Challenges Faced in Setting up a Captive

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Global CXOs believe that captive centers in India will be an integral part of their overall strategy for the future. Over the last 5 years, hundreds of captives have been set up in India and more and more organizations continue to explore this option. So, is creating a captive in India a cakewalk? Looks like it isn’t, especially for organizations who have not tread that path.

There are multiple challenges that organizations face while setting up and running a successful captive. ScrumStart team spoke to many senior executives who are or have been involved in creating and operating some of the most successful captives in India, and below are the biggest challenges that have been reported from this study:

1. Quality leadership:

Many organizations who are trying to set up captives in India have reported a challenge in getting leaders who are able to balance between technical and business perspectives. A good balance between domain knowledge and leadership qualities is also hard to find

2. Attracting and retaining the right talent:

Though India is one of the hot beds for technology talent, it is not easy for a new organization setting up a captive in India to attract the right talent. In such a scenario, it is imperative for the organization to work on creating a strong brand image and have HR policies tailor-made to India

3. Legal procedures:

Every organization setting up their captives in India is expected to follow several legal procedures. The unit should be recognized as a separate legal entity and is expected to adhere to all the applicable company laws (that includes creation of Memorandum of Association (MOA) and Articles of Association (AOA)). They also need to adhere to all the labor laws and meet several guidelines in setting up their bank account and thoroughly update themselves with the tedious audit and tax related procedures

4. Strong support ecosystem:

Another important element in running a successful captive is to have a strong ecosystem that supports the core delivery operations. This includes functions like HR Ops, Admin, Finance, & Corporate Communications. Getting to a level where all these support functions are well-defined and are working at an optimized level takes a lot of time. It was reported that precious time of senior executives – almost 75% of executive time in initial stages – goes in addressing issues related to the support functions

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Though there are challenges in creating and operating a captive in India, with the right partner, it can be a rewarding experience. Having an experienced partner can ensure that the organizations are able to cut down on the learning curve, adopt best practices and are able to ensure a quick ROI for the captive center.