by Oliver Dowson, CEO, ICC – International Corporate Creations
Great, so you’ve decided that you can both save money and improve business efficiency by setting up a Shared Services Centre or “Insourcing” (wholly-owned Outsourcing) operation abroad. Excellent. Now where? There are hundreds of possible destinations. You’ll naturally be putting cost evaluation at the top of your checklist, but there are lots of other considerations. Leaving aside the financial, legal and technical matters that everyone thinks about, there are some others that frequently get neglected or overlooked:
- Does the time zone work?
How much real-time communication is needed with your other offices? Whilst it’s usually possible to hire staff who work nights or non-standard shifts, it’s much more difficult to retain them, and it’s especially difficult to get good management. If it’s data processing work, then work on the other side of the planet where the time difference will help (they work while you sleep), if it’s high-contact, think North-South.
- Will the team have the right language skills?
While you may assume the staff you’ll hire will speak and write English, it’ll be their second language in almost all countries, and there are many kinds of English, not just British and American! Think carefully about what communications you will need, written and spoken.
- How easy will it be to hire and retain staff in the future?
Even if it looks easy to hire the staff you need now, think ahead. If you’ve picked a location which other multinationals are planning to set up in, it’s likely that the competition for skilled staff will drive wage inflation and increase employee turnover.
- Will applicants be right for the job?
There’s probably nothing that gets lost in translation more than a job description! Straight translations hardly ever work, even for defined qualifications – advertising needs to be drafted in consultation with local HR specialists to ensure the right cultural angles are considered.
- What other skill sets are readily available?
You’ll know exactly what operations you want performed now, and the skill sets you need for those, but again, think ahead. Most businesses setting up abroad only think about moving specific tasks. However, once it’s successful, you should want your SSC to take on a wider scope and responsibility – and remember that the higher-skilled the job, the bigger the saving by doing it overseas instead of back home.
- How fast are wages likely to rise?
Salaries in developing countries almost always rise faster than back home – annual rates of 8-15% are common. In some countries, wage rises are government mandated. And, of course, any merit increases go on top! You need to plan costs for 5 years ahead and plan to stay on top of achieving productivity improvements year after year.
- How easy is it to get to?
With good local management, you won’t need to rely on expats located there – but to be fully successful, you will need a lot of regular visits from the mother ship, both by those who can give training and support and by some of the top CXO team. Enthusiasm for travel quickly wears thin if it’s a horrible journey – you and your colleagues will need to travel there year after year. Also, when things go wrong, you may need to get people there in a hurry. So don’t only look for locations with daily direct flights, but consider the door-to-door journey time and the jetlag effect.
- Is it a nice place to visit?
OK, you’ll only ever be going on business – but let’s face it, you and your colleagues are much more likely to visit frequently (and thereby help develop the operation) if you enjoy going there – so this really is a critical consideration. Good weather, tourist attractions, food that you like and a happy culture all help.
- How will your staff commute to and from work?
Understanding this can be critical to staff retention and operational management. If the only way home is by bus, and the last one leaves at 18:30, they won’t ever stay late. If they have a 2-hour commute each way by train, any new job offer that comes along with a shorter commute could be very tempting! These aren’t exaggerations, but true examples applying to many staff in two common outsourcing locations.
- How useful will it be as a base to develop new regional business?
You might only be interested in setting up a SSC today, but, depending on your Company’s business, it’s well worth thinking about how the operation could serve as a future sales and marketing hub for the country or region where you are setting up. Setting up the initial operation can be costly, but adding functionality later is usually straightforward and cheap.