Did you know India has a little more risk today?

Euler Hermes, the 100-year-old trade credit insurance firm, has a fantastic little tool for assessing credit risk around the globe. Euler Hermes monitors country risks in 241 countries and territories. Their country risk map aims to assess the risk of non-payment by companies in a given country.

In other words, if you’re thinking of developing a new market, you can use this little tool to see how likely (or unlikely) it is you’ll get paid. The map is interactive, and updated periodically to reflect changes in the global economy.

As many of you know, we do a lot of business in India — so, I was pretty surprised to see that Euler Hermes upgraded India from “low risk” to “medium risk” this year. In retrospect, while it took me by surprise, it probably shouldn’t have. India still suffers from an immature business market. I can see how this can translate into higher credit risks.

Country Risk Map
Country Risk Map, Euler Hermes (click to open)

It also underscores how important it is to work with a trusted source, and an experienced partner, no matter what country you go into. Euler Hermes is one such resource when it comes to insuring your revenue stream — whether its import/export, manufacturing, or even R&D. If you’re doing International business, trade credit insurance is a must, and these guys know how to do it well.

Getting back to India: Yes, maybe it is a little bit more risky today, at least when it comes to credit risk. But that’s no reason to stay away, it just means you need to account for those risks. Engage with a partner that really knows how to work with India, take the right precautionary steps (such as using trade credit insurance), and move forward with your eyes open. India is an incredible market opportunity, and not one to shy away from!

What Parts Of My Business Should I Outsource?

Rather than wear every hat — every single day — businesses need to be strategic about what can be outsourced or subcontracted. Outsourcing is a way to focus on what you do well. But the challenge is knowing which parts of your business should be outsourced. Here are few tips to help you on that.

Hi, I’m Zacharias Beckman, President of Hyrax International, and I want to talk about what parts of your business you should outsource.

Whenever you use an outside Attorney for expert advice, or a CPA firm to audit your books, that’s outsourcing. Outsourcing allows us to focus. It allows us to concentrate on what makes us great. A lot of companies don’t do this. They get distracted by what doesn’t make them great. But, success means focusing on your secret sauce — on the one thing that you do that nobody else knows how to do. Everything else then becomes a candidate for outsourcing. It’s a simple cost benefit analysis. If there is someone else that can do the work cheaper or faster or better, then let them do it and you stay focused on what you do really well.

Take Apple for example, and the iPhone. Their secret sauce was the industrial design behind a new phone and the software that makes it work great… not so much the manufacturing of the devices. They outsourced that to Foxconn and they delivered a fantastic product, much faster than they could have done on their own. They focused on their core competency and because of that they were incredibly successful.

Outsourcing allows us to focus on what makes us great, and not get distracted by the things that don’t.

Is Culture Shock Ruining Your Chances Overseas?

Traveling to a foreign country, living there, meeting new people, and facing success or failure abroad can trigger fear in all of us. To some, it’s a mild fear of the unknown. To others, it can be a stress-inducing, unpleasant experience. It’s rooted deep in our psyche: Differences in beliefs, race, color, religion, culture, and even language have led to innumerable acts of war and violence throughout human history. Believing that globalism has put it all behind us is naive at best. Those that think trivially of the differences between cultures, and the deep-rooted permanence of those differences, should think again.

Experiencing Culture Shock In The U.S.

Most willing expatriates will approach the prospect of an International sojourn with trepidation. Fortunately for most such feelings are usually manageable. Yet, intercultural issues absolutely cause stress. The stress of travel, of the unknown, being away from home and family, of making a mistake that leads to failure. Stress causes anxiety, and as humans we react to anxiety in much the same way we react to fear.

This exact situation happened to Venkat, after relocating his family to the United States. Venkat had been working for his employer a few years when he was invited to move to the U.S. office. It was an excellent opportunity and one that Venkat embraced wholeheartedly.

