a case study of national culture and offshoring services

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nternational Journal of Operations & Production Managementmerald Article: A case study of national culture and offshoring services

ichard Metters

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o cite this document: Richard Metters, (2008),"A case study of national culture and offshoring services", International Journal

Operations & Production Management, Vol. 28 Iss: 8 pp. 727 - 747

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A case study of national cultureand offshoring services

Richard MettersGoizueta Business School, Emory University, Atlanta, Georgia, USA

Abstract

Purpose Prior surveys have shown that national culture is a leading cause of problems inoffshoring services. The research question posed in this paper centers on how and through whatspecific decisions national culture affects operational implementation in offshore facilities.

Design/methodology/approach A particular US service process offshored to Barbados and theDominican Republic is studied. Ethnographic worker observations are combined with archival sourcesand executive interviews.

Findings A culture clash caused a number of operational dilemmas for a major US airlineoffshoring the same processes to two Caribbean nations. The offshoring was a success at one site, afailure at another. But, even at the successful site, un-intuitive operational adaptations had to be madeto accommodate cultural differences. Specifically, detailed here are decisions or results seen on countryselection, location selection within a country, quality program implementation, and shift work that hadstrong cultural inputs.

Research limitations/implications Any case study may be limited to the specific case.However, broader implications are that operations management decisions may be more highlydependent on national culture than previously thought.

Practical implications Management especially US management continue to make serviceoffshoring decisions ignoring or minimizing the inevitable cultural conflict. This work providestangible examples of decisions affected by culture.

Originality/value Concrete, specific examples are provided for the difficulties national culturecreated in a specific case. Methods used to circumvent these difficulties are shown. By this specificexample, the general case is posited that culture must be considered in operations decisions that mayseem devoid of cultural content.

Keywords Total quality management, Relocation, Outsourcing, National cultures

Paper type Case study

IntroductionIn a widely reported forecast by Forrester Research, it was stated that 3,400,000 whitecollar jobs with $151 billion in annual wages will leave the US for low wage countriesby 2015 (Hilsenrath, 2004). In contrast to that forecast, a recent estimate concluded that

the order of magnitude of actual job losses in the US due to offshoring was in the lowhundreds of thousands, rather than millions (Kirkegaard, 2007).

We have seen this cycle before for the same processes. In 1982, the New YorkTimes stated that due to satellite telecommunications technology (w)hite collar andtechnical work of all levels of sophistication can now be farmed out to wherever laboris cheaper (Pollack, 1982). Likewise, Business Week touted the instant offshore officewhere back-office processes for US firms could be done overseas for a fraction of the

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/0144-3577.htm

The author would like to acknowledge the assistance provided by Carla Freeman on many draftsof this work. Her assistance was more than worthy of authorship.

National cultureand offshoring

services

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Received June 2007Revised April 2008

Accepted June 2008

International Journal of Operations &Production Management

Vol. 28 No. 8, 2008pp. 727-747

q Emerald Group Publishing Limited0144-3577

DOI 10.1108/01443570810888616


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labor cost (Business Week, 1982). However, it was estimated that only 5,000 offshoreworkers of this type existed in 1986 worldwide (Noble, 1986), and offshore serviceworkers do not exceed 35,000 worldwide in 1994 (Wilson, 1995, p. 206).

Services offshoring has thus far not lived up to the promise/hype of the abovestatements. There have been two surveys regarding corporate offshoring experiencethat provide insight into this gap. A convenience sample of 60 executives involved inoffshoring information technology services cited cultural differences as the mostimportant major problem in offshoring (Aelera, 2004). A survey of 96 US companiesthat had or were planning to offshore service operations was undertaken by Lewin et al.(2005). The most cited risk of sending work overseas was service quality, with

cultural fit being second, cited by 59 and 58 percent of respondents, respectively.These surveys can be viewed as barometers indicating the importance of culture.

However, the precise nature of cultures significance is ambiguous. A questionunanswered by these surveys and the academic literature reviewed later is exactly howand in what manner does culture impact operations? How do firms change theiroperations in response to cultural issues? The research question addressed here is howand in what form does culture impact the offshoring of service processes.

Here, we draw on a past experience with offshoring to inform the present. Specifically,we trace how culture altered the operational choices in an offshored back-office serviceoperation. A set of processes fora major US airline were moved from theUSA to Barbadosand the Dominican Republic. In the words of the president of the offshore subsidiary,who went on to become CEO of the parent airline, the culture clash between the USA andBarbados was such that there were problems I never anticipated, things that were noton our radar screen. The problems with Dominican Republic culture were evengreater. Owing to space reasons, we will only highlight the effect of culture on threetraditional operations choices: location, shift work, and total quality management(TQM) implementation (more information on ownership choice owning versusoutsourcing and the operational implications of worker type are available from theauthor).

Theremainder of this work is organized as follows: after describingthe methodology,a review of prior literature regarding culture and business practices among varyingbusiness disciplines is sketched to provide context. Specific findings are then discussed.Concluding remarks include the study limitations and generalizations.

MethodologyThe inspiration for this paper is a collection of publications by a professor of WomensStudies and Anthropology, Carla Freeman (1998, 2000, 2001). Because of Ms Freemans

ties to anthropology and womens studies, her focus was not on operationsmanagement.Instead, she was concerned with views of female work in Barbados. Partially, this paperis a translation of this anthropological work to focus on operations management.

The methodology employed by Freeman is ethnography. Though it is unusual inbusiness research, ethnography is one of the oldest field research traditions andthe cornerstone of anthropology (Miller and Crabtree, 1999, p. 29). Freeman spent threeyears in the field, mainly in Barbados, observing three specific sites where back-officework from theUSA wasbeing offshored. This research had the cooperation of the parentcompanies. Two of those sites were from the same company, which Freeman callsData Air for purposes of confidentiality, and is the subject of this investigation.

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This firm performed back-office services for one of the large US air carriers often calledthe legacy airlines.

But Freemans field work encompassed only the time period 1989-1992. The airlinesprocesses were serviced in Barbados from 1983-1998. Extending Freemans data, theauthor of this paper consulted numerous other archival sources, and interviewedexecutives (hereafter called informants, as is the custom in interview research) fromthe companies in question.

