With mergers and acquisitions, corporate culture compatibility and potential issues arising from differences in national cultures are more widely acknowledged as predictors of success than they are with outsourcing arrangements. In both kinds of business relationships, however, identifying and addressing the "soft" risk factors has been neglected in favor of the more easily identified financial and legal factors. Yet repeated research shows that cultural mismatch and failure of cultural integration lead to poor strategic alignment, communications and execution, and are key reasons why business relationships fail.

Three distinct cross-cultural risk factors can have a critical impact on the success of an offshore outsourcing relationship. The first is commonly recognized, the second tends to receive lip service and the third tends to be unseen or avoided.

-->Risk Factor #1: Corporate Culture Differences

What is the degree of "fit" between the client's corporate culture and the vendor's? How close are their vision and values? Is one bureaucratic, the other entrepreneurial? What is their respective risk tolerance? Are decisions top-down or based on consensus? How different are their operational processes? Their control systems? Their reward structures? Their corporate policies? How do they hire, develop and evaluate employees? What are their behavioral norms and expectations?

Lack of alignment in key dimensions of corporate culture can present serious obstacles to smooth interactions, with bottom-line impacts for both organizations.

-->Risk Factor #2: Differences in National Cultures

The globalization revolution is in its infancy, while national cultures are longstanding. Cultural conditioning is deep. Despite surface similarities in the globally interconnected world, the underlying attitudes, thought patterns, assumptions and expectations of different cultures vary widely. Do people tend to be individually autonomous or group-oriented? Egalitarian or hierarchical? Situational or absolutist in their ethics and conduct? What is their perspective on time? On relationships? Do they tend towards candor or diplomacy and face-saving? Do they focus on results or process?

In overt and subtle ways, the deep elements of national culture influence every area of business relationships, systems, processes and work interactions across cultural boundaries. If you don't understand these differences, your risk mitigation approach won't develop strategies to avoid potential pitfalls and harness opportunities for synergy.

-->Risk Factor #3: Cross-Cultural Competencies of Key Players

In any offshore outsourcing relationship, a wide range of players is involved at both ends: executives, corporate managers, project leaders, members of multinational (often virtual) teams. Some work from their domestic base of operations, others travel or go on expatriate assignments to their partner's location. All are involved in the challenge of achieving business objectives and performing seamlessly in a culturally diverse global environment.

In addition to the technical, managerial, leadership and interpersonal skills required for their jobs, the people occupying these roles need to have cross-cultural competence if they are to be successful and not put their company at risk. This includes both knowledge about other cultures and the ability to adapt to cultural differences. A due diligence process that doesn't address the cross-cultural competencies of the people who will implement the outsourcing relationship misses a crucial risk factor.

Cross-Cultural Due Diligence Rather Than "Retrofitting"

As offshore outsourcing matures, the neglect of "soft" risk factors is receding, especially with leading-edge global organizations setting the next generation of best practices.

"More attention is being paid to the cultural alignment between client and offshore vendor as part of the due diligence process in the offshore space," says Srinivas Tatavarthy, Vice President for Offshoring Implementation Risk at Wachovia. "This is a result of the growth of business process outsourcing, which requires a more cohesive and hands-on approach, and with the rise of end-to-end global delivery services encompassing both ITO and BPO. The need has become greater for up-front cross-cultural due diligence rather than 'retrofitting' the relationship after having experienced the effect of the cultural differences."

But how do you carry out cross-cultural due diligence? How do you predict the potential impact of cross-cultural factors and make plans for mitigation? A robust cross-cultural due diligence process should do the following:

• Build the cross-cultural dimension into the due diligence model as an integral part of the process, using professional cross-cultural expertise as needed rather than relying on impressions and anecdotal knowledge
• For all three factors (corporate culture, national culture impacts and key player cross-cultural competencies), use both quantitative methods (surveys, audits and psychometric assessments) and qualitative methods (in-person interviews and on-site observations)
• Develop risk assessment and risk mitigation strategies to address all three cross-cultural risk factors, recognizing that while they may intersect, they are independent variables, each requiring its own analysis and solution

Many organizations in recent years have reviewed their options for improving business processes and asked themselves if they should transform internally or consider outsourcing that part of the business to a third party service provider.  Unfortunately, we know from our work with clients that the decision is more complicated than simply determining whether to reengineer or outsource.  It involves deciding whether it is better to outsource business processes/functions ‘as is’ or to reengineer or transform those processes and functions before considering outsourcing them to a third party.

