Tata Communications: Building a Global-Local Operating Model

By Stphane J.G. Girod, Joshua B. Bellin and Robert J. Thomas November 2009

Case Study

Tata Communications: Building a Global-Local Operating Model

A Mumbai-based global startup in the rapidly changing communication-services industry must decide how to manage its global footprint and surmount new industry challengesall while honoring the Indian cultural values it was founded on. Its solution? Build a global-local operating model in which hard components like business processes and performance metrics support the soft component of leadership and peopleand manage the challenges that come with the model.
Tata Communications fast international growth
Tata Communications has changed shape frequently and steadily extended its global reach since its inception in 1986 as a state monopoly in India for fixed-line international calls. At the time, the company was called Videsh Sanchar Nigam Ltd. (VSNL). (See Table 1: Tata Communications at a Glance.) In 2002, the Indian government corporate centers role, though as important as ever, is shifting from managing foreign units dependence to managing foreign units interdependence. Emerging-market powerhouses now sell to customers not only in other emerging markets, but also in developed markets. Multinationals source talent at all levels without regard to country. innovation is no longer the sole preserve of the developed world. Technology advances facilitate cross-border integration, but consumer pressures and regulations vary widely from market to market and force multinationals to craft local strategies. In this environment, multinationals need a more sophisticated global and local operating model to manage

privatized VSNL as part of a deregulation plan, and the Tata Group acquired a 45% stake in it. VSNLs market capitalization by the close of that year stood at $1.2 billion. Two months later, India ended VSNLs monopoly status, and the company saw its domestic market share begin to erode. As a result, the company initiated a globalization drive fueled by acquisitions and diversification into value-added services (such as data). Its goal? To step up its presence and leverage its expertise in emerging markets while also consolidating its leadership in India. Tata Communications executives see the company as a global startup because of its rebirth as an international organization soon after loss of its monopoly.

Operating models in a multipolar world: Accentures case study series

The term multinational used to designate companies that operated primarily from company headquarters, usually based in the United States, Western Europe or Japan. Multinationals often sold their first-world goods in other markets, and managed operations in the developing world in order to take advantage of cheaper labor. Talent often meant, first and foremost, expatriate employees from the home market. But in a multi-polar world, where economic power is diffused around the globe, much has changed. The

the complex operations that span continents and cultures. To learn more about how some multinationals are creating these new models, we undertook a series of case studies, with a particular focus on emerging-market multinationals in the telecom and energy industries. This is the second case in the series.

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Tata Communications: Building a Global-Local Operating Model

In 2003, the company set up an international division in Singapore and established offices in the United States, United Kingdom and Sri Lanka. In 2005, VSNL acquired Tyco Global Network for $130 million and began providing data services for global customers. With this move, VSNL joined the ranks of the worlds largest providers of submarine cable bandwidth. In 2006, VSNL acquired Teleglobe International Holdings Limited for $238 million. It now counted among the worlds top five voice and data service providers (in market share). The year 2007 saw additional expansion and change: VSNL, its international division and Teleglobe united under the name Tata Communications.

The company then reorganized itself setting up global business units based in Singapore (data services), in Montreal (voice services) and in India (Internet broadband). (See Table 2: Tata Communications Business Units.) The companys sales revenues doubled between 2006 and 2007. But it was 2008 that saw the biggest expansion of Tata Communications global footprint. Foreign sales made up 57.3% of total sales, and the company became the worlds VoIP (voice over the internet protocol) leader. With its 200,000 kilometers of cables connecting 200 countries, it also became the worlds largest submarine cable operator. Its market capitalization climbed to $5 billion, and it ranked seventh in earnings-per-share growth among 3,000 U.S.-listed peers.