The interviews occurred later in the investigative process. The interviews wereconducted after reading all of Freemans work; performing background investigations ofthe industry, individuals,and the countries involved; and obtainingextensive backgroundon the firm in question from archival sources. This firm was famous in its time, so suchbackground was plentiful, if a bit difficultto find.The closed questions asked were derivedfrom the specific categories of cultural issues these other sources identified. The openquestions sought further categories of issues and other informants.

Early contact: the informants were first contacted by postal mail or e-mail with acustomized letter. The letter contained a project explanation and introduced theinvestigator.

The interviews were with a series of high status individuals who had uniqueexperiences, rather than a collection of people who had similar experiences. They hadthe following different experiences:

. (Informant A) President of the Data Air unit and later CEO of the parent airlinecompany.

. (Informant B) location search and facility setup. Hired the initial Barbados staff

and was the first General Manager of Data Air.. (Informant C) ran day-to-day operations as Managing Director for 18 years and is

a Barbadian citizen.. (Informant D) closed the facility and moved the operations to Juarez, Mexico, and

is currently Regional CFO for Latin America and the Caribbean for the parentairline company.

As a consequence, the interviews were conducted as informally as possible to elicitspontaneous statements and insights from the individuals. While an interview protocolwas followed, the goal was to treat the interview as a conversation.

As is customary for such disparate experts, while there was a general interviewguide, each expert had their own version of the interview guide (Werner and Schoepfle,1987, p. 293). There was no compensation for the interviews. No deceptive devices were

employed. The semi-structured interviews were of 40-60 minutes duration andfollowed an interview guide (available from the author), asking directive questionsconcerning TQM, shift work, ideal employees, location choice, differences between theDominican and Bajan facility, and open ended questions regarding cultural adaptation.

The interviews were by telephone, as the subjects lived in geographicallydistributed areas (Dallas, Boston, Miami, and Barbados). The interviews were not taperecorded. Rather, extensive notes were taken simultaneous to the conversation.

Owing to the expert nature of the informants, there was a limited ability to test theinterview guide prior to implementation. Testing was limited to other interestedfaculty.


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Definition and views of national cultureCulture can be a difficult term to define precisely. Hofstede, a leading businessresearcher of national culture, defines culture as the collective programming of themind that distinguishes one group or category of people from another (Hofstede, 1980,p. 260). Culture tends to be a latent construct that manifests itself though customs,attitudes, status symbols, and other means. The business literature contains numerousarticles that explore how, or imply that, national culture is critical to managerialpractices or organizational strategic adaptation.

A prevalent attitude in the west in general, and the USA in particular, could besummarized as why should culture matter? This attitude actually has been

measured. Trompenaars (1993) surveyed 15,000 managers from 28 countries over a tenyear period. Through factor analysis, a concept of universalism and particularismemerged as a cultural characteristic. For our purposes, universalism can be describedas people believe that what is true and good can be discovered, defined, and appliedeverywhere (Hoecklin, 1995, p. 41). Particularism, alternatively, is a view that uniquecircumstances and personal relationships determine what is right and wrong. The USAwas the most extreme universalist society studied. As relates to this current work,it seems fair to state that those who form their attitudes through US culture like thefirm in question are more likely to believe that programs and methods that work wellhere can be easily exported.

Specifically, a call toward the type of research offered here is made by McLaughlinand Fitzsimmons (1996, p. 56), discussing services globalization: With globalization,the impact of cultural adaptation will need to be central to our study of [many]operational topic areas . . . .

As will be shown later, operations management work incorporating culture isrelatively scarce. The scarcity of such work may be due in part to our methods. Culturalissues do not present themselves to be solved by linear programs. Less often seenqualitative methods may be more appropriate. As noted by Starr (1997, p. 116),Operations managers need some knowledge derived from applied and culturalanthropology. Itis with thisin mind that weborrow from the field of anthropology here.

Literature review: studies of culture in various business disciplinesOperations management literature does have substantial international content, butoften that content is not culturally informed. Further, the focus is usually onmanufacturing. Cultural differences often have more opportunity to surface in serviceprocesses than manufacturing processes. For example, in customer contact centers orcollections, customers directly interact with employees. In service processes such as

accounts receivable or medical transcription, at a minimum, language similarities maybe paramount, and customization is often high, sometimes requiring customer contact,contact with a foreign employee, or other times requiring line employees to decodeinstructions written by someone in another country. Service processes are alsodifferent from manufacturing processes in that other aspects play no role: There areusually no tariffs on services, and there is little or no transportation charge for theirdelivery. So, especially for services that can be electronically transmitted, there aredissimilar barriers to offshoring than there are for offshoring manufacturing processes.

The interaction of international culture and business is commonly studied in otherbusiness disciplines. Hofstedes (1980) work showed that basic cultural differences

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exist in a business environment. Hofstedes work focused on employees of one firm,IBM, but who were from many different countries. Hofstede established that theseworkers have different attitudes regarding appropriate supervision styles, powerrelationships, and other issues that can be traced to national origin. We do not rely onHofstedes work here. For our purposes, his work showed that national culturaldifferences could transcend corporate cultural similarities and have the potential topresent significant challenges to managers.

There are a myriad of practitioner-oriented books and articles on culture and businesspractice, but these studies focus on social norms, negotiation and communication ratherthan operations (e.g. proper uses of e-mail in different countries). Books and articles onspecial methods of doing business in China (Mankin and Cohen, 2004), Korea (Chang andChang, 1994), Islamic countries (Wright, 1981), etc. abound.

Academically-oriented studies in the organization and management disciplines notethe differences in humor between cultures, provide specific direction on cultural issuessurrounding management rotation programs, negotiation styles, and meeting protocol,to name some topics among many. A review of studies concerning culture andorganizational structures can be found in Lewin and Kim (2004). The field ofInformation Systems has also seen culturally oriented research (Marron and Steel,2000; Gopal et al., 2003).

