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Six Reasons Why New Global Capability Centers Struggle to Establish Themselves

First published on Shared Services & Outsourcing Network website

Have you ever wondered why some Global Capability Centers (GCCs) flourish while others flounder, despite having similar resources and goals? In India alone, it is projected that 800 new GCCs will launch operations in the next 5-6 years, adding to the existing 1600. An Accenture study alongside Oxford Economics indicates a significant expected growth in GBS usage, with marketing (113% increase), supply chain and logistics (88% increase), and transformation capabilities (64%) leading the way. These shared services entities are getting reimagined as reinvention centers.

By 2030, Deloitte’s Technology Trend Report forecasts that the Indian GCC market may surpass US$100 billion, with around 2,500 GCCs employing over 4.5 million people. Yet, the journey to success for many new GCCs is filled with obstacles. What are these hurdles, and how do they prevent these centers from delivering true value to their parent companies?

1. Navigating the Unknown

When faced with uncertainties, GCCs often default to their headquarters (HQ) for decision-making, which can undermine local leadership and hurt the business in the long run. Initially, investments in GCCs are driven by cost savings and risk mitigation, later evolving into innovation and technology. However, if employees continuously look to HQ for answers, local leaders are perceived merely as execution experts rather than strategic contributors.

2. Misplaced Trust in Global Brand Names

Many GCCs assume that their global brand recognition will be enough to establish a strong local presence. This assumption neglects the local perception of the brand and the varying impressions the younger generation may have about certain industries, such as alcohol, tobacco, or pharmaceuticals, especially post-pandemic.

3. Communication Challenges

Managing communication from a distance is vastly different from real-time, localized engagement. Often, GCCs keep control over brand and communication at HQ, offering little guidance or support for local communication. Effective engagement should begin well before a GCC sets up a physical office, involving industry forums, media outreach, and connecting with prospective candidates to understand their expectations.

4. Faulty Benchmarking

GCCs often focus on benchmarking salaries and job levels while ignoring the importance of culture and context. Despite numerous studies indicating that salaries are not the primary drivers of attraction or retention, significant time and resources are spent on this aspect, leading to missed opportunities with great talent.

5. Weak Initial Setup

The initial phase of setting up a GCC is crucial. Expecting the office manager or recruiting team to handle both operational and strategic tasks can lead to a weak start. A clear, focused approach is essential to lay a strong foundation and ensure smooth operations from day one.

6. Cutting Through the Clutter

With the influx of new GCCs, the competition for top talent intensifies. Standing out requires substantial effort and creativity. Engaging the best talent demands more than just attractive job offers; it requires a compelling narrative and a visible brand presence in the local market. Transposing corporate culture from the parent company to the local unit is not as simple as implementing global policies. Culture cannot be lifted and shifted; it must be cultivated through consistent experiences that resonate with local employees, making them want to join and stay with the firm.

Reflecting on the Journey

The path to establishing a successful GCC is lined with complexities and potential pitfalls. It requires a deep understanding of local dynamics, a strategic approach to communication, and a genuine effort to integrate corporate culture with local values.

As you ponder these challenges, consider how your organization can navigate these waters effectively.

How can you ensure that your GCC not only survives but thrives, contributing true value to the business?

The answers lie in understanding and addressing the unique intricacies of each market, fostering a culture of collaboration, and continuously adapting to changing landscapes. What steps will you take to turn these challenges into opportunities for growth and innovation?

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