But, soon after arrival, Venkat started to have difficulty. Being from India, he was accustomed to a strong social network at work and home. Both he and his wife felt cut out of society because Americans just don’t connect like Indians do. Neighbors typically don’t become close friends, and co-workers rarely create strong after-work bonds. Venkat was unprepared for this. He felt excluded when his social invitations to neighbors and coworkers weren’t enthusiastically reciprocated. Soon, he came to feel the promises of “getting together after work” where well-meaning but insincere pleasantries — even the few times his efforts were successful the get together was stiff, brief, and conversation revolved around work.

Eventually, Venkat came to realize that Americans only get together rarely after work and when they do, it’s more an obligation than genuine camaraderie. He and his wife felt isolated, and decided to end their stay in America after about a year. The socially distant culture of America was never something they could get used to.

Understanding Culture Shock

Misunderstandings, embarrassments, and misinterpretations occur today, on a regular basis, between tourists and professionals alike. The accelerating pace of technology is speeding up communication — it’s becoming cheap and nearly ubiquitous. Where we relied on couriers that would take months to deliver a message, now we connect with people globally in seconds. The expanding pace of International business adds to the rapidly expanding, global reach of companies — and as it does, so our need to interact across cultures increases with it.

When a family, or husband and wife, are sent abroad, it’s often the partner who stays at home who experiences the worst culture shock. The professional in the family is embroiled in work, kept busy with professional obligations. The business network forms a sort of insulation from the cultural impact. This insulating effect can be stronger when an expatriate is positioned as an expert, visiting a foreign culture to lead a team, share important knowledge, or otherwise perform a critical function. At the same time, the one staying at home — possibly looking after children or a household — is not so insulated. There may be no support group to turn to. Learning to get around, picking up the local language, facing contractors or repair personnel, dealing with school officials, and learning local customs is often harder without the support of an eager team of coworkers.

Acculturation Curve

Culture shock is a normal situation. It affects nearly everyone that relocates abroad for any period of time. It may not set in immediately — in fact, early on, an opposite effect of euphoria often masks the anxiety most people experience. People living in foreign environments typically report a transition in their feelings that follow an “acculturation curve,” shown in the above figure and first introduced in Cultures And Organizations.1 Positive and negative feelings are shown on the vertical axis, while time progresses forward from left to right. The initial euphoric phase is typically short; it represents the initial feelings of adventure, seeing new lands, travel, and meeting new people. Culture shock sets in during Phase 2 in the diagram, as the euphoria begins to wear off and the realities of life in a foreign society set in. Acculturation, or adjustment to local culture, takes place during Phase 3. This is when the foreign national begins to acclimatize to differences in culture, learns to adopt and function within local customs, and establishes connections with a new social network. Finally, self-confidence and comfort with the local environment is established. This “stable state” of mind can settle as negative or positive when compared with home, depending on the individual and their circumstances. Those that are lucky enough to experience a relatively more positive stable state (4c) are ideal candidates for long-term repatriation, and quite likely are well suited to cross-cultural business relationships. This is when the visitor has “gone native.” On the other hand, a negative steady state (4a) can mean that the individual never becomes fully acclimatized. Instead they continue to feel out of place, discriminated against, or an outsider.

The feelings instigated by culture shock often lead to feelings of distress, of being out of place, longing for home, helplessness, and in some cases hostility toward the new environment (as pointed out in Managing People Across Cultures).2 Expatriates often experience higher incidence of medical problems soon after relocation, as opposed to later. These illnesses are linked to the mental state brought on by culture shock. Symptoms can be the same as those of mild neuroses, and can extend to skins rashes, appetite loss, depression, sleeplessness, swellings, palpitations, and more.

Getting Used To It

The time period for acculturation varies dramatically. Both temperament and situation factor into acculturation. The most significant common factor seems to be the time period of the foreign visit itself. People on short term assignments, say a few months, have reported experiencing all phases of the acculturation curve in the same short time. On the other hand, people on long term assignments stretching over several years indicate acculturation takes longer, as much as a year or more.