A large number of marketing and operations studies also feature differenttechniques and attitudes that relate to culture, with a general result that studiesconducted in one country may not be generalizable to others because of nationalculture effects (Voss et al., 2004, p. 214). Most such studies with cultural content focus

on consumer behavior. For example, Voss et al. (2004) explored the differences betweenhow UK and US consumers evaluate service quality. Typical studies also includecultural aspects of forming service expectations (Donthu and Yoo, 1998) and serviceperceptions (Matilla, 1999). There are also studies on consumer behavior differences inindustrial purchasing settings (Money et al., 1998). These efforts have been callednational character studies (Clark, 1990), as they attempt to characterize some type ofnational behavior. Other literature regarding service operations and culture includesa general survey of service operations and cultural adaptation by McLaughlin andFitzsimmons (1996) and the International Service Study of Roth et al. (1997).

This paper also purports to characterize such behavior. But an essential differenceis that instead of viewing consumer cultural effects, we focus on the production ofservices that is, how culture affects how work is performed.

A literature review of international operations strategy articles (Prasad et al.,2001) found 92 such articles in 31 selected journals from 1986-1997. Culture was

never mentioned in the paper, the word services appears only once. None of the 92articles focused on services or had any derivative of the word culture in the title, andonly one of the articles listed appeared to have services content.

Prasad and Babbar (2000, p. 229) reviewed 548 international operationsmanagement articles in 28 journals published from 1986-1997. They note thatfew articles on international services appeared in the set of journals reviewed.The main topic of service was listed for only 14 of the 548 articles, and none ofthose 14 have significant cultural content. Prasad and Babbar identified 32 articlesinvolving culture, all of which focus on manufacturing. Nearly, half focused oncultural aspects of purchasing, mainly focusing on Japanese management techniques.


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Other work focused on finding international differences in techniques. For example,Whybark (1997) focuses on two manufacturing industries, and documented thedifferent operational practices in different parts of the world. Nakata and Sivakumar(1996) explored culture and new product development.

It should be noted that International Journal of Operations and ProductionManagement is a leader in publishing operations management research with culturalcontent, with several articles integrating these concepts that are too recent to be coveredin the Prasad et al. study (Pagell et al., 2005; Prasad and Tata, 2003; Jiang et al., 2007).

Summarizing cultural research in operations, Prasad and Babbar (p. 230) write (o)urreview . . . highlighted specific areas that still need to be examined. For example, cultural

influences could be examined in regards to facility location, capacity, productivity,forecasting, scheduling, aggregate planning, inventory control, services, and projectmanagement. Our current work is a step in moving this agenda forward and inconnecting the knowledge generated in anthropology with operations management.

Environment descriptionBarbados is a small Caribbean island (population 280,000). Data Airwas founded in 1983in Barbados as a wholly-owned subsidiary of a major US airline. The facility focused onwork transferred from Tulsa, Oklahoma, USA. This work involved physically keying ininformation from every ticket stub from the airlines 2,000 daily flights into computerdatabases. The tickets were flown in by the airline on regularly scheduled passengerflights. Once the facilities began operation, additional back-office work was obtained bytyping warranty cards and processing insurance claims from other firms, as well as

accounts payable work and cargo invoice processing from the airline.The airline invested $3 million in facility set up, including $2 million to purchase a

communications satellite channel to send work back electronically to the US Costsincluded $480,000/year rent for two communications earth stations. The airline claimedthe facility saved $3-$4 million per year (Posthuma, 1987, p. 34, 35, 39).

By 1984, the facility had 288 workers. By 1990, there were about 1,000, and it wasthe largest private employer in the country (World Bank, 1995, p. 52). In the mid-1990sthere were 1,500 employees (Informant C). The primary dates of observation byFreeman were 1990-1992. Information regarding times prior to and after those dateswas gathered by interviewing personnel that worked there or by archival data. DataAir was sold by the parent airline to an information processing conglomerate in 1997and the operations were consolidated with the new firms larger facilities in Juarez,Mexico by the new owner in 1998 (Informant D, Informant C). The sale did not reflectpoor performance it was part of a parent company strategic initiative in which all

subsidiaries were sold (Informant D).The Barbados facility was considered a major success by airline management

(Informant A). It was a showcase of the data processing industry (Freeman, 2000,p. 12) and was the subject of many positive press stories over the years in USnewspapers (Yearwood, 1993) as well as numerous plant tours (Informant C). A sisterfacility was founded in the Dominican Republic (population nine million) in 1987and operated for several years, but was considered not anywhere near as successfulas the Barbados facility (Informant A).

According to all the informants, the primary incentive for the airline to move thework was cost reduction. Wage rates in Barbados were one-half to one-fourth the wage

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rates paid in Tulsa for the same position. Wage rates in the Dominican Republicaveraged one-half that of Barbados (Informant A, Freeman, 2000, p. 101). Theminimum wage in Barbados at the time was $2.20/hour, compared to $0.55/hour in theDominican Republic and $4.28/hour in the USA (Safa, 1995, p. 43, all numbers in USdollars). Beyond the wage rate savings, governmental concessions also played a role.As a national strategic endeavor, Barbados desired to bring in work of this nature.A general title for this work is informatics, as it relates to information processing,rather than manufacturing tasks. Informatics work may be desirable to thegovernment for several reasons: It is viewed as more modern than manufacturing, aswell as being viewed as more clean, with little visible pollution stemming from such

work, and a more pleasant, office-like working environment. The firm that is thesubject of this paper was one of the first in Barbados and by far the largest, but by 1997there were 44 such firms employing over 3 percent of the countrys workforce inBarbados and 74 firms in the Caribbean (Dunn and Dunn, 1999, pp. 7, 12). TheBarbados government assisted through reduced tax rates, location assistance,employee recruitment, duty free import/export of equipment, tax free income fornon-residents, and start-up grants to offset training costs. The Dominican Republicoffered similar inducements (Posthuma, 1987, BIDC, 2006).

A note on some basic cultural elements of the two societies is important.The Dominican Republic was founded by Spain and retains a Spanish heritage.Spanish is the official language. Barbados, in contrast, is known colloquially as littleEngland and was founded by the English, who arrived in the seventeenth century,finding no inhabitants. The English imported African slaves, largely to support sugarplantations. The current population is 90 percent descendants of African slaves.Barbados gained its independence in 1966, but relations between the countries remainstrong. English is the official language.

