Jeitosa has just completed the preliminary analysis of Global Readiness Survey results. Some of the key findings include:

• Survey participants were asked what top three challenges they encountered in going global in the HR/HRIT function. The majority of respondents indicated cultural differences (53%) as the top external challenge they faced, followed by compliance with data privacy regulations (42%).

The good news is that there are solutions available for these challenges: leadership development, cultural awareness training, change management programs, and global communication plans can help individuals understand and appreciate cultural differences and provide tools and techniques for improving cross-cultural collaboration. Formalized strategies for dealing with data privacy challenges, particularly in dealing with the European Data Privacy Directive, can be developed and include approaches such as Safe Harbor, Model Contracts, and Corporate Binding Rules.

• The top internal challenges companies are facing in going global fall into two major categories: lack of technology and systems to support global initiatives (51%) and lack of experienced and culturally adept resources to work effectively in a global environment – both a lack of global leadership (47%) and a lack of sufficient other global resources (45%). Going global is a relatively new initiative for many companies, so it is not surprising that many would still be immature in these areas.

Solutions to these challenges are readily available, but organizations need to step up and realize that building a global infrastructure with global systems and global people takes effort, resources, budget, and time. More and more vendors are globalizing their product and service offerings making it now possible to source a global solution for HR systems. With the increased mobility and globalization of the workforce, it is also now possible to find experienced resources who understand first-hand the issues and challenges in designing and deploying a global solution.

• Working globally, companies are also experiencing some successes. By far, the greatest success they are finding is in developing and appreciating global diversity (68%). While this is a challenge for some, it is also a success for others. Generally, the more familiar one culture is with another, the greater the understanding and acceptance of the differences that exist.

You can download a copy of the preliminary research report by clicking here. The participate in the survey and receive a free, personalized copy of the full report, benchmarking your organization to others who have taken the survey, please click here.

Much previous research has shown that success in international work is a function of an individual’s’ “Global Mindset” (Guy & Beaman 2003, 2005). Peter Senge describes global mindset as “deeply ingrained assumptions, generalizations, or even pictures or images that influence how we understand the world and how we take action” (The Fifth Discipline, 2006). An individual’s global mindset governs how they perceive things in the world and take action.

The Global Mindset model distinguishes three broad categories of mindset:

• Ethnocentric Mindsets take the home country as the basis for beliefs and evaluations, holding that their own culture and values are intrinsically superior to those of others, to the point even of assuming national superiority. It might be characterized by the expression: “the sun never sets on the British empire.” This type of mindset is effective when there is a need to standardize operations around the world or to protect the company’s intellectual property.

• Polycentric Mindsets are ones that adapt well to cultural differences and are effective at bridging the gap between home and host culture and company objectives. The polycentric mindset entails accommodation or assimilation with the foreign culture, sometimes even to the extent of “going native”. It might be characterized by the expression: “when in Rome do as the Romans.” This type of mindset is appropriate when there is a need for intense focus on the local market or regulatory situation.

• Geocentric Mindsets are ones that seek universals and commonalities across cultures and are effective at tying diverse groups together toward a common goal. A geocentric orientation implicitly assumes that a universal set of values govern human interaction, downplaying the importance of cultural differences. This mentality can best be summed up by the famous words of John Lennon, “Imagine all the people sharing all the world.” This type of mindset is appropriate for individuals who work at a global level, responsible for integrating the ideas and practices of different businesses and functions into a unified approach.

Different types of mindsets are best suited for different types of international assignments. With respect to international work, Paula Caligiuri and others have claimed that an individual’s global mindset is directly related to his or her effectiveness depending on the nature of the job. In his view, ethnocentric individuals tend to excel in environments that call for significant standardization of methodology or technology, while polycentric individuals thrive in situations that require considerable sensitivity to local conditions, and geocentric individuals excel in positions that require identifying commonalities and integrating different approaches. Hence, the role or job the individual is to perform is vital in determining the type of individual needed for the assignment.

A key role for Global HR is to understand the type of mindset required for each international assignment and to assess individuals to find the best fit based on the person and the job. Nothing can be surer of failure than to select the wrong mindset for the job. Imagine assigning an ethnocentric individual to an intensely local situation. The individual will be frustrated due to a lack of understanding of the environment, and the local team will be irritated at what they see as the arrogance of home office to have sent such a narrow-minded person. Similarly a polycentric individual sent to standardize and protect the interests of home office may be unable to achieve the objectives because of a deep empathy for the local people.

