Running a Successful Global Capability Center (GCC)

Running a successful Remote or Global Capability Center (GCC) is no ordinary task. Here are a few things that worked for me as I ran successful India Development Centers (IDC) for several MNCs. The principles and ideas can be as easily used outside of India. 

While technologies, projects, priorities change all the time, the HQ always expects the GCC to be:

• Aligned with the overall mission of the larger organisation and change gracefully
• Flawlessly execute on the commitments
• Maintain the cost-structure and continuously improve

As the center matures few additional expectations would come:

• Increase in innovation and technical leadership
• Become autonomous, own entire product lines end-to-end
• Contribute to overall strategy by introducing local eco-system (Universities, Start-ups, specialised vendors)

... and do all these while

• Maintaining hiring and retention goals
• Being compliant to all the local and international regulatory needs
• Represent the organisation in the local geography 

Companies use sophisticated metrics (financial, project management metrics etc) and processes (Site Maturity Matrix, for example) and these are well documented. The focus of this post though is to specifically what the site leadership has to do grow the center and become a critical part of the organisation. 

We will not get into standard project/program/product management processes, HR methodologies and the like. There are a few things that the center leadership ought to carefully do and here's a list:

• Positioning the center
• Understanding and Navigating the internal power dynamics
• Picking fights - Balancing alignment and site vision
• Cultural sensitivity
• Higher level metrics
• Communicating "Cost vs Value"
• Growing Technical Leadership
• Sustaining for Long term success

In the next set of articles we will dive deep into each of these and discuss some actionable ideas.

Setting up a GCC: Cultural Sensitivity

 This might not be an immediate challenge but becomes important as the India Center grows. While this could be a huge topic in itself, the following are two major ones that will impact the quality of communication between India and other sites. 

·      have High Context (indirect, rely more non-verbal communication, relationship-oriented), 

·      exhibit High power-distance (automatically respect and value elders and higher-ranked people, hierarchy conscious)

 

Both these means dropping hints, having difficulty to say NO to seniors, long conversations and/or email before coming to the point etc., Further people do not easily speak up, but tend to sulk later. Most people are uncomfortable talking about their contributions and even have difficulty accepting sincere compliments (though they’d be yearning for recognition!). Even seasoned experts tend to keep quiet unless specifically asked to weigh-in. Many people take a lot of time to open up and express their true feelings/opinions.

 

Couple of best practices are:

• Arrange a formal “cultural sensitivity” training for people on both sides
• Make expectations and assumptions clear
• Go first, Go positive, Assume noble intent on everyone’s part and give more benefit of doubt
• Periodically review the need, cadence and duration of every meeting across the globe (people may resent too many evening calls but may not tell due to cultural norms discussed above!)

 

Good to know:

• The DEIB issues in India has a different flavour than what is seen in the western world. Assuming it is the same and expecting people to participate in similar ways (on initiatives) usually would make people annoyed.
• Most people in India accept working outside the standard office hours to interact with their counter parts on the other side of the globe. However, we need to strike a right balance (of having people involved and #meetings outside standard hours)

Resources:

• Here is a handy "cheat sheet for culture code" by Andy Molinsky, where he talks about six aspects (Directness, Enthusiasm, Assertiveness, Formality, Self-promotion and Personal Disclosure) that vary across cultures.
• A must watch 40min webinar titled "Global Dexterity: How to Adapt Your Behaviour Across Cultures without Losing Yourself in the process" by Andy Molinsky.
• In the book titled "The Culture Code" author Daniel Coyle talks of 3 special skills (Build Safety, Share Vulnerability, Establish Purpose) needed to build high-performance teams. Busy? Here is a 10min summary!

Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Choice of the Site Leader
• Regulatory approvals
• Hiring the core team
• Hiring enabling team
• Infrastructure
• Scaling up and Staffing models
• Setting-up the India team to succeed

Setting up a GCC: Setting up the India center for success

Assuming that the setting-up activities are done and that the GCC has become operational, it  is critical that the leadership team sets clear expectations to the team in India and set them up for long term success. A great Site Leader who acts “in spirit” as the CEO or the founder for the GCC, can make it lot easier for the parent team. Some best practices include:

• Immersive induction training for the senior people, at the parent company where they learn about the business, technology and customers and get to know senior execs and the key people they’d be working with.
• Setting up a 30day and 90day goals and set-up a regular quarterly review of the performance of the site (this is outside of the standard program review meetings and other agile ceremonies). Arriving at site maturity matrix and setting goals to move to highest levels can really work wonders.
• Set-up a Board of Directors (possibly outside of the legal requirement), made up of key stakeholders. This group should meet regularly as a small team (different from the quarterly meetings mentioned above) and have the Site Leader talk about goals, challenges and the help-needed, and the board could offer their perspective and guidance. I’ve seen that this idea creating a strong bond, help build commitment and help succeed beyond what is merely expected.
• Allocate considerable budget for travel (both from India and to India) of key stakeholders. Have the India leaders actively participate in strategy and other such meetings, where appropriate. 
• Encourage senior technical and management leads in the India center to actively participate and contribute to company-wide initiatives.
• Do not restrict the India center to mere execution, and provide opportunities to contribute for architectures, long term plans, idea generation and innovation. This helps both to unlock the immense potential and also to retain people.
• To fully utilize the potential of the GCC, it is important to grow other functions too (Product, Services, Customer Success) especially after the engineering team mature. Some even move sales backend, IT and such functions too.

Good to know:

• Expanding work to low cost centers invariably creates anxiety and insecurity amongst a few and it has the potential to derail the broad objectives. It is essential that everyone in the parent company be upfront briefed about the reasons for opening an India center and possibly allay their fears.
• While India has made rapid progress on technology front, there still exists several 3^rd world challenges. Further, there are certain cultural aspects (see next section) that mandates certain changes to be made in the way people (in the parent company) work. Leads and managers leading people in India, might need specific training on managing people remotely.
• Too much matrix management during the initial days makes life difficult for people on both sides. It is better to have only the Site Leader report directly to the parent organization. Even folks in support functions like HR, finance etc., should have only dotted line reporting to their functional heads in the parent company, atleast till the site attains certain maturity level.

Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Choice of the Site Leader
• Regulatory approvals
• Hiring the core team
• Hiring enabling team
• Infrastructure
• Scaling up and Staffing models
• Cultural Sensitivity

Setting up a GCC: Scaling up and staffing models

Once the initial seed team is in place, there are the standard three ways of scaling up the team:

• Organically grow the team
• Hire a contracting company
• Acquire a company

We will focus on the first two here. Organically growing the team helps to create a strong team which identifies itself with the parent company and take pride in the products. However, this calls for a fair amount of time investment. Moreover, in the event of major changes w.r.t the technology/platform, we will have to painfully retrain the people (laying off decreases the morale and should be done only as a last resort). 

 

One of the best-practices is to simultaneously engage with a contracting vendor while the India team is being hired and onboarded. Cost per engineer from the contracting company would be higher, but it helps in quickly getting a critical mass and have the center productive. As and when the India team ramps-up, the contacting engineers can be ramped-down completely.

 

Another model is to always have some percentage (say 10-25%) of the total India staff as contractors. This helps if there is a spike in headcount seasonally or if we want differently skilled people at different times in the year. With a large pool of trained engineers, contracting companies can absorb ups and downs of the headcount monthly. Finally, we could let go of the contractors during business downturns and use layoffs as last resort.

 

Key decisions for this part include:

• Whether or not to engage with contracting firms. If so, how many engineers and at what levels and skill sets. 
• The nature of engagement – whether it should be done as resource augmentation or as outsourced product development (both have their pros and cons). Best practice is to go with resource augmentation mode and then possibly move to outsourced model. 
• Type of privacy , confidentiality and security protocols that need to be put in place while engaging contracting companies

Good to know:

• There are several classes/tiers of contracting companies. At the very top are companies like Infosys, Wipro etc.,  who typically do multi-million dollar accounts and may be too big for start-ups to get management attention and good engineers. At the next level are small to medium sized boutique firms specializing in niche areas. Finally, there are several “me-too” type companies whose only business mode would be to “supply” engineers. Boutique companies charge the highest.
• There is also a possibility of entering into an agreement with the contacting companies to periodically transfer X engineers to the India entity. While this comes with a cost, the India entity will get trained engineers at a regular cadence and with certainty.

Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Choice of the Site Leader
• Regulatory approvals
• Hiring the core team
• Hiring enabling team
• Infrastructure
• Setting-up the India team to succeed
• Cultural Sensitivity

Setting up a GCC: Infrastructure

 Given the rentals are very high especially in Bangalore, where the office is located plays an important role in terms of cost, branding and given the traffic, it even becomes a factor for the potential hires to accept the offer. Best practice perhaps would be to start-off in a co-working space for 6 to 12 months and then perhaps move to a separate facility if needed. It is also difficult to find office space for 50-100 people set-up in a branded space (most of the big names won’t even talk if the requirement is less than one single floor). Starting off in a co-working space also relieves the India team of taking care of things like networking, catering, designing the office space etc., A post-covid phenomenon is the addition of hybrid and remote models, which has a bearing on the space required. The critical decisions at this phase are:

• Decide on total space requirement (preferably for 3,6 and 12 months) and find a suitable space. Space requirement should also take into account how many days we’d want engineers to be in office each day (best practice: for the initial few months people should predominantly work out of office)
• Decide on whether to rent or work out of co-working space. 
• Decide on broad area(s) where we’d like the office to be
•  Decide the co-working space vendor or hire real estate agents to find a place, based on all of the above.
• Choice of STPI or SEZ – the two tax incentive schemes. Whereas any office space be labelled an STPI, SEZ has certain restrictions and therefore has a bearing on the location.

Good to know:

• The rental space comes in 3 flavours and the rent varies from highest to lowest:
• Fully furnished (cubicles, conference rooms, networking, private offices are already done). No or limited flexibility. Usually this office would be occupied by someone and who have left after their lease expired
• Warm shell (networking and carpeting are done). We have the flexibility to design the office as per our requirements.
• Cold shell (just the four walls). Maximum flexibility.

• Best practice would be to go with the fully furnished option.
• Several builders are notorious for not following all the building codes. It is therefore essential to make sure that the paper work is accurate.
• Employees expect some amount of inhouse catering or have the office in such a place where it is easy to get food. As trivial as it may sound, lack of food options could create a major dissatisfaction even in the age of food delivery ops.
• Rentals come with a huge security deposit (often 6 to 12 months). This upfront cost needs to be factored-in as a part of set-up costs.

Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Choice of the Site Leader
• Regulatory approvals
• Hiring the core team
• Hiring enabling team
• Scaling up and Staffing models
• Setting-up the India team to succeed
• Cultural Sensitivity

Setting up a GCC: Hiring the enabling team

A great enabling team will keep the engineering team productive. This’d be mostly the IT, Finance/payroll, Legal, HR and Administration/facilities. Depending on the nature of the work, Finance/payroll and Legal activities can be outsourced. IT support could come from the parent company itself and it might suffice to have one IT support engineer locally. Payroll administration is a critical function, but there are lot of vendors that’d take care of running the payroll and the required filings. Similarly, finance and legal consultancy and filings could also be outsourced easily. At the initial stages of the company it doesn’t make sense to hire people for these. However hiring the HR staff and Administrative staff cannot be postponed – these should be hired simultaneously along with the seed team, but definitely once the Site Leader is hired, allowing the Site Leader to pick his/her team. Again, a good Site Leader should be able to tap the network to get these people quickly. Best practice is to start with the HR and the Admin leaders and then have them hire for sub-functions (Talent acquisition for example). Key decisions of this phase include:

• Identifying the level of outsourcing for enabling functions and finding the right vendors for the same.
• Deciding how IT will be handled – what will be supported from the parent org and what will be done locally.
• How expenses of initial few weeks (while the bank accounts, signatories and other registration activities are still going on) would be handled.

 

Good to know:

• For the first year or so, it is better to go with a single vendor who could offer these services – Accounting, Taxation, Payroll, MIS, Local Law compliance and Company Secretarial services. This’d reduce the overhead of working with several vendors and allow to focus more on getting the engineering team up and running.

 Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Choice of the Site Leader
• Regulatory approvals
• Hiring the core team
• Infrastructure
• Scaling up and Staffing models
• Setting-up the India team to succeed
• Cultural Sensitivity

Setting up a GCC: Hiring the core team

Talent – the single most important reason why companies come to India. However, this could be one of the most challenging activities in a highly competitive market. It is very common to see some engineers have multiple offers and pit one company against the other and try increase their compensation. Core team joining only for money can be a disaster down the road. We’d need people to join for the mission, nature of the work and backed up with a “good” salary. This is where a great Site Leader can make all the difference and can attract talent on his/her own and use the network to spread the word and attract talent in a cost-effective matter. Some of the key decisions at this phase include:

• Identifying the number of key/senior engineers with the required skill set and experience levels and how to compensate them (see next two bullets)
• Where to position the company w.r.t salary levels vis-à-vis comparable companies (should it be in the 80-90 percentile or say 50-60 percentile). 
• Incentives like annual bonus, variable pay linked to performance, stock options and other benefits (insurance, contribution to super-annuation etc.,). 
• Ratios of engineers to tech-leads/managers, number of entry level engineers, interns and a long term growth plan. Avoid the temptation to hire entry engineers till there is enough tech-lead bandwidth to guide them.
• Nature of work in the short and longer term. Engineers get drawn to work that is on the cutting edge. It’d be very difficult if only maintenance work is moved.

Good to know:

• While there is no dearth of talent, it is time consuming to onboard engineers, especially the senior ones. Typically, companies in India have notice period of 30 to 90days and the process drags. Expect about 5-6 months to get tech-lead type people, about 3-4 months for people with 3-5years of experience, on an average. 
• Good number of people will accept the offer and do not turn-up on the day they promised to join. This can be anywhere from 10-30%. Hiring plans therefore should therefore over hire (atleast the mid-level positions). There are several best practices to keep the candidates engaged till they join.
• For start-ups, the concern from most potential hires would be on the runway length that is remaining (and for established/bigger companies, the concern would more be on nature of the work). It is therefore essential for the hiring team to be broadly open about the investors, how the company’s business is, potential funding rounds in the future etc., and even the plans of exit (IPO/Sale). It adds credence if it comes from the founders/senior execs (see next point)
• Involvement of founders and senior execs especially for fence-sitters is a must. While the Site Leader and the local leadership should be able to close most positions, senior execs taking time to explain the mission etc., will go a long way in increasing the yield.

Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Choice of the Site Leader
• Regulatory approvals
• Hiring enabling team
• Infrastructure
• Scaling up and Staffing models
• Setting-up the India team to succeed
• Cultural Sensitivity

Setting up a GCC: Regulatory approvals

There isn’t much of a decision making involved as all the regulatory approvals need to be in place anyways. There are a bunch of approvals. Here’s a quick (but not exhaustive) list: Registrar of Companies, Reserve Bank of India, Shops and Establishment, Tax registration numbers (GST, Permanent Account Number (PAN), Professional tax, Provident fund etc.,). 

 

However, the Government of India (GoI) has made all these seamless and made it a single window system. There are several local and multinational companies who’d assist in getting all these done. Still, the following decisions need to be made by the parent:

 

• The company (local/multinational) company to be engaged. Cost, time, and reputation need to be analysed and a call need to be made.
• The directors of the India entity. Usually this’d be from the company assisting in getting the registration done, along with the Site Leader. During registration a lot of documents need to be signed and to speed up the process the founders and other senior execs are brought in to the board later, in place of the directors from the company assisting with the registration process.
• STPI or SEZ? These are the two incentives that GoI offers to encourage foreign investment and offers different tax incentives. For smaller (<200) set-ups STPI sounds good, as it is little more flexible.

 

Good to know:

• Costs involved in registration (both the government fee and consultation fees)
• Dependencies (for example, bank account, lease agreements are needed before applying for some of the approvals)
• Transfer pricing (the profit that the India entity can claim). Most GCCs operate on cost+profit model for the India entity. The profit margin is usually around 15-20% and periodically the India entity will do dividend repatriation. This has been a messy issue with GoI demanding higher profits for the India entity, especially for bigger companies that claim to do end-to-end product development out of India. 

Related posts on "Setting up a GCC":

• Introduction
• Location within India
• Choice of the Site Leader
• Hiring the core team
• Hiring enabling team
• Infrastructure
• Scaling up and Staffing models
• Setting-up the India team to succeed
• Cultural Sensitivity