Consequently, although the islands are close in geographic proximity, they are distantin cultural dimensions, with Barbados being labeled part of the Afro-Caribbean and theDominican Republic is part of Latin America (e.g., Yelvington, 2001).

Important for an analysis of the informatics industry is the nature of female work inBarbados, as historically nearly all the workers in the informatics industry in Barbadosare female (Bibby, 1996; Pollack, 1982; Nathan, 2000). While this may be offensiveto westerners, anthropologists have noted that in many cultures it is primarily men whowork outside the home to support a family, and the work of women especially youngwomen is seen as providing pin money, or extra income that is not essential to thefamily (Safa, 1995). In Barbados, however, historically women andwomen withchildren have always worked due to the slave heritage (Freeman, 2000, p. 71). Over 40 percent of

Barbadian households are female headed (Freeman, 2000, p. 249). Further, Barbadianwomen tend to continue working after marriage. While a woman and children may be theonly occupants of a specific home, the broad and deep family relationships provide anetwork to help both with child care and finances (Freeman, 2000, p. 127).

Operational concerns: facility locationLocation between countriesTraditionally, the literature has treated cost as the central concern for locatingback-office service facilities (MacCarthy and Atthirawong, 2003; Metters and Vargas,2000). The service facility location chapter of a leading service operations textbook


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focuses on minimizing distances or minimizing costs (Fitzsimmons and Fitzsimmons,2004). Recent research has challenged that view, indicating that many contextualfactors might be relevant for services offshoring (Stringfellow et al., 2008; Bhalla et al.,2008). Here, we present some specific examples of cultural issues that should beconsidered.

The basic point of offshoring this work was to reduce costs. However, two unusuallocation outcomes were observed: First, the lower wage country, the Dominican Republic,was an inferior performer (in quality, cost, and response time) compared to higher wageBarbados (Informant A, Informant C). Secondly, within Barbados lower cost locationswere not chosen, and firms that did choose lower cost locations did not succeed. It is notunusual for a higher wage country to succeed while a lower wage country fails, even if themain criterion is cost. Here, we try to answer the question, why?.

The relative success of the Barbadian versus the Dominican facility can beattributed to both cultural and structural issues. Barbados has a better educationalsystem, with a 99 percent literacy rate versus 75 percent in the Dominican Republic atthe time (Safa, 1995, p. 22), and the country is English speaking. Barbados has betterroads, is more politically stable, has a more reliable power supply, and is perceived asless corrupt (Transparency International, 2006).

These structural issues are important, but are not the only criteria for success.Although the Dominican Republic has lower literacy and fewer English speakers, thatfacility did not suffer from a shortage of workers. Further, speaking the same languagethe work is written in is not essential for performing the work. An accepted technique istermed key what you see, and relies on character recognition rather than knowing the

language (Posthuma, 1987). Politics and corruption are factors, but not large ones: TheDominican government wanted these facilities, so such issues would have worked intheir favor. Unreliableelectric power is certainly an important issue, but less so for thesetypes of facilities than some manufacturers. In the words of Hill (2000, p. 42), a reliablepower supply is an order-losing sensitive qualifier for, say, an electric-arc furnace steelplant. That is, uninterrupted power supply is so important to many manufacturers thatthe Dominican Republic would not even be considered as a possible location. Servicesector facilities like Data Air are affected by this issue, but not to the same degree.

Despite higher wages, the Barbados facility was less costly than the Dominicanfacility. An important factor in keeping costs low was the low attrition ratein Barbados. The attrition rate during the years under study was only 2 percent inBarbados (Freeman, 2000, p. 120). Informant A described attrition for the 15 yearhistory of the Barbados facility thus: There was no attrition. Attrition was 40 percentin the Dominican Republic, consistent with the experience in the US facility and with

work of this type in general in Western nations. Lower attrition causes lower costs dueto smaller human resource staffing, search costs, and learning curve effects. Beyondthe low attrition, absenteeism was extremely low, with 97 percent attendanceover the 15 years the Barbados facility was open (Informant C), a stark contrast to the10-12 percent absenteeism the process had in Tulsa (Informant A).

The low absenteeism and lack of turnover, combined with employees staying in thesame jobs for years, provided an ideal environment for productivity. The employees inBarbados had been at their jobs so long, and there was so little attrition, that trainingand written process descriptions were not needed, which caused severe problems as theprocesses were moved (Informant D).

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The reason for the exceptionally low attrition rate is found in the composition of theworkforce. The workforce in the two countries had a noticeable difference: Gender.The Barbadian workforce of Data Air was nearly entirely female. The Dominicanworkforce was 40 percent male (Freeman, 2000, p. 15). The history of Barbados plays arole here. In Barbados, women have always worked outside the home. Their views onwhat work should accomplish for them are also different than in other cultures.

As a general rule, upward mobility in the company hierarchy was not desired.This is not because upward mobility was not desired, per se, but very few data entrypersonnel wanted to be supervisors, as supervisory status would complicate the socialclimate between workers:

Reservations [. . .] about assuming the personal dynamics of power and authority were thereasons that few of the data entry operators I interviewed expressed interest in beingpromoted to supervisory positions. The disinclination to promotion included keyers who hadbeen working on the system for more than seven years [ . . .] As Pauline, a data entry operatorsaid: I am not really interested in moving up. Although it may be boring, I just prefer to sitthere [in data entry]. I really dont know much about the upper work, but you have to be ableto control the group, bring them together, understand their problems, and then the supervisorgets pressure from management [. . .] I think its tough. [. . .] (T)he women developfriendships and a sense of shared interest with their fellow production workers. Themovement into positions of authority, therefore, involves what some describe as anexpression of betrayal the idea that she was one of us, but now she has gone to the otherside. (Freeman, 2000, p. 158, 159).