What type of mindset do you have? Do you know what type of mindset each of your international workers and expatriates have? Are you actively managing this aspect of your business?

One of the biggest challenges in working across cultures is clearly language. It never ceases to amaze me that, in the effort to save some money, companies often choose to do translations of corporate documents in-house using local staff. But translation is a discipline of its own and just because someone speaks the language doesn’t make them a good translator. In fact, often the opposite is true!

Consider these anecdotes from Gary Ferraro, The Cultural Dimensions of International Business (2005):

• An American airline offering service to Brazil advertised its “rendezvous lounges” in its business class section. They failed to realize that the word rendezvous in Portuguese refers to a room for illicit sexual encounters.

• The American Dairy Association’s successful ad “Got Milk?” was unfortunately translated in Mexico as “Are you lactating?”

• An American ink manufacturer attempted to sell bottled ink in Mexico through their advertisement that they could “avoid embarrassment” (from stains) through their brand of ink. However, the Spanish word used for “embarrassed” was “embarazar” (a “false friend”) which means to become pregnant. People thought the company was selling a contraceptive device.

These very embarrassing situations can easily be avoided through good translation services using native speakers, not someone who learned the language in school. It is only a native speaker who can understand the subtle messages that are being conveyed by the use of one word or phrase over another. And forget automated translation tools, such as Babelfish. While it’s a theoretically interesting concept, and many people have been busy for many years in the field of artificial intelligence trying to figure this out, the field of machine translation is still in its infancy.

HR should help the business identify the types of skills needed for different types of activities. For example, the ability to speak the language is clearly important for sales and marketing activities, whereas it is less important for a highly technical positions where the individual will be working with internal staff. Tying competencies and abilities to individual assignments (project-based on regular) — not just to specific job roles — is fundamental to working successfully internationally.

Fons Trompenaars and Charles Hampden-Turner have become very popular in the business world for their cultural model and Culture Compass — a tool that evaluates the aspects of an individual’s cultural profile and preferences and compares them to another national culture. The goal is to uncover differences so that individuals can learn and be coached in the different ways of working before starting a new assignment in a foreign environment.

Trompenaars’ model distinguishes culture along seven dimensions:

• Universalism versus Particularism describes the differences between rule-oriented cultures and relationship-oriented cultures. Universalistic cultures feel that rules and obligations are paramount and set the bar for how all people should act. In contrast, particularistic cultures are those who believe that individual circumstances and relationships are more important than general rules. They tend to see themselves as pragmatic and flexible, often arguing “it all depends.” Particularistic individuals often seen universalistic people as rigid and overly disciplined. Universalistic people tend to see particularists as inconsistent, arbitrary, and “playing favorites.” Clearly the opportunities for cross-cultural conflict and misunderstandings are ripe in this domain.

• Individualism versus Collectivism, like Hofstede, highlights the differences between individual-oriented cultures and group-oriented cultures. Individualistic cultures are those that prize personal achievement and recognition over those that favorite teamwork and group recognition. One has only to look at American culture, which is highly individualistic and competitive, in comparison to the group-oriented Japanese culture to see the strong cultural differences in this domain. In fact the Japanese have a saying, “the nail that sticks up gets hammered,” demonstrating the importance of not sticking out in group.

• Neutral versus Affective describes cultures that are very affective/expressive versus those that are more neutral in displaying their emotions. While there are clearly strong personality characteristics along this dimension, there are also significant tendencies between cultures. The Latins (in particular, Italians and Spaniards) are known for their expressive passionate behaviors in comparison to the British and Japanese who are much more reserved in their reactions. We also see considerable variation within national cultures, such as the expressive New Yorkers and the reserved Mid-Westerners in the United States.

• Specific versus Diffuse covers cultures where the assignment of responsibilities is specifically designated and accepted by individuals versus those cultures that take a more varied approach in determining who is responsible for what. Clearly the challenges for the global project manager are fierce in this domain. The German manager who has laid out a project plan with specific assignments for his/her French team members is often surprised and confused at the perhaps protracted and verbose approach that may be taken in completing their assigned activities.

• Achievement versus Ascription refers to the situation in which individuals are granted status based on their own individual achievements (compare the views of Gen X and the New Mils discussed in an earlier post) or based on the role that they have been given in the group, such as the father or mother in a family or the president or director in an organization. Highly individualistic cultures tend to also be achievement-oriented cultures, such as the United Status; likewise strong collectivist societies are also often ascription-oriented cultures, achieving their status based on their role, such as the Japanese.

