Creating a Competitive Advantage through the

Strategic Management of Human Capital

Buenos Aires, Argentina

Human Resources Service Center
March 2007

An Emerging Markets Business Case Study

MBA 808

John Reisen
John Rudisill
Emmanuella Saint-Hubert
Creating a Competitive Advantage through the Strategic Management

of Human Capital

It is March of 2007, roughly one year since the human resources service center

opened in Argentina. Sebastian Conde and Amalia Olivera-Riley, are reflecting on

events of the past year. Although they had faced numerous challenges in launching the

ExxonMobil Business Support Center -Argentina S.R.L. the project had been an overall

success. The foundation for the new operation had been laid. Conde and Olivera-

Riley had identified talented employees for new positions, successfully trained the new

team, and got technology infrastructure up and running in the new location. In addition

the year had been a milestone for their company, ExxonMobil, which had recently

completed the strongest year in the companys history as demand for petroleum grew in

the world market. Presently, Conde and Olivera-Riley are considering how to capitalize

on their current successes and mirror the growth of the rest of the organization which

continues to add personnel. As they look at the political and economic environment in

Argentina and the unpredictable nature that surrounds the volatile energy industry they

consider what challenges that will unfold in the near and long term. Between both

managers, is 37 years experience with ExxonMobil, a company that has a history filled

with many peaks and valleys.

As the senior members of the team in Argentina, they now need to determine a

strategy to make their local operations sustainable. Both managers are originally from

South America (Conde and Olivera-Riley were born in Chile and Argentina,

respectively). They have enjoyed the experience and would like to continue their tenure

2
in Argentina; therefore it is imperative that the correct decisions are made in the present

to assure that the facility stays operational in the future. Now that the location is up and

running Conde and Olivera-Riley are moving past the operational basics of the site and

creating a vision and strategy for the future that will allow them to maintain a sustainable

competitive advantage in a volatile industry.

A History of Exxon Mobil

The vision of John D. Rockefeller inspired the birth of Standard Oil Trust in 1882,

after his acquisition and organization of a diverse set of petroleum interests during this

period. That same year marked the incorporation of two refining and marketing

organizations -- Standard Oil Co. of New Jersey and Standard Oil Co. of New York.

"Jersey Standard" and "Socony," as they were commonly known were the chief
1
predecessor companies of ExxonMobil, respectively. Throughout the twentieth

century, both companies continued to advance new technologies and extend their reach

into emerging, and high-potential markets securing rights to extract petroleum and

becoming more efficient by reducing costs to increase shareholder value. On November

30, 1999 (literally days before the turn of the century), the merger that brought two of

Americas top petrochemicals companies together was complete. This historical

moment marked the beginning of a new company that would be called ExxonMobil

1
ExxonMobil Company History:
http://www.exxonmobil.com/Corporate/About/History/Corp_A_H_Kerosene.asp

3
Corporation; an organization that would go on to become a force felt both nationally and

globally in their industry.

Company Information

With over 80,000 employees and operations in 200+ countries, ExxonMobil has

claimed it will, Take on the worlds toughest energy challenges, and achieve its

mission of becoming the worlds leading petrochemicals company. Beyond making its

goals a reality, the organization also strives for superior financial and operating results;

all of which could not be possible without building and sustaining strong relationships

with their shareholders, customers, employees and the communities in which they

operate and live.

In exchange for their unwavering trust expressed though continued financial

investment into the organization, shareholders drive the commitment of the managers at

ExxonMobil. As part of their Economic Responsibility initiative, ExxonMobil focuses on

delivering returns, contributing to economic progress, managing good governance, and

supports transparency to ensure that their shareholders receive superior returns on the

investments. In 2005, they continued their long standing tradition of contributing to

economic progress and development through payments and expenses of $363 billion:

Operations generated $99 billion in taxes to local, state, and national

governments;

4
 $211 billion in payments to suppliers;

$12 billion in wages and benefits to employees;

$18 billion in capital and exploration expenditures; and,

2
$23 billion in dividends and share purchases to reduce shares outstanding.

The organization remains successful by providing their customers with products

that consistently challenge their employees innovative and creative talents at a

competitive price. Because ExxonMobil understands that the needs and demands of

their consumer base are ever changing, the companys engineering and creation

process has a strong emphasis on the ability to satisfy these ever-changing customer

preferences.

ExxonMobil, recognizes that great products and faithful customers can not and

will not last without their greatest asset; their people. In many of their publications or

announcements, the organization stresses the importance if their employees by

constantly referring to them as their competitive advantage. An advantage that they

strive to maintain by hiring the industries best and brightest while ensuring that they are

given a safe, diverse and productive environment in which they can grow and learn.

