Project Management Institute

Evolving the paradigm

leading multicultural teams

Overview

Multicultural project teams are becoming less of an exception and more the “norm,” especially in Information Systems and Information Technology (IS/IT). This paper evolves The New Paradigm – Leading Multicultural Teams (Holden, 2003) placing an emphasis on the “soft skills” needed by the project manager to successfully lead a team comprised of people from diverse national cultures. Drawing on a perspective of the role offshore outsourcing plays in the trend toward globalization of IS/IT products and services, the impacts on Project Management (PM) practices are discussed, as well as, providing a focus on the PM competencies needed to effectively lead offshore multicultural teams. Sample frameworks for selecting candidate offshore projects are also presented.

Introduction

Background

“Offshore outsourcing, a type of business process outsourcing (BPO), is the exporting of IT-related work from the United States and other developed countries to areas of the world where there is both political stability and lower labor costs or tax savings. Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Offshore simply means, ‘any country other than your own’” (http://searchcio.techtarget.com/gDefinition/0,294236,sid19_gci924479,00.html).

Certainly, offshore outsourcing (offshoring) may be the hot topic in IS/IT right now, but is it really anything new? During the 1970's and 1980's many ‘American’ jobs were sent offshore in the manufacturing industries despite the efforts of workers to retain those jobs domestically. Today, as more and more companies are looking for ways to cut or contain costs while trying to do more with less, the IS/IT industry is fertile soil for the use of offshoring.

As with the ‘blue-collar workers’ of the manufacturing industries, today's ‘white-collar workers’ are pursuing various means to retain these jobs domestically. The 2003 Strategic Outsourcing Conference held at the Waldorf-Astoria Hotel in New York City was picketed by laid off IT workers. The St. Louis Post-Dispatch reported that J. Scott Kirwin runs a web site with “more than 100 links to grass-roots and labor groups”, all with a purpose of “fighting globalization and the loss of jobs to overseas companies as well as foreign guest workers” (Von Bergen, 2004, p. E2). Not surprisingly, offshoring has become a political issue, and it's not just candidates to political office that are having their views on offshoring examined. Various federal and state agencies are using offshoring as a means to contain costs.

Use of offshore workers didn't just happen. Indeed American outsourcing companies, such as IBM and Keane, have used workers from other countries for many years, often unbeknownst to their clientele. But these services were often seen as normal ‘consulting services’ which are thought to be more expensive than an in-house alternative. Companies have historically had a greater appetite for IS/IT services than their budgets allowed. Although for decades Computer Science has been a ‘field of the future’ according to job research studies, sufficient in-house talent could be acquired to make the need for consultants the exception rather than the rule. However, over the last ten years unusual demands have been placed on IS/IT shops while, at the same time, technological capabilities have continued to vastly improve.

Serious attention to the issues surrounding software application functionality for the year 2000 began in the 1990s. Companies were required to divert resources from other ‘more desirable’ efforts to address Y2k. Later in the 1990s companies were faced with the dot-com and growth of the Internet phenomena. For many companies, the common wisdom seemed to be that if they did not have a significant Internet presence they would surely go out of business. Both of these initiatives served to make qualified IS/IT resources scarce and more expensive.

The build out of the Internet, as well as, companies seeking to establish a presence on the Internet, resulted in an increased need for networking infrastructure and capabilities in general, and for the individual company. However, the newer technical skills required to develop a Internet presence were in very limited supply. Even as the dot-com bubble burst, new applications of these skills were identified as capabilities in the Internet environment and were seen as the means to replacing many legacy applications. These same legacy applications, ‘fixed’ for Y2k, were typically considered to no longer be a viable basis for doing business beyond five years into the future.

All of these factors resulted in a much larger demand for qualified IS/IT personnel than there was available. One of the first steps to remedy this imbalance was by importing qualified workers. Many companies recruited (through a third party) workers from Asia who came to America on H1-B visas. While this may have helped fill the demand to some degree, it was not without issues. Many of the immigrant workers were ill-prepared for the society and corporate environments in which they were employed. Similarly, managers struggled with understanding and leading their newly-formed multicultural teams. Training was needed on both sides. Now companies found that although ‘sufficient’ personnel were available, the associated costs were higher still and productivity was lower than anticipated.