Today, Tata Communications senior leaders are transforming the company into more than just a utility provider: they are committed to challenging other multinational market leaders. As Vinod Kumar, Tata Communications chief operating officer, explained: We want to be a meaningful challenger to the likes of AT&T and Verizon and other business services, because we believe that their fairly large monolithic organizations will have silos with a lot of organizational and technology legacies. But as a new operator, we are fueled by growth from emerging markets, so we have [new] capabilities. To that end, Tata Communications has maintained its growth drive. For example, in 2009 it expanded into

Table 1: Tata Communications at a glance Industry Year founded Headquarters Parent company Workforce (2008-2009) Revenues (2008-2009) Major business units communication services 1986 Mumbai, India Tata Group 5,800 (82 percent in India) INR. 99.63 billion (US$ 2.1 billion) Voice services (Montral, Canada) Data services (Singapore) Internet broadband (Mumbai, India) provides transmission, IP, converged voice, mobility, managed network connectivity, hosted data center, communications solutions and business transformation services to global and Indian enterprises and service providers; also provides broadband and content services to Indian consumers offices in 80 cities in 40 countries; 22 data centers in developed countries, 12 in Asian emerging countries To deliver a new world of communications to advance the reach and leadership of our customers

Service portfolio and customers

Geographic reach

Vision

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Tata Communications: Building a Global-Local Operating Model

South Africa by acquiring Neotel. The move gave its broadband business international reach. And the company is continuing to set up new data centers in emerging markets (including South Africa). In 2008-2009, the companys internationalization continued progressing as international sales reached 60% of total revenues.

about how to integrate its operations more effectively globally while maintaining a high level of local responsiveness. Tata Communications senior executives had to build an operating model that would: Navigate different regulatory environments in different countries. Executives realized the need for savvy political networking and partnering towards this end. They therefore asked, What global capabilities do we need to forge local partnerships so we can navigate varied regulatory environments? Integrate acquisitions across markets characterized by varying consumer trends and technological realities. Realizing the benefits of acting as an integrated corporation, yet worried about diminishing the

companys flexibility in customizing local approaches, executives asked themselves, How do we integrate our international acquisitions? Attract, retain and extract the most value from talent locally. Executives realized that they needed to explore ways of organizing global talent networks to compensate for industrywide shortage of skilled technology workers. Broadly, they asked themselves, How do we create and leverage local talent globally? Address new competitors and technological convergence. Since many companies were increasingly under pressure to go from being a one-service voice provider to being an end-to-end information and communication technologies (ICT) player, executives

A global startup facing new operating model challenges

As Tata Communications grew in size and expanded internationally and as industry changes were driving new sorts of competitive pressures, the companys operating model came under increasing pressure. (See Whats an operating model?) Specifically, the company had to make difficult choices

Table 2: Tata Communications business units Unit % Total revenues (2007-2008) 61 % Total revenues (2008-2009) 58 Services

Global voice solutions

Provides wholesale domestic and international long distance calling services; serves carriers, mobile operators, Internet Service providers and content companies Provides connectivity and IT infrastructure management (including managed hosting, storage, security and applications such as TelePresence) services to corporate customers and other telecom service providers

Global Data Solutions

34

40

Retail Broadband Services

Provides Broadband and dial-up connectivity and a wide variety of content services to retail and small business customers

Sources: companys annual reports 2008 and 2009.

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Tata Communications: Building a Global-Local Operating Model

wondered, How do we scale up our innovation processes while remaining locally responsive? Enhance customers experience while also reducing costs across international operations. Senior executives realized that the requirements of customers vary from country to country, which led them to ask themselves, How do we enhance our customers experience locally while controlling costs and achieving efficiencies globally? In addition to these challenges, business at home began looking less rosy following deregulation of the industry in India in 2002. Voice services rapidly became commoditized, and Tata Communications saw its gross revenue per minute shrink from INR. 2.75 in 2006 to INR. 1.80 in 2008. Though the company still claimed 36% of the Indian market for international fixedline calls, it faced an increasing threat from Bharti, a major domestic rival. Senior executives knew that to stay competitive, Tata Communications had to make some tough choices about how it would manage its international operations in the context of a fastchanging industry. But its one thing for a multinational enterprise to recognize it needs a new operating model. Its quite another to construct one. The process isnt easy, in part because senior executives must wrestle with thorny questions such as: Are we properly organized and aligned to execute our strategy across geographic borders? Do we have the right mix of global scale and local responsiveness? What should be global, regional and local? Who decides, and on what basis?