The Dominican workforce, however, did not share these views. In the Dominican

facility, where nearly half the operators are men, and where the life span of a workeraverages two years, the jobs are envisioned by many as useful stepping stones towardother computer-related work (Freeman, 2000, p. 149). Consequently, after masteringthe tasks involved, which did not take long, many men quit. Compounding thisproblem was the behavior of the Dominican female workforce. The women recruitedfor these jobs were largely young and recently out of school. The company viewedwomen fresh from school as most desirable (Informant C). However, as noted by Safa(1995, p. 42) in her book on female workers in the Dominican Republic and Cuba, ageneral ideal in many countries is that single women worked, but . . . left employmentupon marriage. And as a matter of practice, (m)any Dominican men . . . may evenforbid them to continue working after marriage (Safa, 1995, p. 118). In general, femalelabor force participation in Barbados is 57 percent, as opposed to 15 percentthroughout Latin America (Freeman, 2000, p. 91).

The point of the job in Barbados was grounded in West Indian culture and

traditions of getting by (Freeman, 2000, p. 48). Many in the west may find thedescription of the lack of desire to be upwardly mobile offensive, but it is part of theirculture. As a consequence, rewards for high performance should be culturally tailored.Rather than rewarding hard work with promotions, it was rewarded with certificatesfor free travel on the airline parent company, a perk that was especially prized byworkers (Freeman, 2000, p. 250).

The point of the job in the Dominican Republic for men was to advance a career, orfor women it was to earn money until marriage. Consequently, there was an attritionrate of 40 percent at the Dominican facility (Informant C, Freeman, 2000, p. 47), eventhough the unemployment rate in the Dominican Republic was 47 percent for women


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and 12 percent for men at the time (Safa, 1995, p. 21). High attrition causes higherrecruitment and training costs, as well as learning curve effects on productivity.In 1998, when the work was moved from Barbados to Juarez, Mexico, there wereinteresting effects. The attrition rate in Juarez was 40 percent. Quality and responsetime also suffered, with the first year in Juarez frequently seeing backlogs of 20 daysworth of work (Informant D).

Facility location within BarbadosLike most countries, real estate in Barbados is less available and more costly in the citythan in rural areas. Further, worker transportation issues are more difficult for

working in the city. Workers could not afford their own automobiles. The workerslargely lived in outlying rural areas and relied on local bus transport to the industrialpark. Although Barbados is a small island, due to island geography there is usuallyonly one road to take to get into the city, and those roads are typically only one lane ineach direction. There are official bus stops approximately every 200 yards, but busesoften also stop at unofficial points when commuters signal a desire for a ride.Consequently, commuting even the relatively short distance into town could take anhour for a ten-mile drive. Indeed, 36 percent of the workers reported one-way commutesof longer than an hour (Pantin, 1995, p. 52). Yet, all of the informatics firms at that timehad their offices in the capital city of Bridgetown:

While most informatics companies are located in a centralized information processing zone inthe capital city of Bridgetown, one company recently set up an operation in the countryside tosave women the commute, and save themselves transportation costs demanded by women onthe night shift. The experiment failed miserably, however [. . .] Despite the early hoursand often long bus rides demanded by shift work, women prefer to go to town (Freeman,1998, p. 256).

The location decisions seem to be a contradiction. The purpose of moving the workfrom the US was to lower costs, yet they chose facility locations that increased cost.The contradiction can be resolved when cultural issues are assessed.

The jobs at Data Air were held in high esteem. However, this was not due to the pay.Workers averaged $95/week at Data Air. However, a job as a sugar cane cutter had thepotential to pay far more. A good cane cutter could make up to $250/week. Yet,Barbados had to import workers from Guyana to perform cane cutting (Hutson SugarMuseum, 2007) even though unemployment was 24 percent (Freeman, 1998, p. 249). Incontrast, each opening at Data Air had an average of about ten applicants (Posthuma,1987, p. 45, Informant C). The Data Air wage level was approximately the same as thewages at local factories, and yet the appeal of these jobs far surpassed that of

traditional industries such as garment assembly (Informant C).Interviews with workers indicated a prestige ranking of jobs that did not correlate

with pay. In Barbados, however, data processors openly acknowledge [. . .] thatthey could earn more money in the cane fields but prefer [ . . .] informatics (Freeman,2000, p. 48):

Some women acknowledged that they could be making more money even as domestic oragricultural workers. Their wages are comparable to or only slightly higher than those in agarment or electronics factory (and many have actually had those jobs). Significantly,however, all argued that they would rather be in informatics [. . .] While they acknowledgelittle difference in pay [between garment work and informatics], they clearly asserted that

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working in informatics is a step above working in the garment factories. Illustrating thispoint was the expression of disbelief and even indignation on the part of several dataprocessors when they learned of a fellow worker who quit her job as a keyer and was nowworking at a [. . .] cigar factory (Freeman, 2000, pp. 214-15).

While women unanimously considered the prestige and status of teaching, nursing and otherpredominantlyfemale(professional) arenas to be greaterthan thatof a data processor, manyalsoperceived their job on par with that of other clerical workers and superior to that of hotelworkers, domestics, and agricultural workers, in status if not in pay (Freeman, 2000, p. 230).

This high esteem also did not correlate with the nature of the work. Workers describethe work as boring (Freeman, 2000, p. 171). In a survey of the workers, 49 percent

stated the work was repetitive, an additional 47 percent called it monotonous, while4 percent called the work interesting (Pantin, 1995, p. 47). Management describes thework as a dreadful job, boring work (Informant A). Beyond the work itself, the workenvironment is problematic:

Through the computer [. . .] informatics lends itself to a level of worker control andsurveillance far exceeding that found in other manufacturing industries and in traditionaloffice settings. [They] monitor workers error rates, speed, quantity of items processed, lapsesin keying, and length and frequency of breaks [ . . .] Donna described the lack of freedominside the informatics workplace.

Every thing you do has to go on a time sheet. I personally call it slavery [she laughs].Everything you do they keep track of. You call it the off-time sheet. It really burns me [. . .]

Claire made the same point [. . .] There aint no freedom nowhere. Not in here.Unlike on the traditional factory assembly line, where workers amuse themselves and

break the monotony of their jobs by talking and joking with their fellow workers, on the dataentry floor talking is minimally allowed (Freeman, 2000, p. 199-200).

Further,flexible scheduling on the partof theworkforce (e.g. stayinglate, coming in early,coming in on weekends and working doubleshifts) was expected (Freeman, 1998, p. 253).

Independently, Posthuma (1987, p. 48) also relates that office work is regarded asprestigious in the Caribbean, and workers are proud to tell their families and friendsabout their jobs.