• Sequential versus Syncronic describes cultural tendencies to do things in a sequential fashion, one thing after the other, or synchronic, working on multiple things simultaneously. Anyone with children these days recognizes that this domain is one in which we see not only differences across national cultures but also across generations. The New Mils (or Gen Y) are a good example, with their focus on the integration of information and technology, with 20 windows open on their computer, chatting with 10 different friends, while twittering and sending SMS text messages to several others.

• Internal versus External Control refers to what cultures believe about the amount of control they have over their environment. Do the individuals control the environment themselves or are they controlled by it? The differing perceptions cultures have in this dimension can affect what we often think of as “work ethic.” If an individual feels they are truly controlled by the environment, then they are less likely to exert themselves and try to change things as a opposed to an individual who believes they can change the environment and circumstances through smarter and harder work.

What sort of cultural differences have you experienced either nationally or internationally and how do you feel such differences impact the workplace? What can HR and company leaders do to help avoid cultural conflict and misunderstanding?

Another very effective model for understanding cultural differences in the workplace is in the pioneering work done by Geert Hofstede. Based on extensive empirical surveys and statistical analyses, Hofstede calculates scores for different cultures and classifies them along five major dimensions:

• Power Distance Index (PDI) defines the extent to which less powerful members of the group accept that power is distributed unequally (such as in the family, in business, in political institutions). In the family, the level of power distance in a culture begins with whether children are raised to be “obedient followers” or to demonstrate “individual initiative.” In business, levels of inequality determine such things who reserves the conference room, who presents the problem, who leads the discussion, and who takes the minutes in the meetings.
  

• Uncertainty Avoidance defines a group’s tolerance for ambiguity and the extent to which people feel comfortable or uncomfortable in unstructured situations. Uncertainty-avoiding cultures tend to be more emotional, believe in one absolute “Truth,” and attempt to control their environment by implementing strict laws, rules, and safety measures. Some European companies, such as as France and Germany, demonstrate a high degree of uncertainty-avoidance which can be seen in the strict employment laws and termination conditions you see in those countries, as compared to Denmark and the UK, for example.
  

• Individualism versus Collectivism defines the extent to which individuals are inte­grated into groups. In collectivist societies people are integrated into strong, cohesive groups, often extended families. In individualist societies, the ties between individuals are loose, and people are expected to look after themselves and their own immediate families. According to Hofstede’s evaluations, China has the lowest score overall for individualism which demonstrates their strong group orientation — a phenomenon which may also have been influenced partially by the years of communist rule.
  

• Masculinity versus Femininity refers to the distribution of emotional roles between the sexes from very assertive and competitive, typical male values, to modest and caring, typical female values. “The women in feminine countries have the same modest, caring values as the men; in masculine countries they are somewhat assertive and competitive, but not as much as the men, so that these countries show a gap between men’s values and women’s values.” The Scandinavian countries show the lowest overall rating for masculinity demonstrating a strong equality between the sexes these countries.
  

• Long-Term versus Short-Term Orientation defines the extent to which a culture tends to take a shorter or longer term view of the world. The values associated with a long-term orientation are thrift and perseverance, whereas those associated with a short-term orientation are respect for tradition, fulfilling social obligations, and saving face. The Asian countries overall demonstrate the highest long-term orientation scores, with China and Japan at the highest. Clearly, the difference between these countries and Wall Street’s focus on quarter-on-quarter earnings is a source of potential conflict.
  

Hofstede’s work on intercultural interaction strongly suggests that success working internationally is largely influenced by the degree and types of cultural differences between the individual’s country of origin and their country of destination. Evaluating the scores of individual countries on each of these dimensions and comparing them to an individual’s home country can point out key differences and hence potential areas of conflict and adjustment for individuals working internationally. HR can better support the development of the global workforce by facilitating these types of analyses and identifying appropriate intervention and development strategies to ensure more successful international work.

Edward Hall’s contextual model provides an effective approach for explaining many of the differences between cultures. The issue of context is certainly one area where much communication goes awry, creating surprise and confusion over where the miscommunication occurred and why. Hall distinguishes cultures along two axes:

• In contract, in a low-context culture many more things are “explicit” in the environment because members of the culture come from a wide variety of backgrounds and traditions. In low-context cultures, people tend to have many loose connections of a shorter duration. Because of its heterogeneity, such cultures can change significantly from one generation to the next. Some examples of low-context cultures are the US, UK, Canada, Denmark, and Norway.