Which business processes, technologies, organizational structures and performance measurements should we standardize? And to what degree should we standardize them? How do we stay true to what made us successful in each foreign country in the first place? Even long-established multinational enterprises based in developed economies find these questions difficult to answer. In fact, one recent Accenture survey revealed that 95% of senior executives in multinationals headquartered in developed markets are worried that their companies dont have the right recipe for managing (or extending) their global footprint.

Principle 1: Maintaining the Tata soft touch In thinking about how to configure the companys operating model, Tata Communications senior executives have chosen to capitalize on the Tata soft touch legacy that has given the company strong leadership and people capabilities and to support these capabilities with new or changed management processes, management technologies, organization structure and performance measures. According to Alan Rosling, former Tata Groups International President, Tata companies can succeed better in todays business arena by favoring the traditional Tata approach. This approach emphasizes entrepreneurial leadership, a networking culture and empowered talentsupported by relevant processes rather than the rigid hierarchies and standardization that characterizes many big Western multinationals. Puneet Chopra, industry expert at Accenture, described the uniqueness of the companys Indian heritage and its basis in operating flexibility and customer-centricity: Typically, Indian managers or leaders are quite flexible in their approach. Thats the way business is run in India . [They are] accommodating, flexible, very caring about customer needs [and] about others needs. They go the extra mile to meet the business demands or the customers demands. To deliver on this customer-driven principle, the Tata soft touch is also characterized by a desire to develop

Tata Communications global and local operating model: four principles

In response to these pressures and to achieve its new operating model objectives, Tata Communications started a complete operating model overhaul in 2007, with the goal of constructing a global-local model. Four principles underpin the configuration that is currently taking shape: Maintaining the Tata soft touch approach Harmonization of processes and technology rather than standardization Global-local talent management Distributed leadership Below, we take a close look at these principles. We examine how the company has applied them and what changes executives have had to make to surmount the potential pitfalls associated with these principles.

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Tata Communications: Building a Global-Local Operating Model

The core elements of an operating model

A multinational enterprises operating model represents the sum total of the choices it makes regarding how to execute on its international strategy. A core requirement of an operating model is that it enables multinational executives to (1) coordinate operations between the corporate center and the geographic business units and (2) to form an end-to-end strategic value chain. Four organizational elements underpin these capabilities. One element (leadership and people) is more intangible or soft. The other three elements (processes, technologies, and organizational structure) are more formalor hard. Performance measures formally tie all aspects of the operating model together. Leadership and people. Leadership consists of the senior team that substantially influences the organization, and serves as an example for how it should operate. Of particular importance to an operating model are an organizations leadership style, its degree of diversity and the way leaders make decisions. As for people, the key aspects are the companys approach to talent management, its emphasis on employee engagement and the way it fosters networking. Also included is the cultural dimension of the organization the beliefs and shared values that bind its members together. Processes. This element consists of the clusters of activities that produce measurable outputs. It includes all the management processes that help coordinate input-output activities in the value chain across geographic units. Some examples of processes are strategic planning, resource allocation, knowledge management, innovation management, customer relationship management and supply chain management. Technologies. This includes the physical equipment, software and tools that underpin the processes. For example, enterpriseresource-planning software and intranet portals can help effect financial control, knowledge management and innovation processes.

Organizational structure. Within this element is the way in which responsibility, reporting and accountabilities are defined. It includes the structural and control mechanisms used both to integrate and to differentiate units and businesses. Taken together, the content and the relative importance given to each organizational element characterise the operating model configuration. Each element may be thought of as a dial that can be set at different levels; the configuration is the unique combination of these dial settings. To achieve high performance, the organizational elements need to work together in a good internal fit.

