05/08/2012 05:27 pm ET Updated Jul 08, 2012

Outsourcing: Relationships Get Results

For managers wishing to appear dynamic and cost-conscious, outsourcing, near-shoring and off-shoring seem to provide the perfect solutions. All entail moving services or production to other countries which boast a charming combination of talented staff and lower labor costs, usually located in emerging markets such as Romania or Vietnam. Basically, outsourcing means having an external company do some activity instead of your own company. Near-shoring is when this is done by a country in proximity to the home country, such as Mexico is to the U.S. Off-shoring is when this is done by a country further away from the home country, like when a French manufacturer off-shores its IT work to India. The whole idea is to enable the home country to reduce costs, something which inevitably produces broad smiles on shareholders' faces. The point is to get results, cheaper. Sounds simple. So why does it often go wrong?

In reality, outsourcing projects are often badly planned and mismanaged, resulting in project delays, rising costs, soaring frustration levels and cross-cultural misunderstandings. In the end, cheap is expensive.

Why? Indians, Czechs, Poles and other nationalities that are considered outsourcing-friendly are usually extremely well-qualified and speak excellent English, albeit with an accent. This means that qualifications and language cannot account for the delays and misunderstandings so common in outsourced projects. The answer very often lies in the major but little appreciated aspect of cultural differences, and the different ways of "signaling" to business counterparts things such as importance, emotion and urgency.

Generally stated, international business cultures can be categorized into "task-oriented" (Scandinavians, German speakers, parts of the U.S. and the UK, for instance), and "relationship-oriented cultures" (India, Asia, Latin American, Southern and Eastern Europe, Africa, the Middle East, parts of the U.S. and the UK, for example). Crudely, task-oriented cultures tend to focus on things -- contracts, facts, deadlines, etc -- rather than people. Relationship-oriented cultures consider people -- business dinners, small talk, sharing emotions -- of greater importance than things or even time itself.

Germany is a classic task-oriented culture. German managers often believe that their outsourced partners can be managed via email, with the occasional phone call thrown in to stress the urgency of some matter, followed up -- perhaps -- by an in-country visit once a year. All their home-based staff has to do is provide their Romanian or Indian counterparts with clearly stated data and milestones. Job done. For them, clearly defined parameters, deadlines and detailed contracts guarantee project success. How do business partners build trust? Through reliable, measurable behavior -- a deadline is universally understandable, right? Who needs to go to dinner? Besides, that would simply increase business expenses and result in nothing tangible.

But most of the world's seven billion people -- from Asia to the Middle East, Latin America to Southern Europe and beyond -- live in relationship-oriented cultures. Here, a handshake is of equal or greater importance than a contract, dinner with your business partner of more significance than some milestone. For relationship-oriented cultures, people are more important than things. "If a deadline is missed, come over, we'll talk about it and work things out. But tell me, how is your cousin doing..?"

In managing outsourced projects, task-oriented managers often prefer to use email, because it is quick, efficient and cheap. Often they believe that words such as URGENT!!! in the subject line -- bright red, of course -- means "please do now." A relationship-oriented counterpart, however, located in California or Mumbai often simply ignores or deletes this message. For them, "urgent" indicates factory on fire, boss kidnapped, war has broken out -- thus if it's urgent, don't email me -- burst into my office. Email, they reason, is cold, impersonal and thus unemotional; if something were truly "urgent" my counterpart would call, or better yet Skype or, best of all, fly out to talk to me -- or fly me to his headquarters.

Furthermore, task and relationship oriented cultures often possess different ideas of what "ASAP" signifies. My German clients believe it's synonymous with "immediately"; my British partner, in contrast, tells me it means "as soon as it is possible for me." Thus, it could take up to a week for him to do an "ASAP" task. In other words, for relationship-oriented cultures, the more important something is, the greater the need to have a face-face-meeting; if it is of lesser importance, email is fine. Just don't expect a reply.

In the end, the intangible costs of these subtle yet crucial cultural interpretations and "signaling" often offset the initial financial gains of outsourcing. Which type should defer to the other? Well, just looking at population figures, relationship-oriented cultures, including 1.1 billion Chinese, 350 million Arabs and 1.2 billion Indians, far outnumber, say, five million Finns. To ensure deadline commitment and on-time, in-budget, smoothly running international projects, the basic rule is: spend quality time with your relationship-oriented partner. Eat with him. Ask about his family. And remember: relationships get results.