Most home-based businesses are fairly small… but some have 1,600 employees.
How can you manage people you almost never see in person? Many managers face that challenge periodically, but people in the outsourcing industry face that challenge as a fundamental part of their business model. That's true in the outsourcing of rote tasks (e.g. call centers), but even more true when outsourcing higher value-added tasks in the "knowledge process outsourcing" (KPO) industry.
According to a Deloitte Consulting study, the global knowledge process outsourcing industry is projected to grow to approximately $17-18 billion by 2010, of which India is expected to account for $12-14 billion. KPO involves knowledge-intensive business processes that require significant domain expertise, analytic skills and judgment, and decision making capabilities (e.g. financial valuation, legal analysis, or market research.) Evalueserve (EVS) provides outsourced custom research, analytics and intellectual property solutions to over 1,100 bulge bracket investment banks, top tier strategy consulting firms, and many other demanding clients.
EVS's entire top management and sales team only meet together in person once a year. Its four-man management team had never met together in one room until just two years ago. Its 50-person sales force is made up entirely of people working out of their homes.
Marc Vollenweider, co-founder and CEO, argues that the virtual structure gives EVS several major advantages.
- Speed: EVS can respond quickly to client inquiries, because they have 24/5 coverage across major time zones.
- Cost: EVS has a low cost base because they do not have to pay for expensive Western office space.
- Ease of recruiting: In a tight labor market, offering Client Executives (salespeople) the chance to work from home is very attractive to many people. Client Executives with children often find working from home particularly attractive. Two different sets of Client Executives are married to one another.
- Entrepreneurialism: Bob Daigle, VP of Marketing & Sales, observed that the flip side of being isolated from the team (i.e. being "virtual") is that isolation "fosters an attitude of independence and self-reliance." Although the Client Executives support one another, to survive in the organization each person has to be a self-starter.
- External focus: Daigle also observed that the absence of internal bureaucracy forces a focus on external events, not internal. There is no big internal bureaucracy to dwell in (and on) like the one Daigle recalls growing up in for the 20 years that he worked at IBM.
Similarly, Daigle observed that the virtual structure eliminates many political issues: "Not only do we not have much of the water cooler, idle time type of communication, and resulting issues — we don't have time for it. I think there is some truth that the four of us [of the EVS management team] have got by without serious conflicts over 6 full years because we're somewhat forced (by geographic non-proximity) to stay out of one another's way, trusting each other to execute. Despite being geographically dispersed, all four senior managers are actively involved in both sales and operations, in touch via email, instant messaging, and phone daily. However, because we are distant we are forced to act independently and to focus on execution."
When David Teten was dating his then lady friend (now wife), he asked an older friend for advice on marriage. The older man, who had recently celebrated his 50th wedding anniversary, observed, "everyone says that the secret to success in marriage is compromise… but that's completely wrong. The secret to success in marriage is domains. If you and your wife are discussing how to decorate the den, and you want blue and she wants pink, then the compromise is stripes. It's much more effective to determine that certain questions fall under the domain of one person, and then let that person take responsibility for all questions in that domain." EVS is adopting a similar philosophy internally.
EVS is a heavy user of free technologies that increase the frequency and ease of internal communications. Client Executives use FreeConference.com, Skype, and MSN Messenger to interact with their peers, managers, and with the service delivery team. The Operations staff uses MSN, Cisco VoIP, and Avistar with many clients. As an example of how integrated the company is, a recent client query in Europe was solved within 15 minutes by a combination of the Indian research team, an Evalueserve intellectual property specialist from California, and an EVS local sales manager from Europe working together through a conference call.
With every new client, EVS faces the challenge of training him on how to manage his new offshore partners. Only about 25% of its clients ever visit their operations center in India, China, and Chile. Daigle discussed how EVS addresses the client education challenge: "First, our sales model is based upon an ongoing involvement to help our clients smooth out the issues of an offshore delivery process. This, to my mind, is our 'secret sauce'. At EVS the Client Executive is in the lead, instead of simply handing off a project to someone else. That's why they're called Client Executives and not salespeople.
Importantly, they lead with an ongoing respect for the analysts doing the project. This is key: if the Client Executives act too bold or arrogant, they will lose the support of the operations team. If they don't stay involved, the inevitable problems involved in conducting projects from several times zones away will emerge, and the clients will walk away — often without saying anything. They will just leave." One of the clichés of corporate life (visible in many Dilbert cartoons) is the tension between salespeople and manufacturing. EVS faces this challenge exacerbated by distance.
Daigle continued, "The other element or 'training' we provide to clients is the model we present while we are engaged with them and the operations team. In short, we model respect. We go out of our way to show that this offshore team is not a sweatshop, but an intelligent, earnest, hardworking group of professionals that have earned and deserve our respect. Respect is contagious. When the clients see us behaving this way, it has a big impact on how they think of our company, and the way they treat our analysts."
Unlike a more established firm, EVS is building its culture as it goes along. We asked Daigle how he inculcates his Client Executives with his culture and approach when he sees them in person so rarely. He responded, "The key is hiring — the best advice I ever got in this area was to 'hire people that you'll like working with.' We don't have to be best friends, but their personality has to be a match. In a sense, given this, our culture was built on day one. If you talk with the four senior managers, our basic demeanor, ethical principles, and respect for people is pretty similar. I think our culture embodies this: many EVS employees have shared this same point of view with me over the past several years."
Although Daigle is correct that hiring people who think like you may expedite culture-building, there is also a very significant downside in the long term — you run the risk of creating a homogeneous culture with a homogeneous client base (although with over 1,000 clients, EVS has so far been able to effectively diversify its revenue streams.)
To get new employees up to speed, EVS uses a buddy system. For the first six months, it assigns a member of the operations team to connect with a new Client Executive and initially introduce him to the operations team. That buddy is tasked to be available to help out on an as needed basis: to find people, negotiate issues and learn about a particular capability.
Operations staff introduce themselves to new Client Executives with self-photographs and a brief conversation. EVS is now considering encouraging operations people and Client Executives to more systematically share a broad range of background information (things like family background and hobbies) with one another before working together. As readers of The Virtual Handshake know, significant academic research shows that the exchange of some basic personal information significantly expedites the operations of virtual teams.
More importantly, EVS has built a sales support structure that removes as much administrative (non-selling) work from the Client Executives as possible. The marketing support team is built with a 1:1 ratio, i.e., the equivalent of one full-time marketing support professional is available for every salesperson. EVS's marketing support infrastructure has been so successful that the company productized it and now sells this infrastructure to external clients. Client Executives can be particularly enthusiastic about this product because they have a personal involvement as customers of it every day. More generally, positioning Client Executives as internal clients gives the, more credibility in the external sales process.
Offshore service providers have shown that many critical business processes can be delivered remotely. In EVS's case, not only is the service delivery virtual, but the entire management approach breaks the traditional paradigm of renting expensive office space in an expensive capital city. Although most businesses are not in an industry as inherently virtual as EVS's, almost any firm can learn from their model.
DISCLOSURE: Evalueserve recently acquired David Teten's Nitron Circle of Experts.