Operating model according to Accenture

Discontinuities Business Model

Customer

Earnings

Value Levers

Product

Route-to-Market

Enterprise Direction Organizational Influences Design, Sell and Market Buy, Make and Distribute Transact, Service and Collect

Support Services
Execution Elements

Leadership & People

Processes

Technologies

Structure

Performance Measurements

Soft Element

Hard Element

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Abroad

Home

Operating Model Strategic Capability Map

Tata Communications: Building a Global-Local Operating Model

a learning organization. Executives want to get knowledge flowing in multiple directionsnot just from India to other parts of the world but in reverse directions as well. This priority is particularly visible in the companys recent acquisitions. As Michel Guyot, brought to Tata Communications with the Teleglobe acquisition and now leading the Global Voice Solutions division, explained: Tata Communications was really listening to what [Teleglobe] thought was good and not good. I was a little amazed [by] that because it was the first time I had a direct relation with the Indian culture. Many people didnt know the Indian culture, but it was quite refreshing seeing that they were really listening and letting the people do their own integration. Executives desire to honor the Tata soft touch reveals the importance they assign to the quality of the companys leadership and its peoplea key global operating model element. Indeed, Michel Guyot lauded the commitment of Tata Communications executives to maintaining a visible presence in each of the companys diverse geographic markets: You want to be present in all your markets and set key directions. You want to show you are there, that youre supporting each of your overseas markets in the same way you do in your own home-country market. Its very demanding for the leadership team.

Principle 2: Harmonization Harmonization is Tata Communications distinct way of integrating its operation globally while remaining locally responsive. It is characterized by a small number of rules that help determine which processes, technologies, structures and performance measurements should be made standard across Tata Communications geographic locations and acquired companiesand which should be allowed to vary locally. Harmonization reflects the companys desire to avoid not only excessive standardization but also insufficient standardization. Consequently, harmonization implies that corporate senior executives avoid hasty top-down standardizing decisions. As Harish Abhichandani, vice president of finance, explained, I wouldnt use the word standardize; I would use the word harmonize.Its not a question of force fitting and saying: This is what youve got to do. Period. Harmonization doesnt necessarily mean that the retained rules or standards are based on home-country practices and dictated to the business units and acquired companies by corporate leaders. These rules about processes, technologies and performance measurements standards can also emerge from Tatas network of international operations and from its acquired companies. Indeed, the companys senior executives consider this the best way to create common knowledge, extend employees networks and engage foreign operations in defining and achieving common strategic objectives.

Tata Communications actively consolidates management processes, structure and technologies across its global operations with harmonization. According to R. Nanda, senior vice president of human resources: Whatever can be harmonized, we will harmonize. But whatever is best left with certain modifications required at the regional level and that is more effective for the organization, we would prefer to leave it that way. So, for example, while the company has a standardized framework for its credit policy, within that framework, different regions or countries or newly acquired companies can develop local processes related to debt and financing, provided these processes are approved by the global comptroller. Big rules of harmonization One intent underpinning harmonization at Tata Communications is to balance economic efficiency with customer proximity and responsiveness. Thus, when deciding which processes will be global and which local, executives distinguish between back-office processes and customer-facing processes. Back-office processes are often associated with shared functions or with standard processes based at a global centerin India, where the company can benefit from Indias competitive cost base. Customer-facing processes, by contrast, are customized according to customers needs at specific geographic locations. As Srinivasa Addepalli, senior vice president of corporate strategy, explained:

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Tata Communications: Building a Global-Local Operating Model

The broad philosophy is that infrastructure or capabilities that are common to or that can be leveraged across business units should be shared and are centralized. But whichever activities or decisions are closer to the customerthey could be commercial functions, direct customer service functions, or sales and marketingthey should be closer to the business units. When the company is forced to weigh cost advantages against customer proximity, the company prioritizes the latter: leaders have decided that if India does not guarantee the best customer service, the company will relocate the function elsewhereeven if the new location is more expensive. According to Srinivasa Addepalli: We also make sure that we have enough people closer to the customer. And therefore its not that back-office or all functions have to be done out of India. And if we need to locate some operations people or customer service [people] in a high-cost location close to the customer, we will put them there We will put enough [of our] people in the markets where the customers are, and therefore get the ability to speak to customers faster, sell [to] them faster, sell [to] them locally in the languages locally. That also creates agility in [our] response to customers.

