Captives are Not Immune to Trust Deficit

Captives are Not Immune to Trust Deficit

Our experience in creating, scaling up and covering a whole journey to maturity in the previous company helped us understand a unique situation. IT Captives have a difficult job at hand selling their capabilities to their internal teams than a service provider. As the word ‘Captive’ suggests and that has been changed to GIC (Global In-house Centres), nothing much has changed in a decade in the way captives are created and operated.

The ‘captives’ are treated as pure captive where the control is primarily one way. The parent company gives the job, and the captive simply gets them done. There is limited freedom to innovate, contribute beyond the given scope and even influence decisions in the parent companies. Traditionally, the main reason the captives are created is to get cost arbitrage benefits more than the companies get from IT service providers. Benefits of better control, better knowledge retention and in recent times more heads for innovation are additional advantages that sweeten the benefit of the cost if exploited well.

As per a study done by Bain & Company Inc., Cost is the most easily understood value element out of the thirty values shared in the study. Cost-benefit gives instant gratification, but it alone cannot sustain the feeling of benefit for an extended period. Unfortunately, captives come with the direct cost benefit as the only and the main reason for which they are created ignoring the other value elements that can quickly multiply the overall benefit and sustain and enhance the utility of captive.

The basic premise of who gets the job done is always ignored while a captive is created. It is the board level decision, and the executives who take that call do not have any problem with their jobs coming under threat due to a low-cost position in geography. It is almost always the staff at a lower hierarchical level in parent company, who get this threatening message when a captive is created and are still in doubt of their jobs getting shipped away offshore, in a captive location of their own company. This is the fundamental reason for a massive trust deficit between a captive and parent company. The staff at a lower hierarchical level, is supposed to collaborate with the captive team on a day to day basis and prove the value of this investment. The same team is not threatened when a third party vendor is engaged for the job, as they usually do not pose such a threat, except in very few situations.

To add to this situation, if captive leadership team is not highly experienced and matured in working under such circumstances, chances of failures are even higher. Captive management is different to a third party IT vendor managing their accounts, and it is always more difficult and needs deeper understanding to manage such hidden trust deficits.

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This situation, almost in all cases ensures that captives are not utilized to their fullest extent, even though the top management feels that the captives are delivering the desired benefits solely based on cost advantage they get.

Our experience says that a successful captive must have a dedicated senior leader in the parent company, solely responsible for getting best out of this investment apart from a set of experienced captive leaders. Regular travel, relationship building, business case proving, change management and regular updating of the benefits to all key stakeholders makes a captive more successful.

ScrumStart Virtual captive model efficiently handles such situations primarily due to the experience of the leadership team and giving the best of third-party advantage, while enhancing the captive benefit as well.

About the Author:

Santosh Panicker1

Mr. Santosh Panicker,

CEO ScrumStart is a specialist in setting up business processes and has established himself as an inspirational leader in the corporate world. Mr. Panicker has demonstrated his capabilities in setting up end- to -end HR, legal, and business process operations for 9 start-ups through his career years. He has over 22 years of experience working across diverse industries including IT, FMCG, Retail, Automobile and consumer durables with blue chip companies