The added dimension of ‘timing’ of an outsourcing initiative introduces another level of complexity to the decision making process when considering how to address outdated or inefficient business processes.  The questions clients typically wrestle with are:

• Should we outsource the selected processes ‘as is’, (in their current state)?
• Should we transform the processes and then outsource?
• Or should we take a ‘big bang’ approach and do both process reengineering transformation and outsourcing at the same time?

Option 1: Outsource As-Is

This means outsourcing the process and operations in their current state and delay any improvements and transformation until after the migration of services to a third party provider.

Table 1 - As-Is option

This model is fairly common considering the range of outsourcing deals.  The primary reason is that the benefits of labor arbitrage are more immediate and translate into cost savings for the business sooner than any other option.  Delaying the beneficial impact of outsourcing until after transformation delays the benefit of labor arbitrage for typically 2 years.  Our analysis indicates this represents a delay of achievable cost savings of approximately £40k per FTE per year.  Those who choose to outsource immediately stand to generate cost savings over the cost of current operations in the neighborhood of 25%.  A recent manufacturing client taking this route outsourced it’s transactional finance processes and realized labor arbitrage savings of 30% in just seven months of making the decision.

Option 2: Transform then BPO

The second option means the client chooses to transform the selected process (es) and implements systems improvements in house.  After these have been implemented the operations in their new ‘improved’ state are outsourced to a third party service provider. The following table shows the sequence of events and explains the benefits and drawbacks of this approach.

Table 2 - Transform then Outsource option

This model is popular in client organizations that are more technical in nature or that are engineering based businesses.  In these organizations the client typically has a strong and experienced IT organization and/or performance improvement teams who routinely manage and implement complex technical projects.  In a smaller number of cases the size of the client or the project is of such a scale that required changes are less complex, require lower level of knowledge or technical skills and can be manage by less robust internal organizations.

Companies considering this option should be particularly aware of the impact on costs and resources required to transform a business function prior to outsourcing.  These costs will invariably be ‘in addition’ to the costs associated with outsourcing that function at a later date.  The combined costs of the transformation and outsourcing effort may not be off-set by the cost savings associated with the labor arbitrage the company hopes to leverage as a result of outsourcing.  Furthermore, not all companies have the in-house technical, business process and organizational knowledge required to make such projects a success.

Option 3: ‘Big Bang’ – Simultaneous Transformation and Outsourcing

The last option is doing both the transformation and outsourcing at the same time.  The sequencing of events is as shown below:

This option requires the following considerations:

1. Timing
A potential benefit of this approach is that if managed well the overall length of the project could be shorter than in either of the two other options described above.  Less time invariably translates to lower costs to execute the programmes and an accelerated time to benefit as it relates to labor arbitrage.  The concern here though is whether the organization in question has the skills, knowledge and time to devote to such a large and complex undertaking.  Most organizations simply do not.

2. Risk tolerance
Most organizations do not have the tolerance for risk that this option demands. Successfully resourcing and managing two major change projects simultaneously injects a degree of risk that companies typically can not afford to support, particularly over long periods of time.  When faced with spending more, and taking on additional risk or realizing more immediate savings (upwards of 25% of today’s cost) most companies opt for a shorter, less risky path to benefits.

3. Cost
The cost of executing both process reengineering/transformation and outsourcing projects simultaneously rarely, if ever, are less than the immediate benefits that can be achieve by one of the other alternatives

4. Investment capital
Significantly more capital investment will be required in support of this option as system investment; project management costs will be higher than they would be under the other two scenarios.