Finally, ExxonMobil recognizes that they do not simply operate within the

communities that they have offices, factories or plants but that they are also citizens of

these communities. Therefore, above all of their objectives, the company is dedicated to

running safe and environmentally responsible operations that comply with the highest

2
ExxonMobil Corporate Citizenship Report:
http://www.exxonmobil.com/Corporate/Citizenship/CCR5/economic_responsibility.asp

5
ethical standards, obey all applicable laws and regulations, and respect local and

national cultures. Overall, ExxonMobil understands that to become and remain

successful they must maintain a leading edge over the competition in every aspect of

the business, while also remaining flexible enough to adapt to changing conditions. 3

Leadership

Our organization structure is built on a concept of global businesses and is

designed to allow ExxonMobil to compete most effectively in the ever-changing and

challenging worldwide energy industry. 4The structure of the company is very

hierarchical in nature and is comprised of multiple layers. At the highest level is the

executive board which is made up of:

Rex Tillerson - Chairman and CEO of ExxonMobil Corporation

J. Stephen Simon - Senior Vice President of ExxonMobil Corporation

Stuart R. McGill - Senior Vice President of ExxonMobil Corporation

David D. Humphreys - Senior Vice President and Treasurer of ExxonMobil

Corporation

Lucille Cavanugh - Senior VP of Human Resources

Much like a traditional organization, there is a level of chain of command that exists in

the decision making process at ExxonMobil. The Policy, compliance, and

communication department is a great place to experience how this process actually

works. For example, before a policy or any form of communication is made/printed on

3
ExxonMobil About Us:
http://www.exxonmobil.com/Corporate/About/ViewPoints/Corp_V_GuidingPrinciples.asp
4
ExxonMobil About Us: www.exxonmobil.com

6
behalf of the company, multiple members of the department have to sign off on it prior to

being reviewed by the members of the executive board.

Going Virtual Off-shoring at ExxonMobil

Despite the various layers that exist within the organizations structure,

ExxonMobil possesses many of the characteristics similar to that of a virtual

organization. The technologies that exist and are utilized in the organization are very

similar to what are commonly seen in the companies of the 21 st century (see Appendix

A). With global demands being placed on ExxonMobil to be all things to all people

(employees, customers, and clients), the organization has recognized and adapted to

the need for more virtual characteristics within its structure. Although the size and the

industry that the company exists in may not permit it to ever become fully virtual in

form (making it a flat organization without any layers), it is important for them to

continue to incorporate and respond to changes that are dictated by society. One of

those changes has been the growing demand for organizations to outsource or offshore

business functions to other locations, organizations, or parts of the business.

At first glance outsourcing and off-shoring appear to be very similar in form. A

closer looks reveals that they are very different and are utilized in varying situations. Off-

shoring describes the relocation of business processes from one country to another.

This includes any business process such as production, manufacturing, or services. In

contrast, outsourcing represents an organizational practice that involves the transfer of

7
an organizational function to a third party. Outsourcing becomes Off-Shore

Outsourcing when the third party county is operating in another country. The major

difference to note here is that off-shoring does not require that the company delegate

the work to a third party. The work may stay within the company. However, to qualify as

off-shoring the work must be transferred to a foreign location/country. To outsource, a

company does not have to relocate its functions to a foreign country but it shares the

responsibility or reassigns responsibility to another party. With these two business

functions clearly defined it becomes apparent that by creating two HR service centers

(one in Bangkok, Thailand and another in Buenos Aires, Argentina), ExxonMobil

corporation has chosen off-shoring to help create a more efficient, virtual, and cutting

edge Human Resource department.

To off-shore an entire HR department to a foreign country seems inefficient and

illogical for any company, especially for one with over 80,000 employees. ExxonMobil

kept this in perspective when structuring this project and decided to off-shore those

functions that are not core to the HR department. Below is a chart that gives examples

to describe the difference between essential a non-essential for every HR function at

ExxonMobil.

Function Core (In USA) Non-Core (Off-Shore)

Compensation: The design of compensation and
payroll systems. These HR
professionals decide who gets paid
and what their salaries will be.
Payroll administration; these
employees process payroll
and ensure that employees
receive their pay checks on
time.

Benefits: The design of Benefits packages for Benefits administration;

various positions company wide. these employees answer
These HR professional decide what questions regarding

8
 type of benefits (health-care, 401k, Benefits that other
life insurance, etc) will be offered employees may have.
to each employee depending their Process requests for
level and position in the changes/additions from
organization. employees.

Recruiting: Recruit and select viable applicants Application processing;

for positions world wide. Administer employees process on-line
all necessary parts of the applications.
recruitment/hiring process:
applicant screening and testing.
These HR professional make all of
the Hiring decisions.

Training & Dev.: Create and Administer training and
development processes for
employees. HR professionals
ensure that employees are
equipped with the knowledge
needed to move on to the next
stage; aid in succession planning.
Service Center employees
(in BA, Argentina) are
brought to the U.S. for
training. No T&D activities
off-shored.