In general, individuals moving from one type of culture to another have to adapt and be more flexible in learning new ways of working than individuals moving to a different culture, but with the same type of context. For example, language issues aside, workers moving among France, Italy, and Spain (all high-context cultures) have an easier time adapting than individuals moving from the US to China (low- to high-context cultures) or from Italy to Canada (high- to low-context cultures). Individuals from high-context cultures expect there to be underlying differences between cultures and so tend to be more attuned and ready to see and work with the subtleties that lie beneath the surface.

In contrast individuals from low-context cultures moving to high-context cultures often can’t believe that there are so many unwritten rules of conduct and ways of interacting. In this situation, low-context culture individuals need to hone their intuition and learn how to look for differences that may catch them by surprise and create that embarrassing “foot-in-mouth” situation. Individuals from low-context cultures must learn to listen and ask questions, rather than attempt to work out a solution independently.

The following chart attempts to lay out some of the major differences between low-context and high-context cultures that affect the business environment:

It should be obvious what areas are ripe for cultural conflict when individuals from high- and low-context cultures come into contact. One area in particular is the decision-making process. The logical, linear thinkers quickly become frustrated by the intuitive, relational thinkers and neither ends up valuing the perspective that the other individual brings.  Another area where I’ve often seen a lack of understanding between cultures is in work approach and style: individuals from low-context, individualistic cultures who are very task and results-oriented versus those individuals from high-context, collectivist cultures who are focused on building relationships and “saving face” in group settings. Add to these, language differences, geographical distances, timezone changes, and organizational barriers, and it’s no surprise that cultures come into conflict and progress suffers because of misunderstandings.
Understanding, accepting, and learning to work with these differences is fundamental to being successful in a global environment. HR needs to broaden its focus on diversity beyond the traditional focus on gender, ethnicity, and generational issues. HR needs to fully embrace global diversity, fostering understanding, acceptance, inclusion, and leveraging of cultural differences to enhance team productivity, organizational effectiveness, and overall business performance.

Many different cultural models have been developed over the years — all with the goal of more effectively explaining and understanding cultural differences between groups of people. The three most well-known models are those of Edward Hall, Geert Hofstede, and Fons Trompenaars.

• Edward Hall, an American anthropologist, is most known for his research on the cultural perceptions of space or proxemics — the study of the human use of space within the context of culture (e.g., how close or far way people stand or sit from one another). While serving in Europe and the Philippines during World War II, Hall observed that the way different cultures define and organize space can lead to serious failures of communication in cross-cultural settings. His book, Beyond Culture, published in 1977, talked about the “unconscious culture” that shapes our thoughts and feelings. His concepts of high-context and low-context cultures describe the amount of information either implicit (high-context) or explicit (low-context) in the culture.

• Geert Hofstede’s landmark book Culture’s Consequences, originally published in 1981 and completely updated in 2001, analyzed cultural differences across 50 countries, synthesizng these differences into five major dimensions: power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus femininity, and long-term versus short-term orientation.

• Fons Trompenaars‘ best-selling book Riding the Waves of Culture published in 1998 took a similar approach to Hofstede, evaluating how different cultures respond to different management approaches. He synthesizes cultural differences into seven dimensions: universalism versus particularism, individualism versus collectivism, neutral versus affective, specific versus diffuse, achievement versus ascription, sequential versus synchronic, and internal versus external control.

It doesn’t really matter which cultural model you ascribe to, but it is important to understand the differing dimensions of culture in order to appreciate how they play out in the workplace. Failure to understand the influence that culture has on business can lead to miscommunications, misunderstandings, costly marketing blunders, lawsuits, and a general undermining of corporate goals.

Clearly an important role for HR is in helping the business to understand the various aspects of culture and how they affect day-to-day business and the productivity and effectiveness of our interactions. Focusing on the different dimensions of culture can help to target training and development opportunities in areas where they are more likely needed. For example, an American project manager, assigned to manage a global project with team members in Japan, needs to learn about indirect styles of communication, the importance status and hierarchy in group dynamics, and the role of the group in day-to-day interactions. The German sales executive working on a big deal with a large French financial institution must understand the importance of building relationships and coalitions and getting everyone on board “before the big meeting” if he hopes to close the deal sometime in this century. Being aware that these differences exist, and then targeting specific training and coaching activities can ensure that individuals working across cultures will have greater success in reaching their goals.

In subsequent posts, I’ll talk more about the specific skills that individuals need to be successful in a global context, as well as individual business processes that need to be localized for global success.