The vastly improved (and expensive) networking capabilities were not being well utilized. Software developer costs seemed to be stuck at a high plateau, and productivity was still well behind desired levels. Companies simply weren't getting the “bang for the buck” they were spending. The situation was further compounded by an economic recession which did little but raise the cries to “do more with less.”

The Basis for Offshoring

Offshore outsourcing is a solution to many of these resource constraints and a natural step in the evolution of IS/IT provisioning. Adam Smith, the father of economics as a science, wrote in 1776 that the growth of a nation's economy was principally dependent on the growth in that nation's labor supply and its productivity (Smith, 2002, p. 155-159). While there has been much exaggeration about the cheap labor and large cost reductions available through offshoring, offshoring represents an expansion of the labor supply available to American businesses. Certainly labor costs are cheaper in India than Indiana. However, rather than expecting to reduce its costs by five-sixths of the current rate, most companies can realistically hope for cost reductions approaching one-half. Clearly this is still a sizeable incentive for any company.

Another major reason companies may pursue offshoring is the quality of the labor pool. Various studies have reported that the technical quality of the results produced by most offshore workers is as good as and usually superior to that of their typical American counterparts. Granted that much of the evidence underlying these reports is anecdotal, and ultimately what matters is what each company's experience is. Nevertheless, these reports speak to not only the quality of the work produced, but also often indicate a higher productivity (quantity) of the foreign workforce.

Other positive effects may also be recognized through offshoring, and indeed there are several avenues for problems to develop due to offshoring. However, these other effects are typically seen at the fringe of a company's decision on offshoring, and the primary opportunities for cost cutting and product improvement are sufficient incentive for companies to consider undertaking offshoring.

Offshoring offers the opportunity to better achieve a company's IS/IT goals as a part of the IS/IT evolution. The stage was partially developed by the rush to the Internet enabled by the accompanying improvements in network infrastructure. Using these network improvements a company is now able to obtain higher quality products at a perceived lower cost through offshoring. While successfully employing offshoring by an individual company is by no means assured, the risk-reward comparisons are clearly tempting. So, how are projects selected for offshoring?

Project Selection Frameworks

Not every IS/IT project will be a candidate for offshoring and organizations should develop criteria for identifying projects as suitable for offshoring. Although each project is usually seen to be unique, many have quite common characteristics and requirements. Much of the same suitability criteria will be useful in the selection process for an offshore vendor and for measuring whether the products provided by the vendor meet expectations.

Ability vs. Competitive Advantage Framework

Agarwal's Ability vs. Competitive Advantage Framework (2003) for evaluating activities as candidates for outsourcing can easily be extended to offshoring. The framework shown in Exhibit 1 is derived based on what Agarwal describes as core competencies. These are, “the capabilities that truly distinguish your organization from its competitors. These are the unique capabilities upon which the ongoing success of the company depends and give it the clear leadership position as seen by your customers. All remaining activities are non-core.” (p. 4)

Application of Agarwal's four-box matrix is further explained by:

Keep - continue doing the “core” activities in-house

Outsource - the activities you are not very good at, they are not core to your success and you will probably save time and money by letting someone else do them

Explore - the activities or expertise you may be able to sell to other businesses

Acquire - the skills you need through recruitment or by forging a strategic alliance with an organization specializing in this activity.

Determining candidate applications / functions to outsource (Agarwal, 2003, p. 4)

Exhibit 1
Determining candidate applications / functions to outsource (Agarwal, 2003, p. 4)

At first glance Agarwal's framework appears to be common sense. After all, many of today's experts routinely tell companies they need to focus on what they do best, their core competencies. Agarwal further notes that the matrix is to be used as a starting point in a company's analysis of its activities (projects), and this perspective cannot be overly stressed. Other factors such as how sensitive is the data and processes that are revealed by the project and/or how much business-specific knowledge is required to create the ‘right’ product in the ‘right’ way will certainly affect how much of the project can be offshored (Agarwal, 2003, p. 4-5).

How comfortable would most companies be with sending IS/IT work offshore if the products represented the company's competitive advantage, regardless of assurances of confidentiality? It is also important to recognize that “how well” the in-house team performs an activity may change dramatically when done in conjunction with offshoring.

