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Capturing Real Value from Your Captive Operation

by Atul Dogra

In the prevailing economic uncertainty, organizations continue to scrutinize their service delivery models to find opportunities for improvement. Captive operations have been integral to the service delivery models of a number of large global organizations, delivering services from basic back-office data management to specialized knowledge services like R&D and engineering.

Consider the following Top 5 key tactics to ensure ongoing operational success and long-term viability of your captive operation:

1. Design and deploy effective and efficient processes. The processes that support service delivery at the captive operation must be flexible and enable continuous improvement and process standardization. They need to bridge multiple geographies and time zones. Processes can be standardized with a few simple measures – ongoing review, automation of manual tasks and deployment of checklists – each of which can have a significant positive impact on productivity.

2. Stem staff attrition and wage inflation. Attracting and retaining trained staff is a challenge that faces captives operating in rapidly expanding economies. While location of the operation is critical to ensuring a steady supply of talent, robust people-management frameworks also need to be in place to guard against wage inflation and high staff attrition. Captives that offer market-recognized specialist services internally are attractive to potential employees and can improve retention.

3. Dial in scale and value creation. The scale of a captive can drive efficiency and set a strong foundation for growth. Many organizations operate a captive and receive services from third-party service providers. A framework that allocates work between the captive and the existing third-party service providers will ensure optimum scale for the captive to deliver value. Creating appropriate scale also offers an opportunity to specialize and differentiate in a marketplace where captives compete to attract talent.

4. Ensure stakeholder engagement. The very nature of captive management means stakeholders across multiple geographies and team members from a variety of cultural backgrounds will need to interact. Define an appropriate governance structure to ensure proactive stakeholder engagement, align expectations, reduce conflicting priorities between stakeholders and ensure operational visibility of the captive’s value.

5. Manage costs. Ascertaining a detailed understanding of the captive’s cost drivers will help to control cost variables that could render it uncompetitive. Plan periodic location analyses to mitigate the risks of rising costs and to assess potential emerging locations for captives to take advantage of labor arbitrage and infrastructure cost benefits. While operating an efficient captive is challenging, the ability to successfully address these challenges can have a positive impact on the quality, efficiency and risk equation for the entire enterprise.

To learn more about optimizing value from your captive operation, contact Atul Dogra, Senior Consultant, ISG..

About the author

Atul Dogra is a Senior Consultant within ISG’s CIO services practice in the UK. Atul has over 16 years of global experience within the Financial Services, Manufacturing and UK Public Sector. He has worked in a number of market segments in Europe and Asia, both in client-facing roles within service provider organisations and as an end user of outsourcing services.