Imperfect Arbitrage



The implications of generational shift resulting from the globalization of work

by Deborah Kops

The problem goes something like this. A young man from a country noted for outsourcing business processes is sitting with a veteran accounts payable accountant, putting the accountant’s tasks in a template in order to achieve so- called “knowledge transfer,” which is code for moving his job offshore. As the young man patiently and patronizingly explains the concept of workflow, the accountant blurts out, “Son, I have socks older than you.”

Rapid changes in the way we work have been the norm since the Industrial Revolution. We first moved work from farm to factory as mid nineteenth century waves of invention took hold, indelibly changing the definition of work. Our second revolution resulted from the introduction of technology, redefining and changing how we do work—how work flows, how fast it is completed, and inevitably as physical workplace became immaterial, where work is done. But today, another revolution is underway, one that few acknowledge, yet it has deep implications for how we manage talent. This is the rapid generational shift of work that is the byproduct of the globalization of work enabled by technology.

What’s happening? Simply put, as Western corporations change their business models to achieve the holy trinity of better/faster/cheaper, work is being shifted en masse to less developed countries rich with recent graduates, tapping into, what Professor N. Venkatraman of Boston University’s School of Management calls  “economies of expertise.”  But the work is not only being done by those whose cost structure is euphemistically called “labor arbitrage,” it is being transferred offshore on a breathtakingly fast trajectory.

Much of the chatter in the offshoring industry centers on the challenges of globalization which can be generally defined as implementing consistent work ways in light of different beliefs, cultures and the difficulties that result when currently dominant Western practices are no longer the norm.   However, in the current revolution, work is not just being shifted from one geography to another; it is shifting from one generation to another, shortcutting the traditional sequence of handing work down from one managerial level to another, and eliminating the generational diversity that has historically signified the progression of promotion.

In the progression that we are familiar with, the concept—whether literal or figurative—of “time in grade” has been the generally accepted talent management construct. One has been historically promoted, or given more responsibility, when s/he demonstrated the capability take on more or more complex work according to the construct of existing rules or increase his span of management. Empirically, for example, American time in grade in a role is of three to five years’ duration, perhaps slightly less in high intellect roles such as consultancy, and often mandated in professions such as law (average seven years to partner), or in occupations with traditional apprenticeships. The concept of time in grade was in sync with corporate growth trajectories; talent management and organizational constructs were aligned.

This concept of career progression not only assured certain levels of competence, but creates the ability to perceive patterns and solve problems based on an intuitive understanding of cause and effect.  As a result, mature organizations typically created managers when they were in their 30s or beyond, and appointed senior level executives as more work tenure was acquired.  Staged and safe was the order of the day—each work generation had the time to adopt technologies and adapt to new ways of working in a planned manner. And management perceived the evolution as risk-free because the next generation approached work in a somewhat similar manner, with a value system only marginally different, easing the transition.

However, business models have now inextricably altered because of globalization, eliminating the traditional rhythm of the orderly transfer of work to successive generations. The value proposition upon which work is now globalized rests on the ability of technology to send work to younger talent, who are quick adopters and whose output can be managed by standardizing workflows, thereby increasing productivity and efficiency. But the reality is that there is not yet a mature, experienced workforce to whom work can be transferred in offshore locations, hence the term imperfect arbitrage.

Today 24 year olds in India and Malaysia are assuming job responsibilities that it took Baby Boomers in the West twenty years or more to learn –and earn. They are now managing accounts, processes and/or teams, replacing management that may be as much as twice their age. But the workers who are managing them onshore, or process leaders who interface with these younger workers daily, do not have the same attitudes toward work, company loyalty, goals and communication patterns.   The problem is not resolvable by pondering the future of work in the year 2020, or managing tomorrow’s people, or capturing the best and brightest talent. Rather, it deals with a profound, but short term, disconnect driven by shifting workforce demographics.  Simply put, as a result of globalization, buyers or clients of business processes and services are of one generation, while providers (whether outsourced or captive) are of another—at least one generation away.

Because of the pace of change and the trajectory of demand, time in grade is simply not possible. As a result, offshoring decouples both people and processes from older, evolved work architectures which have been years in the making, causing dissonance when two or more work generations are suddenly mandated to work together. Although a command of process can be gained through rigorous training, values, insights gained through experience and problem solving skills can only be learned over time by the vast majority of workers.

In effect, while output may be greater and better, there is a nagging perception by those who offshore that work doesn’t work because it is not infused with the same levels of judgment that come from experience.  As a result, onshore management complain about a myriad of problems, many of which have little to do with the distance between New Jersey and Noida, and everything to do with the fact that the parties involved simply do not work the same way.

What’s the challenge?

Why should we perceive the generational shift of work resulting by globalization as a challenge? To put the shift in context, it is important to the note that the majority of the business processes we are globalizing today were established in a different business context, with limited technologies and tools available, with a heavy reliance on insights from experience. The resultant wisdom that comes from being able to perceive patterns of problems and opportunities, and act on them confidently and intuitively, was a prized capability in the pre-Internet era.

