincide with local Indian festivals, high absenteeism is common because of the integration of the festivals and celebrations into the social life of the Indian employee. Indians believe in "Karma" or predetermined destiny and believe they are rewarded in their life according to their deeds. Change is acknowledged as inevitable and therefore organizational changes are more easily accepted as a way of life. Long-term commitments and higher education are favoured and targeted for. These can be translated into motivators like tuition benefits and long term pension benefits that may hold immense appeal to them. Body and nonverbal languages are different. Indians are hesitant to say "no" directly and often beat around the bush or are evasive to avoid a negative direct answer. This may confuse a western manager who is used to direct answers to straightforward questions. While moving the head sideways in the United States denotes a negative response; in India, a sideways movement of the head carries a positive connotation of understanding. Conflicting verbal and body languages often send confusing signals and create communication issues. Therefore, it is important to invest extra effort to understand what exactly is being said than just judging superficially. Employee evaluation and appraisals executed with open, frank discussions for performance evaluation, the norm in western culture, may be possible in India, where supervisors are treated more as a "boss" rather than a colleague. Often comments about work are taken personally when dealing with Indians and therefore these appraisals need to be tailored to suit the prevailing culture. People in the USA are more resilient to the Hire-and-fire culture but in India and accept it as a phase of life and move on, whereas, job security and career longevity are really important, and losing a job is not taken easily and symbolises failure for the Indians. Recommendation As a consultant I would recommend that definitely India is a land of immense potential. The presence of numerous Fortune 500 companies in India harnessing its potential is definite point in its favour. Cost savings are definitely possible when sufficient diligence is applied and the plan is followed through. I would recommend a two-stage process to start its own operations in India. The US telecom firm can start off with a test pilot program outsourcing call centre operations to a local vendor for a short-term. The local vendor will bring his local expertise and this would smooth the initial start up issues. It would also would give the invaluable opportunity to actually understand the pros and cons of operating in India and the benefits it can accrue. Coupled with the working knowledge of operating under those constraints, this information will allow the firm to imbibe through experience what does work or what works better in an alternative way. It will also allow HRM to understand human resource issues and modify operational policies to cater to the local needs. It can use this time frame to do the spadework and obtain licences, float a company and register it so that it can start its own offshoring operations with the intrinsic working knowledge gained by its test pilot operations which will mitigate risks to a great extent. Cultural variations and differences do exist but are definitely not deterrents to business success. Building trust goes a long way in ironing out small differences. Having open-mindedness and able to look long term, spells success. 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