Resolving harmonization pitfalls Harmonization can create global efficiencies through standardization while also allowing for local responsiveness. But deciding what to standardize and what to leave local can also consume more time than senior executives may want to spend. Yet Tata Communications senior executives are willing to be patient; they dont wish to impose standard processes too hastily, because doing so could backfire if the quick solution turns out not to be the best. It would also backfire if the actual users resist standards unilaterally imposed on them. Such resistance would increase costs by raising the need for centralized control. This in turn would contradict the companys empowerment policy. Thus, as Harish Abhichandani also put it, [Harmonization] takes time. And maybe it has a little extra cost to it. But in the end, the result is far more sustainable. There are limits to how much time it takes to integrate foreign operations and acquisitions, however. Harmonization also hinges on easy, speedy communication across employees and borders, as senior executives are finding out. With an eye toward ease and speed, the company is creating a common intranet for all its employees around the world, so they can readily exchange best practices. Tata Communications is also consolidating its two ERP planning systems (SAP and Oracle) into one platform. Fragmentation of these platforms often resulting from acquisitionshas made it difficult for shared services to coordinate their work, has created costly inefficiencies and has eroded

the companys flexibility. This consolidation will address these problems as well as enable the company to accelerate integration of its financial and non-financial performance measurements across borders. Eventually, the company will also rationalize the number of metrics it uses. Thus, paradoxically, one way to avoid over-standardization is to heavily standardize information and communication technologies. The sooner a multinational manages this trade-off, the sooner harmonization will deliver its positive effects towards the integration of acquisitions.

Principle 3: Global-local talent management Tata Communications global-local talent management principle follows directly from its harmonization principle. Through this principle, the company is working to create a global network of local talent. It is standardizing a set of common values and the structure of talent management by establishing corresponding processes, technologies, structures and measurements. But it leaves the content of talent management for example, specific hiring guidelines and compensation decisions to local leaders. Standardizing values to create unity and empower people With the help of Tata Communications central human resource function in India, senior executives have begun disseminating globally a common set

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Tata Communications: Building a Global-Local Operating Model

of values to bind organizational members across business units and geographic locations. Inherited from the Tata Group, these values promote a professional, global and competitive culture which contrasts sharply with the bureaucratic and nonmerit-based culture that had characterized VSNL before the Tata Group became its parent. According to Srinivasa Addepalli: The Tata Group value system [is about] respect for individuals, respect for business, respect for society, doing things in an ethical and a moral manner [and] not placing results over our responsibility. I think the Tata Group value system and the culture of the parent organization lends itself to people wanting to work closely. I think the respect that the Tata brand and culture bring to an organization and the respect that [the company] offers to people helps in attracting good people and then making them bond very well. According to Vinod Kumar, new talent is recruited on the basis of these common values. Executives view the values as essential for executing Tata Communications ambitious strategy to become an emerging-market multinational that can compete with big Western players. The promotion of future leaders is also based on these values, which perpetuate the Tata soft touch. Leaders know that when employees share common values, they trust one another to do the right

thing. Trust in turn makes a commandand-control leadership style unnecessary. And when executives steer clear of command-and-control, autonomy and empowerment emerge at lower levels of the hierarchy. Standardizing talent management processes and policies Tata Communications standardizes certain international human resource processes and policies. First, to enhance employee engagement across its many locations, it has created a new global policy of employee rotation across locations (provided this satisfies the customer-proximity rule) and across business units. This rotation policy creates new career tracks for employees and is open to all employees, not just to few Indian expatriates. It aims to facilitate leadership and expertise development and to reward talent. Potential leaders can be rotated to improve their skills; more generally, rotated employees develop new task-related and cross-cultural skills. This process also expands employees formal and informal networks, further reducing the risk of silos. As Vinod Kumar put it, Weve been an organization that leverages talent where it is found. Second, to further enhance engagement, the company links the variable pay of its top 50 leaders to two performance measurements: their own level of engagement, and their employees satisfaction. This practice enhances leaders visibility in the organization and encourages them to strengthen their communication skills. To measure engagement and satisfaction, the company uses the Gallup engagement index.