A noticeable difference between American workers in back-office jobs andBarbadian workers is clear just by looking at them. As back-office workers never seecustomers, dress standards are usually casual in US facilities. In facilities the author isfamiliar with, jeans and t-shirts are common attire. In Barbados, however, the attire ofthe informatics workers is elaborate. Colorful and relatively expensive dresses areworn to work, and significant expense is devoted to obtaining jewelry and purses:

In fact, professional dress is as important for the workers commute as for the workplace itself[. . .] Indeed, unlike their urban American counterparts who don smart suits with runningshoes en route to the office, the Bajan data operators display shiny patent leather or wellpolished shoes and bags on their commute to work or fast food lunch break. In the chillyrecesses inside, however, high heels are often kicked under desks, in favor of stocking feet,plastic slippers or [. . .] sneakers (Freeman, 1998, p. 256).

Workers are dropped off by the bus system at the central bus depot in downtownBridgetown. The Data Air facility is a fifteen minute walk from the bus depot throughthe crowded main shopping areas and pedestrian malls of Bridgetown. Despite thelength of the walk and the uncertain footing on the uneven, rough pavement the


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workers chose to walk to work in high heels, and transfer to more comfortable footwearonce in the office, exactly the opposite of what is seen in US cities.

The attire of the workers seems irrelevant to a manuscript on operationsmanagement, but it provides us a key insight into a non-traditional location decisionthat had to be made. In short, it would appear that part of what the workers want fromtheir jobs is to be able to go into Bridgetown and be seen. The feeling of working andbeing in the city is part of the allure. When the facility was moved to the rural areas,there was less of a point to dressing up there was no-one around to see you.

To summarise, the operational decision of location was influenced by culture.The goal of the firm in bringing the work to Barbados was cost reduction, but the best

location for the facility was the more expensive one. Similarly, the government ofJamaica created a free trade zone with many governmental advantages in a relativelyrural area of the island. However, of the several dozen informatics firms in Jamaica, thefinancially successful ones were located in the largest city, Kingston, which did notbenefit from the governmental assistance (Posthuma, 1987).

Operational concern: total quality management implementationThe role of national location in TQM programs has been studied previously. Usually,though, these studies do not explicitly involve culture. The research question that isusually tested is, roughly, is TQM universal? So, the success or failure of TQMprograms in different countries is assessed without specific causes of failure beingassigned. In looking at national location and the success of TQM the record is mixed.Several studies have come to the conclusion that national location matters (Dalhgaard

et al., 1998; Rungtusanatham et al., 1998; Roney, 1997; Mersha, 1997; Yoshida, 1989),while others conclude that it does not (Rungtusanatham et al., 2005; Dahlgaard et al.,1998; Mitki and Shani, 1995).

There have been studies that try to assign causes to TQM success or failure. Twoprototypes for how operations management researchers approach this problem areembodied by Ebrahimpour (1985) and Rungtusanatham et al. (2005). Ebrahimpourdevelops a list of operational and managerial differences between two countries, andstates that one country produces better quality than another. Rather than ascribingthose differences to culture, which would make them difficult to imitate, Ebrahimpoursuggests that the methods and technologies of the superior performing country beadopted. That is, Ebrahimpour implicitly incorporates Trompenaars (1993)universalist mindset. In Rungtusanathan et al. specific quality practices are noted tobe either different or the same in various cultures. That is, a survey is taken of numerousfirms in different countries and a statistical assessment is made as to whether firms

operating in different countries are different or not based on countable practices.While these two approaches provide valuable insight, they may not fully envelop

TQM. The two methods listed above answer the question what practices are differentbut not why are they different? As noted by Roney (1997), TQM is embedded withcultural values and assumptions which are consistent with its culture of origin. So, inthe ethnographic view, a third approach is taken. Through viewing personalinteractions and understanding local history, reasons why TQM may be better adaptedto one culture than another are explored. In the general business literature Roney (1997)and Yoshida (1989) take this view, but such views are not seen in traditional operationsmanagement journals.

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Regardless of the universality of TQM, theearlyimplementation of a TQM program atData Air was a failure (Informant A, and C). Certainly, many TQM programs fail.Characteristics of over 100 successful and failed programs have been explored in alongitudinal study by Taylor and Wright (2003), but culture was not among the variablesstudied, and all the programs were in the UK An ethnographic study of a particular TQMfailure in a US firm(Bushe,1988)highlighted corporate culture issues surrounding TQMthat are relevant here. Bushe found that the TQM failure was the result of several issuesthat were also present in Data Air. In Bushes paper, there were large status differentialsbetween workers and management and different categories of workers. For example,when a TQM project of line workers pointed to a machine design flaw of higher statusengineers, the suggestions were resisted. Further, the corporate culture valuedperformance over learning, and the lengthy training time was perceived as wasteful.

Informant A describes the failure at Data Air as due to culture. The TQMmethodology was not the way they thought of things. Freemans work in Barbadoscentered on two informatics firms. The following describes a TQM implementation inthe other informatics firm in Barbados which Freeman observed:

Although the [. . .] participants (supervisors and managers) obediently recited the companymission statement aloud, followed along though thick manuals of total quality guidelines,and entered in (reluctantly) to the role playing and small-group episodes organized by theconsultants, the sessions were rife with contradictions. Participants nodded when askedwhether communication channels were open across levels of the hierarchy and whether, assupervisors and managers, they rewarded production workers for their good work more thanthey criticized them for mistakes. The seminar was an exercise in idealization and false

affirmation that made no progress toward confronting deeply rooted management problems,because there, as in the production process itself, those lower on the ladder adeptly affirmedexactly what their superiors said or would want said, regardless of their true beliefs,resentments, and experiences.

With some sense of defeat, Roark [the general manager] described the difficulties he facedin actually realizing his goals of TQM and revealed a number of ways in whichunderstanding the local work force had eluded him [. . .] I didnt understand West Indianculture at all. Id be telling people to do things and theyd say okay, yes, yes, and nod inagreement and then simply not do them. Theyd rather say yes and then figure Id forgot,than say no and have to explain. [. . .] The seminars with the TQM group yielded few results.

