Jack’s experience is not uncommon; in fact, many companies have experienced
similar troubles in recent years. Some Western businesses, especially from the U.S., consider disengaging from their offshore engagements or have
already done so. Journalists already coined a new term, ‘back-shoring’, for this move.
Pulling out of offshore contracts altogether may nevertheless be short-sighted.
Across many industries, companies have demon- strated the benefits of global collaboration and the use of offshore subcontractors. The key is to
manage these engagements right. Those struggling with poor vendor performance all too often over- look three important rules:
Don’t Expect Your Subcontractor to Understand You or Your Business
Asia’s large outsourcing vendors, among them many of India’s IT heavyweights,
are quick to assure Western clients that they won’t have to worry about distance, language, or cultural differences. They usually point to
their extensive expertise in working with this client group and to proven processes that allegedly minimize the risks presented by such factors.
These assurances are best taken as statements of good in- tentions, rather than
facts. In reality, each new subcontracting en- gagement, especially one that requires working across cultures, requires a carefully managed process
of learning about the other’s ways of doing business, practices and processes. When enga- ging with a new foreign client, you know you have to
understand their expectations, their competencies, their culture, their bounda- ries, and so on, all of which goes both ways. Don’t expect
this to be any different if you are working with a foreign vendor.
Don’t Assume Bad Intentions
Things sometimes go wrong. When they do, it never helps to assume that the other
side intentionally failed you. Wanting to make clients happy and taking pride in having done so are universal traits that have little or nothing
to do with culture. What may be strongly culture-specific, though, is what defines success or failure. Being late by a few days, or not having
done something you were supposed to do, may be major issues in one culture and minor nuisances, if even that, in another.
That makes it critical to be very clear about your expectations, and not only
those regarding deliverables and deadlines. Let your vendor know which deviations from your agreement might be acceptable and which ones
won’t be. Most importantly, give them a reason for the latter. The better a vendor understands your ex- pectations and requirements, the
more likely they are to avoid issues or at least give you early warnings of potential delays, giving you a chance to identify possible
workarounds in time.
Don’t Use a Contract As a Stick
The forces of Globalization have made legal systems in many countries much more
dependable, especially in the area of con- tract law. Trying to enforce a contract in court, once considered naÔve in many places, is now often
realistic. Smart international businesspeople know to do this only as a last resort, though, as such a step is likely to cost both parties
steeply, not only mone- tarily but also in damages to their reputation and lost future business opportunities.
Nevertheless, Western clients tend to be quick to point to con- tractual obligations
and threaten legal consequences whenever disagreements surface. This is usually counterproductive. In international business engagements,
contracts serve two important purposes: to clarify nature and scope of the agreement and to provide strong evidence if seeking legal remedies.
Attempting to use a contract as a management tool to direct a subcontractor’s work rarely makes sense. For one, threatening legal consequences
usually makes the vendor less communi- cative, out of fear of increasing their legal exposure. In addition, vendors belonging to
relationship-oriented cultures, for instance in Asia or Latin America, tend to respond by becoming less colla- borative. In these cultures,
threatening legal action is considered the last resort after all other attempts to resolve a dispute have failed. When a client threatens them
with legal action too soon, vendors might no longer be motivated to fulfill the contract – just the opposite of what the client hoped to