Labor Relations: Manage the relationships between No Labor Relations

union employees and ExxonMobil. activities off-shored.
These HR professionals meet and
work with union/labor
representatives to create
contracts/agreements for union
employees.

HRIS: Create and Maintain HR information No HRIS activities off-

systems with the help of EMIT shored.
(ExxonMobil IT). Design
technologies that facilitate the
administration of HR policies and
procedures.

HR Executives: Make all major decisions in Human No HR Executive activities

Resources allocation of funds, off-shored.
succession planning, promotions,
etc

In Outsourcing HR Functions Requires Careful Analysis an article written

by Darren McKewen, a survey conducted revealed that that over 72% of the companies

9
in the U.S. now outsource at least one non-core HR function. Never before has a

company with the size and complexity of ExxonMobil ever taken the leap of faith and

off-shored all of their non-core HR functions (currently everything from payroll, benefits,

and recruitment functions are handled in these two countries). With HR service centers

in both the eastern (Bangkok, Thailand) and western (Buenos Aires, Argentina)

hemispheres of the world, ExxonMobil has stepped up to this challenge and are reaping

the benefits of being first in the market. All of this success did not come without failure

due to errors. Being first to succeed also meant being first to make mistakes that served

as learning experiences as well. The service center in Bangkok, Thailand served as a

test pilot for a future project the service center in Buenos Aires, Argentina.

Bangkok, Thailand - A Test Pilot:

Off-shoring an HR department to another part of the world is not something that

should or can be done over night. An activity of this magnitude takes a lot of trial and

error before it can work at its highest level of efficiency and effectiveness. To pilot their

idea, ExxonMobils Migration and Integration team set up a pilot service center in

Bangkok Thailand (where there was little to no risk of political unrest) to see if and how

outsourcing these functions could work. In 2003, the project of delivering equal or

better service at a lower cost to the Americas, EU, and Asia Pacific began. Once the

necessary technology was put in place, recruitment of Bangkok natives having the

necessary knowledge, skills, and abilities to perform the required tasks began. As

explained by Sebastian Condre, the fact that Thai culture values education made it easy

to find employees who had the talent, however this also served as a negative as it made

10
it much harder to convince these employees to leave school to come and work for

ExxonMobil.

The Bangkok service center now handles HR operations for the following

countries: UK/Ireland, China, Korea, Japan, Benelux/Central Europe, Italy, Pakistan,

India, Thailand, Singapore, Indonesia, Hong Kong, Australia, Malaysia, Philippines, and

Taiwan. It is estimated that off-shoring Asia/Pacifics HR functions to Bangkok has saved

the company over 8million dollars. It was the these cost savings and the need for a back

up center that caused ExxonMobils Migration and Integration team to begin to look at

Buenos Aires, Argentina as a potential location for their western service center to

service the Americas (North, South, and Central America).

Decision to Enter Western Hemisphere Location

Primarily due to time zone issues, ExxonMobil wanted a second human

resources center in the western hemisphere to handle services in the United States as

well as Central and South America. Currently, these services were being handled out of

the Houston office. Since these operations are support functions that do not add value

to the products ExxonMobil sells, they had a desire to reduce these costs without

sacrificing quality. They needed to find a location that has telecommunication

capabilities, low wages, significant accounting educated people, and English speakers.

These criteria led them to several locations in South America that they were

considering; Brazil, Chile, and Argentina. With the largest economy in South America,

11
Brazil became the early favorite for the new location. The service sector is also well

developed in the country. Banking accounts for roughly 16% of GDP. However, there

were some downsides to Brazil as well. Brazil is the only country that primarily speaks

Portuguese so it would be harder to find people fluent in both English and Spanish.

They also have a low literacy rate which is 88.4%. In addition to this, Brazil does not

have a large pool of accounting graduates. These negatives caused ExxonMobil to look

at the other locations a little more closely to see if there was a better location for the

new site.

Chile was another strong candidate for the new facility. They have had strong

economic growth over the past few years, roughly 6%. The literacy rate in the country

was stronger than Brazil at 95.7%. Many of the locals also speak English which helps

to find qualified personnel. Chile also is a democratic government that is relatively

stable. Elections have been deemed free of corruption as well. Santiago, the capital

city, has a population of 5 million people so they have a large labor pool to choose from.

Despite all of these positives, Chile was not the perfect answer. Spanish spoken in

Chile is sometimes considered hard to understand by others Average wages were also

slightly higher in Chile than in other locations.

