HR's Offshoring Mistakes

These are the top 5 HR mistakes companies make when they offshore processes.

Friday, March 16, 2007
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1. "Follow the leader" syndrome. Many companies offshore only because other companies are doing so, or jump on the bandwagon and head off to India or China without doing the proper due diligence and planning. These companies do not properly articulate why they are offshoring and what it is they are trying to accomplish by offshoring, particularly in terms of their overall strategy, goals, objectives and service delivery direction. 

2. Underestimating the true costs of human resources. Organizations often fail to capture the true costs of attraction, recruitment, rewards, retention, training, career development, turnover, performance management and so on when they offshore. Lower labor cost is usually the main reason companies opt to offshore, paying little attention to other HR costs. Companies that invest in the appropriate HR programs right from the beginning, such as career development and retention programs, have the potential of reducing HR costs in the future.

3. Insufficient employee communications. It is not uncommon for companies to delay the creation of a communications plan related to offshoring until after the deal is signed. However, frequent, careful and thoughtful communication of the goal and objectives enhances employee acceptance of an offshoring strategy. It also gives the company an opportunity to prepare all parties for the changes that are about to occur.

4. Undefined expectations and service levels. Whether companies create their own internal offshoring entity or captive, or use an external vendor, it is good practice to create service-level agreements and a set of performance standards that address how certain services are provided as well as what level of quality is acceptable. Unfortunately, companies do not define the appropriate metrics to ensure the achievement of such performance and quality standards, nor do they have the appropriate governance structure in place to ensure accountability or outline the process of dealing with escalating issues. 

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5. Overlooking cultural differences. Cultural differences can cause problems or even failure of offshore outsourcing deals. While preparing policies and practices, especially for captive offshoring centers, HR managers tend to overlook the cultural differences that exist. It is important to understand that cultural factors -- such as different approaches to complete tasks, differences in attitudes towards conflict resolution, and different communication and decision-making styles -- usually cause problems while managing an offshore outsourcing relationship.

Annella Heytens is the U.S. West Division International Practice Leader of Watson Wyatt Worldwide. She is based in the firm's San Francisco office.

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