Third, Tata Communications has also recently launched a mentoring program designed to systematically fill its global leadership pipeline. As Michel Guyot explained: Through the mentoring program, [we want to] identify future leaders. One of the most important qualities of a leader is to prepare employees to take over the company eventually [to grow] into the company. This mentoring program is supplemented by an individual growth and development management process. According to Milind Kulkarni, General Manager IT: We have a strong performance management system wherein we try to capture the strengths and development areas for each individual and take into account how they want to act, where they want to grow. And that is one of the strong processes, which is reviewed every six months. Last, the company has created a common induction platform for new hires that emphasizes Tata Communications core values, internal communication systems and the common appraisal process from which performance evaluation and rewards can be customized locally.

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Tata Communications: Building a Global-Local Operating Model

Localizing specific talent management content While Tata Communications has standardized some talent management processes and policies, it allows local leaders to determine the content of their talent management. This is consistent with the harmonization principle. For example, Tata Communications has standardized the performance appraisal process. But it allows local leaders to set performance goals for their people and to determine what various incentives and rewards will consist of. Resolving global-local talent management pitfalls Applying global-local talent management has proved challenging. For example, its taking time for the global mindset the company is striving to cultivate to become a reality at lower levels of the corporate hierarchy. Sandeep Mathur, President of Corporate Affairs, describes the situation as follows: If you ask any person in the organization how his or her activities relate to the companys goals and objectives, some [but not all] would be able to do that today. How do we make sure that everyone is aligned toward working for the company goals? I think most senior level leaders are aligned to the company strategy. But for us to be a world-class company, weve got to have everyone pulling in the same direction.

In addition, many employees at the middle management level are finding it difficult to work in global virtual teams, often owing to lack of experience with this kind of work. For Vinod Kumar, a recurrent question for middle managers is: How do you manage a person who youve never seen and who you only talk to on the phone or on e-mail? Executives have begun putting solutions in place. With the new coaching and mentoring program, senior leaders spend a lot of time showing lower-level employees how their work makes a difference to the company overall that is, how their work helps the company achieve its mission and strategic objectives. To help middle managers gain experience and comfort with overseeing virtual teams, senior executives also involve them in do-or die initiatives. By participating in such initiatives, middle managers can observe how senior managers operate within the global organization, and can learn from those observations.

Distributed leadership supports both global integration and local responsivenesskey elements of the companys strategy. Its defining characteristics include being geographically agnostic and de-emphasizing corporate headquarters. Being geographically agnostic In the companys new structure, leaders of key shared-service functions are based in India, where the bulk of the back-office workforce is located. But the heads of the two main SBUs and their teams are based in Singapore and Montral, and they have global responsibilities. The global teams they coordinate are spread throughout most regions of the world and work virtually. So, the heads of the various offering lines are distributed around the world and have authority over local decision-makers. Thus, distributed leadership requires both broad empowerment and extensive crossgeographic team work. As a result of this configuration, a perception has developed in Tata Communications that leaders do not have to be physically present in India. In Alan Roslings words: Both key businesses are international, and the people who operate them are internationally organized. Both are backed up by as much legal and core services as we can [provide] in India. I think telecommunications is a good example of a business which is geographically agnostic.

Principle 4: Distributed leadership The fourth principle of Tata Communications operating model results from the companys effort to distribute its leadership across hierarchical levels, geographies and functions. To support this principle, Tata Communications defined a new organizational structure in 2007, in which no distinction is made between the companys Indian and non-Indian parts. Rather, the company is structured around global business units. Many of our customers are global in nature, Srinivasa Addepalli said, therefore our structure is global in nature.