Last week I introduced the four dimensions of the Evolving Multi-Dimensional Talentforce and talked about the first dimension: multi-generational differences. This week I’d like to talk about the second dimension: multi-cultural differences. There are significant cultural aspects that influence how people interpret and respond to events, define and act in the workplace, and in general determine how we do business. These cultural aspects include such things as differing styles of communication, multiple ways of making decisions, and various approaches to engagement, commitment, diversity, ethics, and so on.

Culture (from the Latin cultura stemming from colere, meaning “to cultivate,”) is defined in Wikipedia as:

[1] patterns of human activity and the symbolic structures that give such activities significance and importance; systems of symbols and meanings that lack fixed boundaries, that are constantly in flux, and that interact and compete with one another.

[2] Different definitions reflect different theoretical bases for understanding and evaluating human activity; manifested in music, literature, lifestyle, painting, sculpture, theater, film, etc.

Geert Hofstede defines culture as “the collective programming of the mind that distinguishes one group or category of people from another. This stresses that culture is (1) a collective, not an individual attribute, (2) not directly visible but manifested in behaviors, and (3) common to some, but not all people”.

Analogies used to understand cultural differences have brought such images as “peeling an onion” — carefully removing layer after layer until getting to the core — or “the iceberg” — because many cultural aspects are below the surface and hence not readily seen. The first and most obvious layer of culture that we can see above the surface involves language, food, buildings, monuments, dress, fashions, art, etc. These artifacts are symbols with meanings from a much deeper level. The next layer of culture entails the norms and values that the culture holds, the mutual sense of “right/wrong”, “good/bad” that individuals share. Some of these are written and formally codified in the laws and social controls of a culture, while others are informal, learned early in childhood, and passed down through the generations. Finally, at the deepest, innermost level of culture, invisible and unconscious to human perception, are those aspects of basic human nature that control how we interpret and respond to various situations. For example, our sense of time and space, our focus on family and relationships, our view of status and hierarchy. These sometimes subtle aspects of culture are more difficult to understand and appreciate, making them ripe for misunderstanding.

• Extent to which individuals are independent versus interdependent
• Expression of individualistic intentions versus more collectivist, group behaviors
• Belief in a more egalitarian versus hierarchical status
• Degree of aggressiveness versus accommodation to others
• More direct versus indirect styles of communicating
• Feelings of neutral versus more affective relationships
• Specific and closed relationships versus multiple and diffuse relationships
• Orientation toward tasks and getting things done versus building relationships and rapport
• Appreciation of universalism versus particularism
• Degree of risk tolerance versus more conservative approaches
• Short-term versus long-term planning horizons
• Mono-chronic versus poly-chronic sense of time
• Differences in sense of personal space (called proxemics)
• Tolerance for and acceptance of versus resistance to change
• Receptivity versus resistance to diversity
• Acceptance versus resistance to new ideas

If this seems like a lot to absorb, it is! Understanding and working effectively with cultural differences is one of the greatest challenges we have. So much is invisible, not obvious, and very different from our own way of thinking and acting that we find it hard to fathom, believe, and work with.

In their fascinating book, Developing Global Executives, McCall and Hollenbeck (2002) contend that working globally is difficult because it combines complexity from two different dimensions: business complexity with cultural complexity. As business complexity increases, managerial abilities must also increase. Naturally, it requires much greater leadership skills to manage a large number of diverse functions, products, suppliers, business units, locations, etc. Likewise, as cultural complexity increases, facility in dealing across cultures must also increase. The greater the difference between geographies, languages, customs, values, habits, etc., the greater the skills the individual must possess to effectively work across cultures. Combining these two dimensions – an increase in business complexity with an increase in cultural complexity – creates an intensely complex global environment, requiring more highly developed global management abilities.

Hence, we see the importance of HR’s role in developing global executives. We have tended to focus our managerial development activities around more concrete skills such as business acumen, professional speaking skills, financial management, etc. In the increasingly global world we live in, we must spend as much if not more development effort on understanding cultural differences and learning how to work with them. In subsequent posts, we will explore this important multi-cultural dimension of the modern talentforce and how HR can help improve the productivity and effectiveness of cross-cultural work.

