Stan Lepeak, Director, KPMG Global Sourcing Advisory Research

KPMG research and client experiences find a renewed interest in the use or expansion of shared services as a core component of a global services delivery model.   Interest in nearshore captive shared services centers is growing among firms in the U.S. and western Europe.  Interest in offshore captives located in India remains strong with demand growing rapidly for captives in Asia Pac, especially China.  While most organizations that are building out near and/or offshore captive services centers have onshore service center experience that they can leverage, there are important nuances to take into account when moving offshore, near or far.

One key issue is talent management.  Many organizations struggle to attract and retain the talent they need to operate near and offshore centers.   Attrition rates often are high and prove disruptive.  Too often it is felt that paying higher salaries is the answer; however, this alone typically does not solve the problem and contributes to escalating wage inflation common in these markets.  Rather, organizations with near and offshore shared services operations need to develop a tailored strategy that uses a number of available levers to attract and retain local market talent.

There are five key levers that organizations can pull to attract and retain shared services talent.  They are listed below in no particular order because their relative importance will vary across organizations, markets, and based on the services in scope.

• Brand. The brand of the parent organization is very important to attract talent in offshore markets.  Organizations with strong global and ideally local market brands should play this up in the recruitment process and reinforce it to existing employees.  This could include supplying many branded perks to employees.  Organizations with weak brands must factor this negative into hiring, wage and attrition plans.
• Career path. Organizations must define clear career paths that outline the path to advancement all the way to the top.  Clearly defined and articulated milestones and time frames for advancement are critical.  Titles are important in offshore markets.  More titles are better than less and provide a means to offer regular advancement for qualified staff.  Consistency in titles should exist across operations.  Flexibility and duals paths are also important, for example, to allow advancement for staff who are skilled technologists but do not want to (or are not suited to) move into management roles.  On the flip side, organizations must consistently and quickly eliminate underperformers and malcontents.
• Compensation.  Clearly compensation is the top draw.  Organizations need to employ as aggressive a compensation model as the business case permits but augment with these other levers.  Regular market benchmarking is important.  Organizations should often conduct them more often than yearly.
• Work duties. Organizations need to clearly define work duties, roles and responsibilities and try and make the work as interesting and varied as possible.  Cross training, promotion, and dual roles creates more well rounded staff and is more interesting to more motivated employees.  Being treated as an equal with home office/onshore staff at the same level, and being “part of the team” is motivating and can accelerate skills development.   Where appropriate, direct involvement with clients and business partners can provide valuable experience and drive loyalty.
• Training and career development. Organizations should define and map training needs and requirements throughout employee careers.  Tying advanced training to retention is appealing but can prove hard to enforce.  Hands-on training, including periodic off-site events (ideally at nice locations), promotes morale and loyalty.  If viable, individual or group trips to the home office market for training events should take place.  Assigning a mentor from the home office can accelerate learning and create a stronger bond with the parent firm.

Successful use of these levers will not stop attrition or necessarily significantly reduce wage inflation. Ideally their usage will improve an organization’s talent management success rates to above those found in the market average and among their competitive peers.

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Filed under: Shared Services by EquaTerra