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Tata Communications: Building a Global-Local Operating Model

Distributed leadership also means that high-level leaders do not all originate from India. As Vinod Kumar explained: If you take the top 50 people in the business, theyre distributed across twelve cities so we can be as close to our customers and markets as possible. When we look at the top 50 people again, less than one-third of them are Indian. Its not necessarily a practice that even some of the other telecommunication companies have managed to pull off. We hold onto this passionately because we believe that the mix of the people and the location of the people need to reflect our thinking. Being geographically agnostic does not mean that geography is absent from the organizational structure. Customer-facing employees are organized by geography for the purpose of achieving local responsiveness and customer intimacy on a global scale. As Michel Guyot described it, geography is contained within each global business unit: We are also structured by region in the sense that we have some regional managing directors in each continent or region. Europe, Asia/PAC and India (being one region itself because its so important for us). [Other regions include] Latin America, North America and Middle East and Africa. Regional managing directors meet on a regular basis to set objectives on a regional basis, and [to] measure and monitor the results on a regional basis.

De-emphasizing corporate headquarters In traditionally structured companies, headquarters are principally in charge of the home country and secondarily in charge of international operations an arrangement that typically limits lateral exchanges between business units. This isnt the case at Tata Communications. The company believes that the traditional role of headquarters does not support its distributed leadership principle, that it contradicts the view of the company as a global startup and that it constrains networking among far-flung managers and employees. We dont want a headquarters, Vinod Kumar said. We want to have twelve locations, twelve centers of gravity. So we shun the word headquarters. Consequently, the global management committeewhich often meets virtually owing to the physical distance between its membersis considered more important than the corporate headquarters. This committee is also renowned for its agility and speed. As Michel Guyot observed: Even though we are a large company with people around the globe, the leadership team acts very fast. [It is] a small team that can get together with ten minutes notice, can get on the phone wherever we are, and we are there to take decisions. Resolving distributed leadership pitfalls Distributed leadership can succeed only if empowerment becomes a widespread reality within the companywith decision-making confidence and authority extending down through all employee levels. But changing the entrenched hierarchical structure of the former VSNL has turned

out to be difficult for the new Tata Communications. For example, employees still sometimes feel compelled to report small decisions to top management, and the threshold for capital-expenditure approvals remains low. Sandeep Mathur, for example, explained: We perhaps need a little more flexibility in our organization And its probably also got to do a little bit with our culture. I dont think we empower enough yet. Its much better than what it was four years ago, but its still not enough. So a person who is closest to the customer perhaps doesnt have the requisite authority to take decisions which he ought to. And if [decisions] get pushed up, particularly [if] theyve got to go to another continent for a decision, we dont have good flexibility. Owing to this constrained empowerment, tactical and operational decisions take more time than they might otherwise. Delays could jeopardize customer intimacy, since lower-level employees are not able to make the quick decisions customers are expecting. Lack of generalized empowerment can also put off entrepreneurial employees, depriving the company of the fresh thinking and innovations such employees bring. Aware of these drawbacks, senior managers are working to define roles and responsibilities more clearly at the lower levels of the hierarchy, so people will feel more confident about making judgment calls themselves. For example, executives have begun specifying

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Tata Communications: Building a Global-Local Operating Model

whom a global shared-services process owner should deal with at the local level and whether a particular process is a business units responsibility, a regional managing directors responsibility or a shared-service teams responsibility. While the new structure has only been put in place for eighteen months, a key learning for senior executives is the urgency of removing any ambiguity in the new structure.

