Cultural Factors when Choosing an Outsourcing Company

The world goes online. Even before pandemics, e-commerce, mass services digitization, virtual twins, etc. were on the rise. The year 2020 just speeded up these already existing trends. According to Mordor Intelligence’s research, the IoT market size was $761 bln in 2020 and is projected to reach $1.3 trillion in five years. Nasdaq claims that in 3 years about 95% of all retail purchases will be made online.

Changing working culture is another challenge for businesses. It’s not just the clients who want to be served in a contactless smooth and innovative manner. Employees are also not eager to come back to the tiny offices. Small talks and free cookies (after a two hour traffic jam)? No, thanks.

Acceleration of these processes leads to the increasing lack of resources. Not every company can afford to create its own software development department. Hiring software specialists also takes time. In the USA, it takes approx. 28-35 days to hire a software developer. In 2019, according to CNBC, there were about 920 thousand unfilled IT positions. And as you can imagine, IT specialists know their value and aren’t afraid to show it during the interview.

So, no surprise that the ordering of software by outsourcing companies is becoming more and more popular. Grand View Research predicts optimistic annual 7% growth of the software outsourcing market from 2021 to 2027. The main reasons for businesses to outsource software development in 2021 are:

But great expectations can bring great disappointments. According to Dun & Bradstreet’s Barometer of Global Outsourcing 2020, every fourth outsourcing relationship fails within five years. But why? Key reasons mentioned in numerous studies are:

As you see, there is nothing about hard skills and technical knowledge. And now (sorry for the long foreplay), we finally arrive at the topic of our article. Why are communication and soft skills on the top of problems’ list? Why can’t a client just say what he or she wants, and why can’t the dev team simply follow the instructions and create the custom software? What is the problem?

The point you might overlook is the cultural difference between the customer and the outsourcing companies. The main outsourcers today are the USA, the UK, and Germany. The most popular outsourcing destinations are the Asian region (India, Vietnam, China, Philippines), Eastern Europe (Ukraine, Belarus, Bulgaria, Poland, Russia, Lithuania), and Latin America (Brazil, Chile, Colombia, Uruguay, Guatemala). Globalization, common business codes, and numerous team buildings won’t help if you ignore the main cultural differences between you, your employees, and the outsourcing company. So, let’s check what are these cultural factors you have to take into account, and how they differ in each of the above-mentioned countries.

Cultural Parameters

There are hundreds of culture definitions and approaches. Below you’ll find the parameters that can influence employees’ behavior the most.

Time approach

This criteria is important for solving two problems: poor project estimation and failed project planning.

American anthropologist and cross-cultural researcher Edward Hall suggested dividing the cultures on polychromatic and monochromatic depending on the time approach.

Monochromatic cultures

In such cultures, time is strictly regulated. All activities should be scheduled. For representatives of monochrome cultures, consistency and concentration on one thing at any given time is an important work approach. In one period of time, one thing should be done, and only after completing the first task, it’s fine to move on to the next.

For representatives of monochrome cultures, punctuality and adherence to deadlines are important. To be late for a meeting, a call, a meetup, etc. can be perceived as a lack of interest in the project, and it can cause conflict. Time in these cultures is presented as a limited, irreplaceable, and rare resource, the value of which is extremely high.

Polychromatic cultures

Polychrome cultures are freer when it comes to dealing with their own and their partner’s time. Being 10-20 minutes late for a meeting is not rude. It can even be used as a demonstration of the significance of a latecomer. In polychronic cultures, a person can simultaneously do several things at once.

Keep in mind that in different cultures there may be elements of both types, with one or another type being dominant. So, the Russian culture is often characterized as predominantly monochronic with some elements of polychronic behavior.

Another culture researcher, Richard Donald Lewis, developed a more detailed model in which all cultures could be divided into three types: monoactive, proactive and reactive. It corresponds pretty much with the Hall’s system.

Monoactive cultures

The monoactive or task-oriented culture representatives are calm and rational. It’s common to plan the future systematically, draw up a schedule and carefully organize the activities. A linear organization of work is believed to increase efficiency; there are fewer abstract concepts while discussing the project. Not soon but tomorrow at 2 pm.

Proactive cultures

In proactive or people-oriented cultures, which Lewis also called “talkative” and “sociable”, the main resource is communication. In everyday life, it is not customary to make long-term schedules. Representatives of these cultures often prefer to run many projects at the same time. In this case, projects can overlap.

Reactive cultures

In a reactive or respect-oriented culture, people are careful about planning their routines. For representatives of reactive cultures, time is cyclical and it is customary to adapt to it. There is a saying in some Asian reactive cultures – “When God created time. He has created enough of it. ” This accurately describes the behavior of people in a reactive culture. They hesitate to make decisions. The monoactivers can perceive it as wasting time. But respect-oriented employees try to build relationships with their business partners and colleagues tactfully, to avoid unpleasant moments in negotiations, giving all their strength to building harmonious communication. Lewis calls such cultures “listeners.”

In the 1960s, Geert Hofstede launched a large survey inside IBM, a multinational company. He wanted to find the national differences in values, and to see how they influence behavior in the workplace. Based on the results, Hofstede developed a cultural dimensions theory. Today, this theory is like the Newton’s law of universal gravitation in cross-culture studies.

Here, we’ll take the first four dimensions Hofstede analyzed: individualism-collectivism, avoidance of uncertainty, power distance, and masculinity-femininity.