It is important to note that other challenges, such as the ability to work with teams in different geographies and cultures, should not be diminished; we do acknowledge them when selecting a site, provider, or training during transition. But they arguably pale against the reality that those who are working in the home locations have ways of working that are disparate to those in the delivery locations.  As very little of the work companies source can be truly termed “black box” or all-inclusive in scope, offshoring requires a high level of collaboration and cooperation to complete a process end-to-end; as a result, this disparity is exacerbated.

With a divide between work generations delivering processes delivering processes, the problem manifests itself in unmet client expectations.  Statements that “the offshoring just isn’t working” or sagging customer satisfaction scores, or ugly governance meetings where the parties bristle at each other, are often attributed to poor relationship management. Certainly, other problems—such as inappropriate scope, inadequate change management, or a delivery center’s inability to meet SLAs— cause dissatisfaction. But let’s equally consider that the cause is the workplace equivalent of miscegenation in play. When people do not work the same way, expectations are not met. When expectations are not met, or as importantly, perceived to have not been met, companies slow globalization, bring work back in house, or fail to exploit the opportunity to gain the benefit of innovation, higher levels of performance or better quality.

The challenge starts with transition. There are simply aspects of doing business one generation cannot instantaneously download from another in the process euphemistically called” knowledge transfer.”  Even assuming full cooperation, the ability to replicate and document the full extent of knowledge—not just process mastery and procedures, but nuances around customer expectations, or knowing when to observe rules and when to adapt to the situation-from mature, soon-to-be-made-redundant  staff to  younger workers offshore loses something in translation. Yet we expect that, when offshoring work, this knowledge is smoothly replicated.

Upon business-as-usual, the disconnect can—and does–become larger.  During the course of daily work, the differences in generational-specific approaches to timeliness, attention to detail, discipline, adherence to rules and others surface, resulting in so-called “communication gaps or “relationship” problems.  The cause? The teams just do not work on the same page.

What does this generational mismatch portend for offshoring, at least until Baby Boomers move out of the workplace? How do just a few of the fault lines manifest themselves?

In-congruence in work styles

The values of and communications between those who manage and those who deliver as part of an extended enterprise are not congruent. For example, onshore managers of the Baby Boomer generation have as part of their work ethos long hours, hard work, a sense of hierarchy and ritual, and a reverence for rules, while the staff offshore, comprised mainly of Millenials,  are far more informal in their work styles, require constant communication and feedback, and demand customized, personalized experiences.  The divide manifests itself in a different sense of urgency when a problem arises, or the need for adherence to a process. As a result, the onshore team perceive their offshore colleagues as less than dedicated, or poorly trained, while the offshore team cannot fathom what all the proverbial fuss is about.

Different pace of career progression

Those of us who were required to take COBOL programming classes in university had very different timescales for meeting our expectations. For the Baby Boomer, putting in time in grade, earning one’s stripes, mastering—and testing– new skills through experience, then moving up at the right interval, often when someone retired, was the modus operandi. We left the company only if a hard earned promotion did not materialize in a reasonable period of time. And over the course of our tenure, we developed a deep understanding of corporate sacred cows, customers, and attained a level of wisdom that permitted us to solve problems efficiently and effectively. In a nutshell, we learned how to understand—and work—the nuances of the system. The system in turn acknowledged this wisdom accordingly.

Today’s workers, especially those in fast paced economies where opportunities are seemingly limitless, have no patience for the concept of time in grade. If a job, or a company, does not deliver to personal needs today, one can easily move to a perceived better opportunity tomorrow. And, as companies headquartered offshore create better and better brands, the patina of working for a captive or an outsourcing provider loses its lustre. The onshore team thinks the offshore team is not dedicated and does not want to learn; the offshore team sees no benefit in the career version of paying it forward.

Different aspirations

Managers onshore, and workers in delivery centers offshore, quite simply are at different stages of their careers with vastly different risk profiles.  The onshore manager wants to preserve the status quo in the face of a new business model, most likely not of his choosing. He may think he dodged a bullet when the business transitioned to an offshoring model, holding onto his job, and will do his best to enforce ‘the way things used to work,’ grudgingly dealing with the changes which accompany offshoring. On the other hand, the staff who are delivering to his scope are at the beginnings of their careers with plenty of opportunity, have no stake in preserving the status quo, and do not have the time—nor the interest—to understand why processes and procedures have evolved the way they have, and why their onshore client is pushing to preserve them in some form.

Disconnects in the perception of quality

How often does the onshore manager evince dissatisfaction because a dashboard is missing data or a business review document does not meet exacting standards? The offshore team does not understand the concern—the data is available, the boxes are ticked, and it is time to move on to the next topic of discussion. At the same time, the onshore team member thinks the offshore team member is not taking quality seriously, and does not understand the concept of pleasing the client.