talent capabilities. Only then can the enterprise achieve local responsiveness. Sanjay Mathur, head of the Management Assurance Group, expressed this line of thought as follows: I would say that even the best processes in the world will not help you if your management is not visionary. In addition, Tata Communications has honored but also scaled up the Tata soft touch management philosophy. This approach has enabled the company to balance standardization of management processes and performance measurements through harmonization, to begin leveraging talent globally and to start balancing hierarchical reporting structures with wide empowerment through distributed leadership and virtual headquarters. The result? Tata Communications is managed like a global startup. In the words of Madhusudhan Mysore, chief officer of Customer Services and Operations, Our global company is running like a startup. That means the flexibility and (to an extent) the communication goes vertical as well as horizontal. Coordination is much tighter and easier. But Tata Communications experiences so far in building a global-local operating demonstrate that the process isnt easy. Balancing the five components of an operating model takes careful thought, and the choices made arent always ideal. They inevitably present frustrating trade-offs.

For example, distributed leadership can help executives and managers forge close relationships with partners and customers in far-flung locations. But it can also make it harder for them to present one face to partners and customers. Distributed leadership cannot work without clearly defined roles and responsibilities. The interface between global process owners and implementers at the local level needs to be sharply defined. Harmonization can create global efficiencies through standardization while also allowing for local responsiveness. But deciding what to standardize and what to leave local can also consume more time than executives may want to spend. To get the most value from harmonization, a company must standardize ICT that facilitate internal networking. Paradoxically, standardization on this front reduces the risk of deploying the other operating model components in an over-standardized or over-centralized way. There is a final lesson. Being global and local means being in flux. This flux can take the form of big, radical changes (such as Tata Communications 2007 complete operating model overhaul) that are required to execute new strategies. And it can manifest itself as continuous fine-tuning on a smaller scale to resolve the tensions resulting from the trade-offs to improve business results. Thus, a global-local operating model will always be a work in progress, not a finished product that, once built, stays in place indefinitely.

Key lessons What key lessons can be drawn from Tata Communications operating model journey? In just a few years, the company has achieved important milestones in creating a global-local operating model that fits the new challenges arising in its industry. It has pioneered several organizational innovations based on this assumption: hard components such as organizational structure, management processes, and management technologies matter when a company is integrating operations and businesses across borders and increasing its global scale. As Sunil Joshi, president, India, explained, Focussing on people alone places a limit to what you can achieve in terms of growth and performance. Structure and processes play an important role too. But the hard elements in the companys operating model support, rather than take precedence over, leadership and

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Tata Communications: Building a Global-Local Operating Model

References
In addition to one-hour face-to-face interviews with eleven Tata Communications top executives, we collected the following secondary information:

About the authors

Stphane J.G. Girod, Ph.D. (stephane.girod@accenture.com) is a research fellow with the Accenture Institute for High Performance. He is based in London. He was the study lead in the telecom and energy industries. Joshua B. Bellin, MSc. (joshua.b.bellin@accenture.com) is a senior research associate with the Accenture Institute for High Performance. He is based in Boston. Robert J. Thomas, Ph.D. (robert.j.thomas@accenture.com) is the executive director of the Accenture Institute for High Performance. He is based in Boston.

About the Accenture Institute for High Performance

The Accenture Institute for High Performance creates strategic insights into key management issues and macroeconomic and political trends through original research and analysis. Its management researchers combine world-class reputations with Accentures extensive consulting, technology and outsourcing experience to conduct innovative research and analysis into how organizations become and remain high-performance businesses.

Company annual reports and corporate presentations Credit Suisse, Tata Communications, 29 January 2009 Columbine Capital Services, Tata Communications Ltd , December 5, 2008 Datamonitor, Tata Communications Ltd: Company Profile , September 8, 2008 HSBC, Tata Communications, September 4, 2008 Asit C. Mehta, Tata Communications Ltd: Company report, August 26, 2008 Religare, Tata Communications, June 23, 2008 HSBC, Tata Communications: Company Report, May 2, 2008 BNP Paribas, Tata Communications, April 22, 2008

About Accenture
Accenture is a global management consulting, technology services and outsourcing company. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the worlds most successful companies, Accenture collaborates with clients to help them become highperformance businesses and governments. With approximately 177,000 people serving clients in more than 120 countries, the company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www.accenture.com.

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