Individualism or collectivism

This is an important parameter that affects how willingly your team members work with outsourcing specialists from another country, share their opinions, challenge unsuccessful decisions, argue with the manager regarding unpleasant decisions.

In the Hofstede concept, individualism characterizes a society in which the connection between individuals is less significant and self-interests prevail over the interests of the collective. A collectivist society is a society in which the interests of a group prevail over individual gains.

Conflicts and disputes are perceived differently depending on this parameter. In collectivist countries, it is believed that a conflict within a team is inappropriate, because initially there should be an opinion generally accepted in a group (the one that’s been voiced by the leader), and an opinion of an individual is irrelevant. Representatives of such a culture avoid direct statements, as this can lead to a conflict. Instead of a categorical “no” they will say “maybe” or “we will think.” Also, the word “yes” cannot be taken literally.

One more feature of the collectivistic culture is the need to “save face” even at the expense of project efficiency.

In individualistic countries, on the contrary, it is almost essential to argue. Firstly, because everyone has their own opinion, and making an argument for it is a part of the job. Conflicts are natural and normal, and they are beneficial. The dispute is believed to be a sign of interest in the project, and honesty.

Hofstede found that when choosing a workplace, individualists and collectivists pay attention to different “values”. For an ‘individualist’ it is important to have:

 

For the ‘collectivist’ it is important to experience:

 

In collectivist societies, the relationship between the employee and the boss is characterized by emotionality. They are perceived similar to how relationships in the family are perceived. (In a collectivistic family: controlling, with no personal barriers, awkward personal questions, etc.)

Individualists fulfill the assigned task. The emotional and personal component is not so important for them. Instead, there is a contract, and it regulates all relations within the company, with the boss, and the client.

Uncertainty avoidance

This parameter strongly affects the culture of planning, the perception of project risks, the assessment of own and teams’ skills.

This parameter shows the attitude towards uncertainty. In some societies, uncertainty is perceived as a negative phenomenon, it is customary to avoid it: “take fate into your own hands.” In others, uncertainty is considered a natural state: “take every day as it is.”

Uncertainty tolerance means:

 

At the same time, uncertainty-avoidance cultures are characterized by:

Power distance

Understanding the power distance shows what type of governance and project involvement is expected of you. Perhaps the daily meetings will be perceived as a sign of distrust and an attempt to find mistakes in the work of the outsourcing team. Or maybe vice versa, lack of control will demonstrate disinterest in the project and unwillingness to work with the team.

The Hofstede distance of power is the recognized and permissible degree of inequality between people in terms of how much influence they have in the decision making process. Simply put, it is the actual availability of management for subordinates, the ability to influence management’s decisions. Countries where people overwhelmingly agree that power should be unevenly distributed and that social relations are based on inequality are cultures with a high power distance. In cultures with a low power distance, people strive for an equal distribution of power.

In countries with low power distance:

In countries with high power distances, companies can become small autocracies where:

Masculinity vs. femininity

Don’t be irritated by the name of this parameter. This is not about all men in the masculine culture behaving like alphas, and in the feminine culture, there is nothing about all women staying at home with their children. In Hofstede’s model, this dichotomy represents how social roles are distributed, what are the basic values ​​inherent in this culture, and what prevails when making a decision – emotional or rational.

Masculinity is inherited in societies with clear social roles. In such societies, educational success is encouraged, there is a focus on competition and career achievement. The approach to the problem is developed from a rational point of view.

In a feminine society, social roles can be blurred. The emphasis is on building relationships, finding a compromise, and gaining experience. In feminine societies, it is not only the result that is important, but also how the result was achieved. The emotional component of life is not ignored or suppressed here. Work and life balance is the mantra of feminine society.

High and low context cultures

This parameter overlaps slightly with power distance. It can influence the occurrence of such problems as unclear expectations and objectives.

Edward Hall revealed that each culture has its own rules for “reading the context”, understanding the hidden meanings.

In countries with a high-context culture, there are many such “You-Know-Who” or “He Who Must Not Be Named”. Representatives of a culture with a high context do not strive to describe the situation in detail and are not inclined to specify what their interest is. In such cultures, the non-verbal plays a huge role. Perhaps something that was not said in words, was said with a gesture, a look, a smile.

In countries with a low context culture, Voldemort will be called Voldemort. Representatives of these cultures clearly express their attitude to a problem. There is no need to build a system of personal relationships to obtain reliable information. Conversely, vague assessments can be perceived as a lack of competence.

The difficulties associated with the interaction of representatives of cultures of high and low contexts are the following:

  1. A person from a culture of high context is not inclined to make decisions without detailed discussion that a low-contexter may perceive as a waste of time.
  2. For people from high-context cultures, clarification, written and formal documentation, may seem like an unwanted burden rather than part of a business process.
  3. Representatives of cultures with a low context are also focused on long-term cooperation. But for them, it is primarily associated with a successful implementation of the task, and not with building interpersonal relationships during the project.

Сomparison table of culture parameters for major outsourcing countries

To sum up

The described classification of cultures is not a universal instruction for action. If you are a US company and your outsourcing company is in India, do not rush to look for a contractor in your region. In practice, there is a wide variety of relationships between people within absolutely polarized societies. Each situation is different.

But in every society, its approaches and principles prevail. And knowing the basic patterns of behavior of representatives of different cultures will help you avoid conflicts and achieve effective communication with your outsourcing agency. To know and understand the difference in cultures means to be able to deal with these differences. Well, it helps to understand your own behavior as well 😉

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