Different preferences in communications 

It’s a given that Millenials are most comfortable using electronic communication. They text, Yammer or Twitter constantly, But the communications channel differential is not merely the technology per se - it is how team members interpret each other’s intentions based on communication approaches. Offshore teammates are accustomed to rapid and informal responses; scheduled communication is perceived as having no more impact than that which is informal. On the other hand,  onshore team members have a more formal approach to communication; they tend to structure messaging by channel according to importance and immediacy; for example, voice may be used for an emergency while an email is used to inform, and an in-person meeting is employed to obtain concurrence and get commitment.

Different sense of time

Boomers are planners and schedulers; Millenials deal with events as and when; when faced with a need to get in touch, they are likely to ascertain each other’s immediate coordinates, and then hone in on each other, often virtually. Onshore teammates prefer to rely on pre-planned schedules, and can become very annoyed by offshore team members’ seemingly seat-of-the-pants approach.

Making the generation gap work in the context of offshoring

The challenge will not disappear quickly; the demographic shift in markets such as the U.S. and Europe are producing a workforce that is aging. These workers are not expected to retire anytime soon; according to the World Health Organization, the number of workers aged 55 years and older will grow from 13 percent of the labor force in 2000 to 20 percent in 2020, while Millenials (those born between 1977 and 1997 will represent 47 percent of the workforce by 2014.

Blame the Boomers’ loss of retirement funds as a result of the recent recession, or better health, or unfunded pension liabilities, moving the retirement age up from an average of 61.4 years in Europe today, to as much as 68 in 2028. The result is that onshore managers and process leaders will tend to hold their jobs longer, while their extended workforces will become younger and younger.

By understanding generational fault lines, it is possible to perfect this imperfect arbitrage. Here are a few strategies to bridge the chasm:

  • Don’t ignore the generation gap; embrace the difference to effect a step change in performance There can be a benefit to this resultant generational miscegenation. Onshore staff can make a step change in work effectiveness by adopting delivery staff’s more up-to-date communications technologies. For example, tweeting about a problem rather than sending an email or waiting to complete a daily dashboard can surface a delivery problem earlier. Or deployment of 21st century media can occur much faster—the command of social media that offshore staff possess can be harnessed to more quickly implement digital customer communication channels. Alternatively, offshore staff can be exposed to the benefit of delivering to precise standards, in turn differentiating their teams, their companies and ultimately themselves, contributing to higher client satisfaction and delivery performance.
  • Don’t merely recruit offshore talent and put them to work; spend the time to brand an organizational approach to work Instead of simply sourcing employees to work in offshore delivery centers, companies—or their providers– should focus on branding their organizations and initiating relationships with recruits at the start of their employment, using social networks whenever possible to communicate their messages. In a hyper growth economy where options abound, consistent brand enhancement and relationship building with employees is critical to retaining offshore employees long enough to benefit from judgment obtained from time in grade.
  • Don’t train to merely replicate processes in scope; invest the time to impart nuance, variation and prescribe opportunities for bandwidth in decision making This is the equivalent of training judgment on steroids. Rather than relegating training of offshore staff to the specifics of process workflow, help them put their tasks in context. Instead of holding training sessions in a bubble separate from a live environment, consider increase the learning content in work, making learning happen on the job. The standard train-the-trainer and client orientations programs fall far short when it comes to fostering collaboration and cooperation. Differences in approaches to work may be bridged by formalizing work exchange programs—moving team members on- or offshore for concerted periods of time, with predefined learning programs for both the onshore and offshore teams
  • Don’t just engage merely when it is time for a formal business review; communicate constantlyand in a range of media  Transition and governance regimes typically spell out the responsibility for formal communication, but not necessarily the means and optimum non-emergency frequency  Within these programs, the teams have the opportunity to design communications programs which acknowledge generational preferences and embrace the variety of  channels, developing their own hierarchies and rules of communication using  face to face, voice, email, SMS, Twitter and any others. This communication structure can be used to link team members on both shores, for acknowledgements, real-time individual feedback and interpersonal understanding.

Fostering successful globalization of work is not just marking the holiday of Diwali on an American calendar, or understanding the subtle differences between Gujarati and Punjabi. The impact of generation gap is arguably far more acute than those caused by cultural differences, putting stress on companies’ attempts at delivering processes seamlessly across geographies as they move through increasing stages of globalization.  If this gap is not understood and mechanisms put in place to bridge the differences in generational approaches to work, there will always be a nagging concern about the ability to successfully deliver offshore operations-critical services.

There is a need to recognize, and effectively deal with, the accompanying generational shift that accompanies globalization will exist until the Baby Boomers  who govern or work with remote teams leave the workforce, and conversely until staff in remote locations have sufficient experience to wrap wisdom around the processes they deliver.

The author wishes to thank Dr Anthony Hesketh for his contribution to this article which was first published in the Human Resources Business Review, Volume 3, Number 1, November, 2010.

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