Conclusions

In summary, we have described three competing options that many companies face as they reengineer and transform themselves to remain competitive.  Furthermore, we have shown that the decision is not as simple as deciding whether to transform or outsource because the dimension of time forces us to consider the tradeoffs of different approaches.

There are many aspects to consider when deciding the order of events and each option has associated advantages and disadvantages that must be taken into account.  The ‘as-is’ transition model is one we see most widely and the one that is most accepted because the ‘time to benefits’ tends to be minimized as compared to other options.

Ultimately the client must fully consider these options taking into account not only the time and costs associated with the projects themselves but also recognizing whether they have the kind of knowledge, skills and experience required to manage the complexities of each option.

Finally, each outsourcing deal is unique and must reflect differences in company culture,  countries involved, processes to be transitioned, number of resources involved, the company’s current strategic/financial position, etc., all having an impact on the decision. Ultimately companies need to review and understand the risks and benefits of each option before deciding how much then can afford to take on.

Before brainstorming, it is important to understand not only the fundamentals of the method, but also how to prepare for and conduct a session. With the right atmosphere, team members and encouragement, the ideas will flow.

Fundamentals of Brainstorming

There are several fundamental requirements for a successful session:

1. Everyone must be familiar with the problem.
2. The problem must not be too complex or multifaceted. If it is, a smaller subproblem should be considered.
3. A group of between three and 10 people is optimal. A smaller number does not give enough interaction between people so that ideas can feed off of one another. A larger group, on the other hand, is too cumbersome. Some people will be left out of the discussion and will become negative or apathetic – a fatal flaw to a brainstorming session.

Preparing for a Session

One of the most important things to do before a brainstorming session is to define the problem. The problem must be clear, not too big and captured in a definite question, such as “What service for mobile phones is not available now, but needed?” If the problem is too big, the chairperson should divide it into smaller components, each with its own question.

Select Participants

The chairperson composes the brainstorming panel. Many variations are possible, but the following composition is suggested:

• Several core members of the project who have proven themselves
• Several guests from outside the project, but with affinity to the problem
• One idea collector who records the suggested ideas

Draft a Background Memo

The background memo is the invitation and informational letter for the participants, containing the session name, problem, time, date and place. The problem is described in the form of a question, and some example ideas are given. The ideas are solutions to the problem, and used when the session slows down or goes offtrack. The memo should be sent to the participants at least two days in advance so that they can think about the problem beforehand.

Create a List of Lead Questions

During the brainstorm session, creativity may decrease. At this moment, the chairperson should stimulate creativity by suggesting a lead question to answer, such as “Can we combine these ideas?” or “How about a look from another perspective?” It is advised to prepare a list of such leads before the session begins.

Three Simple Brainstorming Warm-ups

Brainstorming warm-ups are useful for getting people into the right frame of mind for a session. These three common warm-ups help those involved in the brainstorming process to overcome stumbling blocks and maximize creative results.

1. Word games – Excellent brainstorming warm-ups, word games exercise the mind and help get participants into the proper mindset for brainstorming. It really doesn't matter which specific word games are used, as long as they are mentally stimulating and challenging.

2. Practice run – Brainstorming a completely unrelated topic is one of the more popular and productive brainstorming warm-ups. It is done by creating an amusing imaginary problem and then brainstorming ways to overcome it. Practitioners can get a feel for the brainstorming process and exercise the parts of the brain that will be put to work during the actual session.

3. Game of opposites – To perform this brainstorming warm-up, write down a list of 10 to 20 common words. Next to each word, write down the first three words that come to mind when thinking of what the opposite of that word should be. If this is a group brainstorming session, have one person read each of the words aloud as all members of the brainstorming team write down the first three words that come to mind.

Setting Session Rules

While participating in a brainstorming session, there are several rules that need to be followed to make it productive:

1. No criticisms or negative judgments are allowed. These come later, after the session is finished. The basic idea is to obtain new ideas and not to rate them. The introduction of criticisms, judgments and evaluations will stop the flow of creative ideas by making individuals defensive and self-protective, and thus afraid to introduce truly new and different ideas for fear of ridicule.