[. . .] In an attempt to invigorate and reconstitute the agendas of the PACS [the term DataAir gave to quality circles], Data Airs general manager became a consultant member of allgroups, bringing their focus more directly to work-related issues. He said, in some, therehave been roaring arguments, and in one the group came up with eighteen ways in which thesupervisor wasnt doing his job. [. . .] The tension between a rhetoric of equal participation

and voice in the management process and the reality of hierarchy and power is palpable insome of these gatherings (Freeman, 2000, pp. 184, 185, 188).

At the Data Air facility:When TQM was introduced, the inter-hierarchical teams and attempts at Japanese style

participatory workcircleswere metwith suspicion and unease. Somewomen complainedthatmeeting together with managers just wasntright, andthat themandatory useof first names,designed to enhance familiarity and a corporate family ethic, was awkward and evendisrespectful (Freeman, 1998, p. 248).

While TQM is often seen as empowering workers, it exacerbated tensions in manyBarbadian firms. A strike at the local electric company in December 1996 produced


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placards denouncing TQM. . . (Freeman, 2000, p. 195). It would seem that as a matterof culture, Bajans do not communicate in the ways prescribed by TQM.

Informant C, however, stated that after the observation time of Freeman, and afteryears of trying, the TQM program finally became a success. To achieve that success,the corporate model was tossed and the Barbados facility practiced TQM our way.According to Informant C, the Bajan way involved a complete leveling of thehierarchy, as well as requiring employees to practice TQM in their private life withone-third of their performance evaluation revolving around TQM being applied tosome aspect of their home life.

Informant C also attempted to implement TQM in the Dominican facility, but was

never successful. Similar to the quote from Freemans work above, the Dominicanculture was too hierarchical. In Informant Cs words, the Dominican workforce wasparticularly subservient and expected paternalism. Quality was achieved throughinspection. In the Barbados facility, a single worker was entrusted with keying in data.In the Dominican Republic facility, quality was achieved through inspection. Threekeyers independently typed in the same data, and the results compared to achievequality. Consequently, the wage advantage over Barbados was negated. Beyond issuesof quality control, this also meant that the Dominican facility was not entrusted withtime-sensitive work. While keying in used airline tickets does not appear to be timesensitive, the airline could not recognize revenue until the tickets were keyed, so therewas pressure to have no backlog (Informant D). Further, the higher order claimsprocessing work done in Barbados was also often time sensitive, so it was not given tothe Dominican facility (Informant C).

The TQM and national location argument presented here is somewhat tangential tothe debate in the literature. Articles in the literature have counted TQM practicesperformed, or concluded that a society is better at TQM and directed us to adopt thatsocietys practices. Here, the focus is on practice localization, that is, determining howthe benefits of TQM can be garnered by adapting it to local culture.

Operational concern: shift workOwing to the lower salaries in Barbados versus the US, the relationship between thecosts of capital and labor are different. It has been noted that when offshoring work tolower wage countries, the balance of labor and capital should shift to increasing theamount of labor (Agrawal et al., 2003). While the costs of computing equipment arerelatively small today, that was not the case during the time and place under studyhere. Wages were $95/week per employee, but the limited bandwidth communicationsearth station rental was $9,230/week. Also, the word processing hardware systems

used were expensive. Because the workers were to be sitting all day the firm purchasedergonomic chairs then costing $400 each (Informant B). Because of the large amount offixed costs, it was desirable to run the equipment 24 hours per day if possible. Thesefirms typically had a day shift that worked approximately 7a.m.-4p.m., a swing shift(also called night shift) that worked 4-11p.m., and a graveyard shift that worked11p.m.-7a.m. (Dunn and Dunn, 1999, p. 9).

In ourcase, a specific incident of shifting to more laborculminated in the additionof awork shift. In both the Dominican and Barbados facilities, a third graveyard shift(11p.m.-7a.m.) was added. For the Dominican facility, this was not a difficulty. But forthe Barbados facility, the effort was initially tried and abandoned (Informants A and B).

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Initially, just getting workers to accept a swing shift was difficult (Informant B). Eventhough the day/swing shift received 3,000 applicants for60 jobs in 1993 (Freeman, 2000,p. 145), and unemployment was 24 percent in general, and 30 percent among women(Freeman, 1998, p. 249), the workers would not work the night shift.

Opposition to the graveyard shift was so strong that one manager said it was worth doingjust about any alternative arrangement for getting the work done than to demand such latenight hours. He said, Bajans are homebodies. You find most just want to be back home withtheir family, and not out at work at night. Again, the quiet conservatism of the Barbadiancultural milieu was contrasted with that of the Dominican Republic, where a graveyard shiftoperates more steadily amid a lively culture of the street (Freeman, 2000, p. 165).

Informant C states that Barbados is a day-time island, and that introducing thegraveyard shift was extremely difficult. Socially, the Barbados beaches are largelydeserted by Barbadians after dark, and the peak hours for nightclubs are beforemidnight. However, by 1995, twelve years after opening the facility, a graveyard shiftwas finally operating. Informant C stated that the difficulty was reorienting people onhow to live on a third shift.

Extrapolating this to other cultures and times, night shift work is extremelycommon in offshored services due to the vast time zone differences between the Westand India and the Philippines. In India in particular, night shift work is seen as counterto their culture especially for women. Consequently, night shift call center work ishighly populated by men in India (Richard, 2006; Dony and Pande, 2003).

Discussion and summary

As noted in the introduction, the offshoring of back-office service processes fromhigh-wage to low-wage countries has garnered significant popular attention. However,while it seems that many call centers have been offshored, there are still an estimatedthree million people in North America working in call centers (Gilson and Khandelwal,2005). While several notable Western firms have sent the processing of accountsreceivable, employee benefits, or other electronically transmittable back-office servicesoffshore, the vast bulk are still performed within the home countries. Owing to thesharp decreases in telecommunications costs since 2000, and the ubiquity of computerand language skills in some low-wage countries, there are no longer technical reasonsfor much of this work to remain in high-wage countries. However, as the surveys citedearlier suggest, a primary reason for the slow pace of work movement may be culturalconflicts. If this is the case, we believe the work represented in this paper can beinstrumental in understanding why and informing business practice.