Strategic Framework

Another method of project categorization employs a strategic perspective. An example of this framework, provided by Ward and Peppard (2002, p. 239) is reproduced in Exhibit 2 below. Although this model is typically used as a means of identifying projects for the purposes of project portfolio management, its focus on the project's relationship and importance to the business is perhaps the major criterion.

Developing the application portfolio (Ward & Peppard, 2002)

Exhibit 2
Developing the application portfolio (Ward & Peppard, 2002)

Combining a company's risk posture with the strategic framework suggests which type of project(s) the company would consider for offshoring. A company that is strongly risk-averse should consider Support activities only until a high level of confidence is gained for offshoring activities.

Considering a risk scale from risk-averse to risk-seeker, it is suggested that projects in the High Potential box would follow Support, then projects in the Key Operational box, followed by projects in the Strategic box. Of course, as a company experiences success with offshoring projects, its comfort level with offshoring will increase thereby reducing the perceived risks associated with offshoring in general.

All of the same caveats exist for this approach to project selection as are applicable to the ‘Ability’ framework previously discussed. However, the strategic approach incorporates a perspective of the company's needs regardless of how capable the company is currently able to fulfill those needs.

Selection of the Project Manager

Arguably, the key role necessary for the success of offshore projects is the project manager. A project manager who is adept at all five process groups and nine knowledge areas as defined by A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (PMI, 2004), and has some prior experience of leading a multicultural team can make the difference between a successful and a failed project. However, such persons are rare, and even those individuals who possess Project Management Professional (PMP®) certification rarely have a full command of all knowledge areas. This is often especially true in the Information Systems industry.

American businesses have a ‘traditional’ method of selecting management personnel in areas that require specialized knowledge. This method likely developed in the early days of the Industrial Revolution and has simply carried forward. This method has been to promote the ‘best’ of the specialists to the manager's position. The best accountant became the Accounting Manager, the best salesman became the Sales Manager, and the best programmer became the Programming Manager. This was thought to be the normal ‘next step’ for the person's career path, and often was seen as the only way in which to reward the ‘stars’.

Only in recent years has business management come to realize that management positions require quite a different set of skills from those of the specialists. Nevertheless, we continue to see the traditional approach employed when selecting project managers, and again, this seems to be especially true in the IS industry. Perhaps too much weight has been given to the (mistaken) belief that IS project managers must possess expert power and authority through their technical knowledge. This yields personnel who are more naturally comfortable with software tools and knowledge of the more technical aspects of project management such as project planning. However, they may fall short in other areas such as human resource, communications, risk and integration management. These knowledge areas are what is commonly referred to as project management ‘soft skills’, and are often the weakest assets of the typical IS software developer or specialist.

Senior management at most companies believes it can simply acquire the necessary IS human resources (specialists), and in a short time they will be fully productive. Management usually also believes that the most difficult thing to do is to “teach someone the business” and for people to develop the relationships needed to coordinate efforts among teams. Companies have begun to turn to business personnel outside of IS/IT as the source for their CIO, and this perspective is filtering down for identifying IS project manager candidates as well. Some perhaps obvious advantages to this type of individual is that s/he will likely possess a level of business acumen that enables them to better understand the business from both an operational and strategic perspective. This may aid such a person in understanding how projects are intended to benefit the business in a way the typical IS specialist cannot. While business personnel may not initially have the necessary IS/IT expertise, they have probably developed relationships with non-IS stakeholders, and will be better able to leverage this network to “drive a project to completion” using these relationships.

Offshoring simply further exaggerates the ‘weaknesses’ of the IS specialist in that it very much brings procurement activities to the forefront. This is because, for an offshore IS/IT project, external human resources are being acquired to provide the services. Not surprisingly, the typical specialized IS developer has little, if any, interest in contracts, and along with a deficiency in soft skills, s/he is very likely to also be lacking in the negotiation skills essential to procurement management.

So what does our ideal IS project manager for offshoring projects look like? S/he is likely to be certified in the project management discipline such as a PMP. This will indicate that the person has at least a sound understanding of project management methodologies, processes, and practices. S/he will also possess a level of business knowledge or background that allows him/her to understand the business goals, objectives and strategy of the organization. Having this business acumen will likely improve his/her chances of having, or obtaining, business knowledge shared by management. Additionally, the PM will need to be sufficiently acquainted with the respective company's IS/IT methodologies, processes, and architecture. However, this ‘acquaintanceship’ needs only go so far as to enable the PM to identify, understand, and support the activities necessary to lead the project. S/he does not need in-depth expertise at the same level as the IS specialist(s).

