Setting Up a Successful Offshore Captive - Keys to Success!

Establishing a successful distributed workforce model does not happen by chance, there are some critical keys to success… 

In a managed captive model, the Australian business establishes offshore capability that (to all intents and purposes) it owns and manages. This style of operating model has some significant advantages over more traditional outsourced models including: 

1. Lower costs of operation (@30% over traditional outsourcing).

2. Better control over the quality and capability of staff.

3. Lower levels of attrition, and hence improved IP retention and efficiency.

4. Improved control over day-to-day operations. 

However, whilst the benefits are clear, it does put a greater onus on the Australian entity to effectively build and manage the offshore capability. In this short article, we summarise what you need to get right in bringing this model, and the resulting business benefits, to life. 

1. Treat your offshore centre as an integral part of your business 

COVID has taught us that many roles can be performed remotely. Extending this to overseas locations is not the big step it used to be. These centres, once established, should not be seen as ‘offshore locations’ where we send low value work, but as integral parts of your business e.g. Sydney, Melbourne, Hanoi, Manilla. The more effectively you align policies, remuneration/bonus strategies and, performance measures, the better aligned and effective your overseas-based employees will be in helping you achieve your business goals. 

2. Upskill your onshore leadership 

Many businesses assume their leadership can ‘manage offshore’. We have found that not only do you need to invest in training your new staff in overseas location, but that change management and skills building of the onshore team is just as important. In some instances, this can involve enhancing the onshore leadership team. You can build an amazing overseas engine to drive your business growth, but if the onshore team doesn’t know how to capitalise on it, you will get suboptimal outcomes. 

3. Establish effective talent acquisition and retention practices and work at pace 

The bottleneck to talent acquisition in overseas locations today is generally not the ability of your offshore fulfillment partner to provide candidates, but the ability of the onshore teams to work at the same pace. Having clearly agreed recruitment processes with explicit role descriptions at the outset, combined with an accelerated and managed pipeline, will ensure capabilities are built quickly. 

Once sourced and landed, a coherent retention strategy is essential. Best in class captive centres in the Philippines and Vietnam can achieve retention rates in the 2%-5% range for many roles, given the right strategies. 

4. Clarity of roles and responsibilities 

Clear documentation of core business processes should be completed during the transition phase. This includes handoffs, approvals and artefacts. We have found this work is more effective if the current business process is challenged, reviewed and streamlined. This approach results in the efficient transition to a distributed delivery method, as well as reducing the work required overall. 

5. Be honest and transparent with your onshore teams 

Whilst it’s important to finalise the new operating model and support the investment case without the involvement of those impacted, once a decision is made it's often more effective to quickly communicate the new strategy to the organisation and those impacted. Careful consideration of the roll out strategy prior to taking this step is critical. 

For some organisations a short sharp transition approach allows the benefits to be captured quickly and the organisation to move forward following a short period of disruption. For others, we might target open positions first, and have a process whereby any replacements from resignations are first considered for the overseas office. This is less disruptive but delays full benefit realisation. It’s a balance that’s important to get right. 

6. Partner with companies that can accelerate and de-risk the establishment of offshore operations 

Although it’s tempting to undertake such an exercise without support, the acceleration of benefits derived from the right advice is paid back multiple times through reduced risk (i.e. the cost of getting things wrong) and accelerated benefits.  Having the right experience from your onshore strategy and transition support provider, combined with the assets and accelerators they provide, can be critical to success. This can include items such as draft cost benchmarks and business case models, target operating model frameworks, transition plan templates, change ,and communications strategies, training assets, and role definition catalogues.  Additionally, they can help with the selection of the right offshore partner, ensuring their location, service provision, and terms are the best fit for you. 

If you would like more information on this topic, please contact neil@alchemypartners.net.au.