Culture shock can be so severe that assignments may need to be cut short. In extreme cases, anxiety, depression, or homesickness will directly affect work. Such cases can lead to significantly reduced performance, and even inability to function. In at least one situation I’m aware of, a family relocating to Europe experienced long-term problems with social integration. The stay-at-home partner, responsible for raising the couple’s child, developed a strong aversion to leaving the house and continually avoided learning the local language. This left the working partner saddled with most responsibilities for both business and household care, at least when it came to running errands, arranging services, and working with the local school or health care system. The anxiety of the cultural transition became exacerbated, leading to a strain on the couple’s relationship. After several years, there was little improvement. The “steady state” was clearly a negative one. Even though the husband wanted to stay abroad, the couple frequently discussed plans for returning to the United States.

In part two of this article, I’ll discuss how to prepare for and deal with culture shock, from both a management and individual perspective.

1 Cultures and Organizations: Software for the Mind, Geert Hoftstede, Gert Jan Hoftstede, and Michael Minkov, McGraw Hill.
2 Managing People Across Cultures, Fons Trompenaars, Charles Hampden-Turner, Capstone.

Risk Mitigation In Global Projects

I was recently asked what are the most relevant, pressing risks that affect global project management, and if I had any ideas regarding risk mitigation. Many come to mind but one stands out immediately: The most significant risk we routinely identify is a globally distanced team. This means geographic separation as well as cultural separation. Teams working in separate regions face tremendous challenges that a co-located team doesn’t have to think about. This is exacerbated when outsourcing, where conflicts in language, time orientation, power distance, culture, and business environment all affect the organization.

The Top Risk: “Globally Distanced Teams”

Organizations facing these work environment risks need to put a considerable investment into risk mitigation — specifically, developing an early strategy to avoid serious long term problems stemming from a distanced team. It turns out that the risks of a distanced team are a principle reason that the “promise of outsourcing” has been toned down over the past decade: Gone is the illusion that you can get solid work for 25 cents on the dollar. “Real” outsourcing costs tend to range anywhere from 70 cents on the dollar to $1.20 on the dollar (yes, outsourcing can often lead to higher costs — but sometimes it’s not just about the investment, but geographic presence, distribution, foreign market penetration, etc.)

Language barriers pose some of the most difficult issues to work around. Being unable to easily communicate means poor communication becomes a barrier to the entire team. This can lead to misunderstood requirements, misinterpretation of directions, even a complete disconnect on whether a team is in trouble or doing fine. Open communication, information radiators, and visibility are central to successful projects, but these ideas will not solve the problem of communication alone. Closely related to language barriers are cultural barriers. Any barriers increase risk, and that means increasing efforts to compensate. The best performing teams create tightly integrated work environments, attend cross-cultural coaching, and set up an active program to educate everyone about the business cultural preferences of each organization.

Local business environment, cultural bias, and common assumption will contribute to the risk of global projects too, especially those separated by business culture. I once had a U.S. client developing a legal work product solution using East Indian resources. The lack of a common business foundation quickly lead to a serious disconnect regarding business objectives. Not only is the legal system in India much different from that of the U.S., but a pervasive lack of trust in the local legal system put a pall on the entire project. Only by tackling the problem of the disconnected team could the problem be solved. Our risk mitigation include extensive “cross pollination  between the teams, such as bringing all team leaders to the U.S. for extended work periods. This not only improved their understanding of the U.S. legal system, but also changed their perception of what a legal work product could, and should, do.

All of these issues can be mitigated with appropriate practices. The necessary measures will vary from one project or organization to another — there are a lot of variables at work, and that means every project has to be treated uniquely. One common thread is communication. Every global project has to deal with this particular issue at some level. Breaking down these barriers by using process, technology and cultural integration is the key to success. The disconnected team needs to become one team, working as a unit — and that usually means a significant investment in tools, strong processes and team-building exercises. I strongly advocate rotating team members across the organization or project as one example. This helps across the board: It breaks down communication and culture barriers, helps team members get to know one another, lets distant teams experience local culture, and helps to build a collaborative “whole team.”

[quote style=”boxed”]The globalPMguy blog is all about tackling the challenges of international projects. If you’re working with an international partner, in any way, be sure to keep reading![/quote]