While this “knowledge foundation” provides a framework that the PM will use, other traits and characteristics are likely to be the more important critical success factors (CSF) for the project manager. Talent and abilities in the soft skills, an understanding of general and organizational management, as well as, relationship building and leadership skills are likely more important.

As mentioned earlier, this is an ‘ideal’ portrait of the offshoring project manager. Obviously such individuals are very rare, and most are likely to be doing something other than ‘just’ being a project manager. However, the list of desired qualifications is useful to any company as a starting point in determining what factors it considers most important. From this starting point, a company can then use one of a myriad of techniques to weight the factors and grade potential PM candidates for their offshore project(s).

Final Reality Check

The Future of Offshoring

Much more can easily be said regarding offshoring projects. Indeed there is a plethora of information available for research and consideration. Regardless of one's perspective towards offshoring, positive or negative, most everyone agrees there's no stopping this juggernaut.

Morello (2003b) notes, “The global migration of IT and other services is an irreversible megatrend.” Woodie (2004) wrote that Gartner Chief Executive Officer Michael Fleisher recently “gave a rousing thumbs-up to the controversial practice” suggesting that “companies and individuals that want to survive should consider how they can move technology jobs offshore.” A recent study by the Information Technology Association of America (ITAA) indicated that offshoring actually “increases the number of U.S. jobs, improves real wages for American workers, and push[es] the U.S. economy to perform at a higher level.”

Certainly the economists believe offshoring is ‘good for the country’. Chairman of the Federal Reserve Board, Alan Greenspan, has, in several speeches, commented to the effect that offshoring is to America's benefit and warned the politicians that it would be ill-advised to take any actions which would restrict or prohibit this form of ‘free trade’. Of course much of the furor originates with the laid-off IS/IT worker who believes his/her job was sent offshore. The reality of this is in many cases uncertain while other times the worker has literally trained their replacement in India.

The ethics of this reality spawned a controversy based on the thinking that it is the social responsibility of American companies to employ American workers. Certainly then, it is heresy to ‘ship’ American jobs overseas, or so the rhetoric goes. However, Milton Friedman, a Nobel Laureate in Economics (usually recognized as the father of monetary economics), refuted this attitude regarding a business' social responsibility more than thirty years ago. Friedman (2002) reiterated “that social responsibility is essentially a tax imposed by a CEO of a corporation on the stockholders – a tax that can be imposed without permission and on whim.” He went on to say that “there is, in reality, only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it engages in open and free competition without deception and fraud” (p. 33-38).

Yes, offshoring of IS/IT products and services is here to stay, and if the pundits are to be believed, the practice of offshoring will grow at a annual rate of 26 percent during the next five years.

Impact on an Average Company

Morello (2003a) notes that “Comparatively few IS organizations have climbed beyond Level 1 of the Software Capability Maturity Model” (CMM). Indeed, some estimates place the degree of level 1 companies at 85 percent. This indicates that while most companies have implemented basic control processes for software development, they have yet to establish processes that provide a consistent, repeatable method for software development which is a hallmark of level 2 of the CMM (SEI, 1994).

While the CMM is more oriented to software development practices, is it not reasonable to expect that a similar percentage of companies have little, if any, familiarity with ‘project management’ as a discipline. Most companies have acquired the phrase or implemented Project Manager as a position or job title, but is it rational to think that if they have not implemented repeatable processes for software development that they have adopted anything approximating ‘true’ project management practices?

Projects which are sent offshore require a focus on different knowledge and skills as compared to projects executed entirely in-house. Many of the PM knowledge areas and deliverables that are routinely passed over, such as communications planning and risk analysis, take on a heightened role when offshoring. Establishing and building a relationship with an outside vendor, especially for IS/IT products or services, mandates that these heretofore avoided deliverables and processes be conducted with contractual rigor.

Although this may be beyond the capabilities of the ‘average company’, no doubt these same companies will believe they must soon begin to offshore projects or surely they will lose their competitive advantage – even though IS/IT may not currently provide them with such an advantage. Perhaps management has been overcome by a form of greed since the supposed potential cost savings are too great to ignore.