There is no question that the modern workforce is changing. And it’s changing fast and in many ways. Understanding these changes and learning to manage them effectively is a key role that HR has in optimizing the productivity of workforce. I see four major aspects to the evolving modern workforce, which I am calling the Multi-Dimensional Talentforce:

• Multi-Generational – we are are now seeing up to four generations of workers working simultaneously in the workplace — Veterans, Boomers, X’ers, and New Mils — each with differing world views, work/life needs, and job expectations of their employers.

• Multi-Cultural – we are experiencing increasing cultural differences as organizations continue to go global; pervasive globalization, continued immigration, and increased mobility is bringing greater global diversity to the workplace and creating considerable opportunities for cultural conflict.

• Multi-Contractual – we are living in challenging economic times which is spawning the rise of the contingent workforce and a plurality in worker contract types from full-time employees to part-timers, contractors, consultants, freelancers, outsourcers, partners, and other third-parties.

• Multi-Environmental – the ubiquity of the Internet and the evolution of Web 2.0 are enabling the digital, virtual, mobile, remote world in which workers can work anywhere, anytime, anyhow, reducing our perceptions about space and time and blurring the distinction between work and play.

Interwoven throughout these four dimensions are, of course, personality characteristics — both learned and socialized — that make up the human workforce. Clearly the challenge for HR and organization leaders is to develop strategies that effectively utilize the strengths of the multi-dimensional talentforce and mitigate the challenges by leveraging global diversity through Awareness, Understanding, Acceptance, and Integration. Transitioning through these stages from initial Denial and Rejection to Awareness and Integration involves managing the process of change. Some individuals understand and embrace diverse ways of working more readily than others. A major role for HR professionals is to support individuals and the organization throughout the continual change process.
In subsequent blog posts I will talk in more detail about each of these areas and explore the lead that HR can take in helping to leverage the workforce and manage the change process in the increasingly complex world we live in.

I have been asked often in the recent times from clients and prospects, what would be the best way to deliver HR services through a shared service centre model, either internally or externally. Would it be an offshoring or an in-region delivery model?

Let’s start with the primary ‘customers’ of an HR service centre, the employee. The valid expectation of an employee of any given company would be that if the company is changing from a personal, face-to-face HR support model to a service centre model, the service centre support would be in the language of the employee. Also the service should be provided by service centre specialists, who knows the local HR environment, incl. the company specifics. Given the complexity of the country rules and regulations in the 100+ EMEA countries with hundreds of different languages and a variety of cultures, it is hard to believe that you will find a significant number of HR experienced talents with the needed language and cultural skills, outside the EMEA region. This is the main reason why a regional service delivery model suppose to be the most promising way for a successful HR service centre deployment.

But what should this regional model look like?

From my perspective, a combination of three components is a key for an HR service centre delivery, especially in the Europe, Middle-East and Africa (EMEA) region:

1. Regional service centres to support the regional workforce
2. In-country expertise for certain areas and required depth of knowledge as a virtual extension to the service centre
3. Offshore centres in a low cost area for heavily transaction oriented work, e.g., mass updates

The regional service centres should be establish to obtain some cost savings through economies of scale and lower cost of labour in certain EMEA areas. The service centre should focused primarily to deliver inquiry support with a high level of first touch resolution. So first you should allocate one or more locations which would give you the best balance of talent availability and labour costs. This could be Budapest, the Ukraine, Prague or other Eastern European countries. But also areas like the triangle between Germany, Switzerland and France, the locations close to the Belgium/Netherlands border or parts of Spain should be considered. Even if labour cost might be higher, the talent pool for experienced HR specialists with language capabilities might be better. Also the inflation in the Eastern European countries is higher than in the Western European countries and the market experts are predicting that the cost of labour in the Eastern European countries, e.g., Czech Republic, will hit the average cost in the Western European market in the next years.

For certain expertise (e.g., payroll) and language capabilities (e.g., Finish, Dutch or Flemish) as well as legal requirements (e.g., Russia) or cultural reasons, there even would be no other place for a good talent pool, except in the country for which the service needs to be delivered. For those countries the model should contain in-country support from people who are living and working in the country and act as an extension of the service centre. Especially for the real process experts, it is very likely to find those specialists only in the countries.

For a very limited number of highly transactional oriented work, like mass updates or report generation, it might make sense to utilize an offshore centre. But be careful that a low labour cost area of today, might not be that inexpensive in the near future anymore. There have been some articles in the press that, even in India, based on the inflation labour cost will raise to the average of US labour costs in the next years.

I think a good, ‘balanced’ model would be to deliver 60-70% of the work out of regional shared service centres, 20-30% through in-country experts and roughly 10%, using offshore capabilities.