In business practice, the author is aware of many processes that have been

offshored, failed, and have been brought back to the home country. It is possible thatoperations are mistakenly offshored due to perceptions created by the media andconsultants that processes can be offshored without considering cultural issues theuniversalist mindset described in the introduction. For example, the reasonoffshoring was first considered for Data Air is because the airline CEO read the 1982

BusinessWeek article on back-office offshoring referenced earlier and assumed costissues were the only considerations (Informant B). The author is also aware of recentfailed call centre offshoring adventures with cultural content. In an case known to theauthor, a US home improvement chain, where the mainstay of business arehomeowners who work on their own homes, offshored calls to a culture where homes


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were not made of the same materials and the cultural ethic was to hire others to makerepairs. The employees lacked basic product knowledge due to the culture they livedin. After fielding many customer complaints, a crystallizing moment arrived when anexecutive listened in on a customer call regarding defective roof shingles. The responsefrom the call center agent was whats a shingle?

Cultural understanding may assist in determining which processes remain inhigh-wage countries in a structured manner. Future research in this area could includemodel building for appropriate decision making that includes cultural factors.

In this particular instance, we highlighted the operational decisions of locationchoice, TQM implementation, and shift work as these issues did not conformto standard textbook theories. It could be argued that these findings are specific toBarbados, and many of the reasons for these issues are due to the specificity ofBarbadian history. Consequently, this does not mean that these issues will be resolvedsimilarly in such a workplace in, say, India or the Philippines. Rather, the generalconclusion that may be garnered is that the national and regional cultures of each areamust be assessed individually.

Many of the cultural aspects observed here appear to be directly related to choicesnow being made. Offshoring facility location in India and the Philippines follow asimilar pattern to that of Barbados. Call centers and BPO facilities are nearly always inhigh-rent urban or suburban areas, rather than in rural ones (Farrell, 2006). It is unclearthat this is optimal. Research questions emanating from this empirical fact of locationdecisions could explore the reasons why and determine optimal location policies.

The failure of TQM programs described here centered on the strength of hierarchy

in the culture. A measure of heirarchy strength appears in virtually all studies ofculture. It is related to the concept of Power Distance (PDI) found in the culturalstudies of Hofstede (1980, ch.3) and the GLOBE study (House et al., 2004), which has ananalog called achievement-ascription in Trompenaars (1993). In a sentence, PowerDistance is the measure of how much power inequality is tolerated or expected in asociety. In high PDI countries, strict hierarchies are expected, and the decisions ofsuperiors are not questioned. In low PDI countries, subordinates have more of a role indecision making and discussion. From the comments made about TQMimplementation in the Dominican Republic and Barbados, it would appear that ahigh PDI was a root cause in the failure of TQM. This is especially relevant foroffshoring at the current time, as the PDI of countries that have been successful withTQM, Japan, the UK, and the USA, for example, are low PDI countries, and thecountries gathering the offshored work, such as India and the Philippines, are high PDIcountries (Hofstede, 2006). The literature is mixed on this issue, with qualitative

assessments from Kumar and Sankaran (2007) indicating that certain high powerdistance structures actually support TQM, whereas Papalexandris and Panyotopoulu(2004) argue the reverse.

We have focused on the effect of culture on several particular characteristics.It should not be construed that these were the only operational choices affected bycultural differences. Two important topics not discussed for reasons of space here werethe choice to outsource and the effect of workforce composition on operations.More broadly, consider the words of Informant A, the Barbados unit president andlater the airline CEO: The culture clash between the USA and Barbados was such thatthere were problems I never anticipated, things that were not on our radar screen.

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This study has the strengths and limitations inherent in ethnography. In anethnographic study, a small group is studied at a particular place and time. Traditionalbusiness researchers may call this a weakness, as specific results may not generalize toother areas of the world at other times. But this is a view that is colored byTrompenaars (1993) universalist mindset which here is a view that managementpractices should be translatable across cultures.

To an anthropologist, this view misses the main point. The need for ethnographicstudy is precisely because local specifically matters. That such a study is very muchlocal is its strength. What is generalizeable about studying back-office serviceoperations in Barbados is similar in nature to the previously mentioned quote from

Voss et al. (2004, p. 214): studies conducted in one country may not be generalizable toothers because of national culture effects. The job of the business researcher can beto build models that include such effects.

Limitations and extensionsThe specific problems that occurred in the transfer of these particular processes areunlikely to occur in other environments. Beyond the normal limitations of a case study,this case study is limited because it involves the culture of Barbados, which has alimited capacity for international business due to its small size. Further, the accuracy ofremembered events from the informants can be questioned. However, it should benoted that there was no need for finger-pointing and blame laying for mistakes here.Adaptations had to be made, but the Barbados facility was a major success.

It is hoped that this work can be extended towards more co-operative work with

anthropologists. As noted by Prasad and Babbar (2000) and Starr (1997) earlier, thereare many operational topics that may have significant cultural content, but thestandard toolset of the OM researcher is not equipped to elucidate or even uncoverthem. Owing to their techniques and training, anthropologists bring different viewsand different tools to the table than the traditional business researcher. Here, thesubject was a more conventional use of anthropology: studying a foreign culture.However, industrial anthropologists investigate a wide array of topics that couldinform OM researchers and shape future theory.

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Further reading

Damaso-Dumo, G. (2002), Filipino women perform well in e-service jobs, available at:www.cctl.com/cyber_dyaryo.htm, February 20 (accessed August 2, 2004).

Erramilli, M.K. and Rao, C.P. (1993), Service firms international entry-mode choice: a modifiedtransaction-cost analysis approach, Journal of Marketing, Vol. 57, pp. 19-38.

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Metters, R., King-Metters, K., Pullman, M. and Walton, S. (2006), Successful Service OperationsManagement, 2nd ed., South-Western College, Cincinnati, OH.

Tihanyi, L., Griffith, D.A. and Russell, C.J. (2005), The effect of cultural distance on entry modechoice, international diversification, and MNE performance: a meta-analysis, Journal ofInternational Business Studies, Vol. 36, pp. 270-83.

Corresponding authorRichard Metters can be contacted at: [email protected]


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