Of course there will be some successes, just as there already have been. There will also be many failures, some due to a lack of business judgment, but certainly also due to a lack of sound project management practices.

Leading the Offshore Team

Unlike the IS/IT specialists whose tasks and jobs have or will be outsourced – often to offshore teams, the need for qualified project managers will increase. An offshore IS/IT project is one of several scenarios where the project manager will find him/herself leading a team comprised of foreign nationals, or a multicultural team. So what project management competencies are needed to be successful in this scenario? Several are recommended and fall into the broad categories of cross-cultural skills, business skills and project management skills as summarized below:

Cross-cultural Skills –

Cultural awareness and sensitivity – learn about the country and cultural background of the team. Read about it, visit if possible, and ask questions. This will be helpful to the PM in setting and managing expectations for team performance (Holden, 2003).

Flexibility – especially in communication style and leadership style. This may require observation and active listening skills, which may be a challenge with an offshore team. However, if the team is Asian a less direct and confrontational style may be required from the PM than would normally be expected (Bauer, 2004; Holden, 2003).

Building and maintaining relationships – even if they are at a distance. Establishing relationships may be necessary to obtain cooperation or do business at all in certain countries. The organization may need to consider engaging the services of a mediator, to build the necessary relationships and bridge the inevitable communication gaps (Bauer, 2004).

Business Skills – particularly in the area of business requirements to be addressed by the project. This is especially important when defining the scope of work to be performed by the offshore team and in verifying that the delivered work products meet the organization's specifications. For an IS/IT project, careful testing will be needed to determine if the business requirements have been properly implemented.

Project Management Skills – in addition to a well-rounded knowledge of generally-accepted project management practices, expertise in Procurement Management processes is critical for offshore projects. This includes: defining the Statement of Work (PMI, 2004, p. 280), Vendor Selection (p. 286-288), and Contract Administration (p. 292-295) with particular focus on Change Control (p. 96-98) and Performance Reporting (p. 233-234). Selecting an offshoring vendor that subscribes to the same project management methodology and terminology as the organization, such as the PMBOK® Guide, will certainly facilitate these project management practices.

References

Agarwal, A. (2003). How to Optimize Outsourcing Relationships. Retrieved April 1, 2004 from http://www.infotechadvisor.com/archives/features/optimize_outsourcing/optimize_outsourcing.pdf

Bauer, N. (2004, March). Taking it Personally, PM Network 18(3) 50-58.

Friedman, M. (2002). The Social Responsibility of Business Is to Increase Its Profits. In T. Donaldson, P. H. Werhane & M. Cording (Eds.), Ethical Issues in Business: A Philosophical Approach (7th ed.), 33-38. Upper Saddle River, NJ: Prentice Hall.

Holden, A. (2003, October). The New Project Management Paradigm: Leading Multicultural Teams, 2003 PM Global Congress Proceeding, Baltimore, MD

Morello, D. (2003a). Business Forces Spur Career Changes for IT Professionals. Retrieved November 26, 2003 from http://www.gartner.com

Morello, D. (2003b). The Organizational Implications of Offshore Outsourcing. Retrieved November 26, 2003 from http://www.gartner.com

Project Management Institute (PMI). (2004). A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (3rd ed.). Newtown Square, PA: Project Management Institute

Smith, A. (2002). Benefits of the Profit Motive. In T. Donaldson, P. H. Werhane & M. Cording (Eds.), Ethical Issues in Business: A Philosophical Approach (7th ed.), 155-159. Upper Saddle River, NJ: Prentice Hall.

SEI. (1994). The Capability Maturity Model: Guidelines for Improving the Software Process. Reading, MA: Addison-Wesley.

Von Bergen, J. M. (2004, March 14). Ex-workers unite to stop offshoring. St. Louis Post-Dispatch, E2.

Ward, J & Peppard, J. (2002). Strategic Planning for Information Systems. West Sussex, England: John Wiley & Sons, Ltd.

Woodie, A (2004). Offshore or Lose. Retrieved March 23, 2003 from http://www.gartner.com

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2005, Angela D. Holden and Daniel L. Holden
Originally published as part of 2005 PMI Global Congress Proceedings – Toronto, Canada

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