2. Arrange for a relaxed atmosphere. If the environment is noisy, crowded or full of distractions, concentration will be lost. Also, the positions and personalities of the participants are important. An autocratic supervisor could ruin a session if people are afraid of appearing "silly" and thus do not speak up when they have novel ideas.

3. Think quantity, not quality. The point of brainstorming is to obtain large numbers of different types of ideas. Again, judgments come later when ideas which do not look promising can be filtered out. By concentrating on quantity, the subconscious is encouraged to continue making new connections and generating more ideas.

4. Add to or expand the ideas of others. This is not an ego-building contest, but a group effort to solve a common problem. A basic premise is that ideas from one person can trigger different ideas (some closely related and some not so closely related) in other people. That is why this technique works better in a group, as opposed to when used in isolation.

Variations on Classic Brainstorming

Newer variations of brainstorming seek to overcome barriers such as production blocking and may well prove superior to the original technique. The following are some of the alternative options:

Nominal Group Technique

This method encourages all participants to have an equal say in the process. It also is used to generate a ranked list of ideas.
Participants are asked to write down their ideas anonymously. Then, the moderator collects the ideas and the group votes on each one. The vote can be as simple as a show of hands in favor of a given idea. This process is called distillation.
After distillation, the top ranked ideas may be sent back to the group or to subgroups for further brainstorming. For example, one group may work on the color required in a product, another group may work on the size and so forth. Each group will come back to the whole group for ranking the listed ideas. Sometimes ideas that were previously dropped may be brought forward again once the group has re-evaluated the ideas.

Participants are asked to write down their ideas anonymously. Then, the moderator collects the ideas and the group votes on each one. The vote can be as simple as a show of hands in favor of a given idea. This process is called distillation.

After distillation, the top ranked ideas may be sent back to the group or to subgroups for further brainstorming. For example, one group may work on the color required in a product, another group may work on the size and so forth. Each group will come back to the whole group for ranking the listed ideas. Sometimes ideas that were previously dropped may be brought forward again once the group has re-evaluated the ideas.

Group Passing Technique

In this method, each person in a circular group writes down one idea, and then passes the piece of paper to the next person in a clockwise direction, who adds some thoughts. This is repeated until everybody gets their original piece of paper back. By this time, it is likely that the group will have extensively elaborated on each idea.

A popular alternative to this technique is to create an "idea book" and post a distribution list or routing slip to the front of the book. A description of the problem should be listed on the first page of the book. The first person to receive the book lists his or her ideas and then routes the book to the next person on the distribution list. The second person can log new ideas or add to the ideas of the previous person. This continues until the distribution list is exhausted. A follow-up "read out" meeting is then held to discuss the ideas logged in the book. This technique takes longer, but allows for individual thought whenever the person has time to think deeply about the problem.

Team Idea Mapping

This method of brainstorming works by using association. It may improve collaboration and increase the quantity of ideas, and is designed so that all attendees participate. The process begins with a well-defined topic. Each participant creates an individual brainstorm around the topic. All the ideas are then merged into one large idea map. During this consolidation phase, the participants may discover a common understanding of the issues as they share the meanings behind their ideas. As the sharing takes place, new ideas may arise by association. Those ideas are added to the map as well. Then ideas are generated on both individual and group levels. Once all the ideas are captured, the group can prioritize and take action.

Electronic Brainstorming

Electronic brainstorming is a computerized version of the manual technique. It can be done via email. The facilitator sends the question out to group members, and they contribute independently by sending their ideas directly back to the facilitator. The facilitator then compiles a list of ideas and sends it back to the group for further feedback.

Electronic brainstorming eliminates many of the problems of standard brainstorming, such as production blocking and evaluation apprehension. An additional advantage of this method is that all ideas can be archived electronically in their original form, and then retrieved later for further thought and discussion. Electronic brainstorming also enables much larger groups to brainstorm on a topic than would normally be productive in a traditional brainstorming session.

Individual Brainstorming

This is the use of brainstorming on a solitary basis. It typically includes such techniques as free writing, free speaking, word association and the spider web, which is a visual note taking technique in which people diagram their thoughts.