Since neither Brazil nor Chile seemed like the perfect answer, Exxon looked at

Buenos Aires, Argentina as the possible answer. Argentina had the highest literacy rate

among all of the possible candidates at 97.2%. They also are a democratic society with

free elections. The economy has been booming since the currency crisis in 2001. The

city also has more than 12 million residents creating a large pool of people for the

workforce. They are very well educated and have a significant amount of accounting

12
personnel. Lastly, since the economy is still recovering from the collapse in 2001,

wages are still relatively low making this an ideal location for a cost conscious service

center. For these reasons, Exxon decided to make Buenos Aires the western

hemisphere location to complement their Asian location in Bangkok.

Operations in Argentina

After the decision was made to develop the second location in Argentina, it was

time to create a strategy to make the new location effective. Exxon made the decision

to bring Sebastian on board as the Migration Project Manager. Since Sebastian is

Chilean, he is familiar with the local culture and speaks the local language, Spanish. He

also has been with Exxon for 25 years so he is a dedicated, loyal employee that has an

invested interest in the success of the Argentina service center. Exxon was also able to

bring in Amalia who has been with the company for 12 years. She was working in

Houston as a scientist and was eager to return to her home country. She became the

Benefits and Policies manager. Bringing in such experience and company loyalty

exemplifies Exxons dedication to quality.

Before the center could become operational, they needed to find, hire, and train

qualified employees. To do this, they mimicked the migration efforts that already took

place in Bangkok. To make the center effective, Sebastian and Amalia needed to find

qualified professionals that are multilingual. They primarily needed Spanish and English

speakers. This was not a major issue in Buenos Aires so the candidate pool was quite

13
large. There also were not a lot of HR service centers in the city so the competition for

this talent was less than what Exxon found in Bangkok. In some cases, they needed to

find Portuguese speakers to communicate with their Brazilian employees. This was

slightly harder to find, but was still not nearly as difficult as finding Japanese speakers in

Bangkok. The Argentina service center also hired people with less education than

Bangkok. Here in Argentina, they recruited college graduates whereas in Bangkok 40%

of the workforce had masters degrees. Finding talented individuals was not a major

issue so the company now had to focus more on training the new hires and get the

center up and running.

A Brief Political History of Argentina

The people of Argentina experienced political instability throughout most of the

countrys history. Argentina was experiencing a Golden Age around 1910, when

Buenos Aires was the largest city in Latin America, and only second to New York in size

in the Americas. The Golden Age was short-lived. In 1916 the Radical Civic Union took

control and the following fourteen years were economically depressed times that finally

ended with violent strikes and a military coup.

The beginning of the Second World War decreased the import of goods from

countries in Europe and the working class grew as the necessity for increased

production increased labor demands. This led to military rule and the rise of power of

Juan Domingo Peron who became president by becoming a champion for the working

class. Peron nationalized many industries and proved ineffective in managing

economic policy. Argentina slid into economic decay and faced repeated military coups

14
and violent struggles between Peronist factions. In 1973, after a short return to the

presidency by Peron, General Videla took control of the presidency and began

reorganizing the country. Many political persecutions are said to have taken place.

Democracy was finally restored to the country in 1983, however the economy at

this time was in turmoil and by 1989 the monthly inflation rate reached 197% under

President Menem. Menem attempted to reform the economy by easing trade, however

he faced stiff foreign competition and a currency collapse in Mexico. This led to the

Currency Crisis and default on foreign debt.

Nestor Kirchner was elected following the Currency Crisis and Argentina has

established policies restricting international trade in some areas, but allowing free-trade

in others. As the power of Venezuela and its President, Chavez, has grown there has

been a movement in South America toward self-reliance. It is clear that ties between

Kirchner and Chavez have grow closer as Venezuela had become Argentinas lender of

choice. It is clear the people of the country remain divided as demonstrations by the

piquetas in Buenos Aires protest against government policies.

Training in Houston

Currently, all of the work that the Buenos Aires center will do is being done in

Houston. To get the best training possible, each new hire went to Houston and

performed an extensive training program. This program primarily consisted of job

shadowing. Each employee worked closely with the person whose job they were going

to replace. This clearly gave cause for concern since trainers are training their

replacements. In practice, however, there were few problems. Exxon had pairs of

15
individuals work with each other for a relatively long period of time, typically 3 to 4

months, and friendships were created. These helped alleviate any issues that may

have arisen. Also, each person in Houston was being redeployed to a new job and not

let go so they had a better attitude about the change as well. The job shadowing taught

the subtle intricacies of the job that are hard to explain and helped improve performance

once they took over the job. Everyone was continually reviewed and tested to ensure

that they were learning what they needed to learn. They could learn in a low stress

environment where any mistakes could be caught and corrected immediately.

In addition to technical training each individual received cultural awareness

training as well. This training was further enhanced by the fact that everyone was living

in the United States, which is the primary country they would service.

Even though the training was considered to be very effective, there were three

knowledge gaps that were identified as issues. The first was that people were told how

to do their job and not why. Without knowing why they were doing what they were

doing, a new hire loses the context in which a job operates.. This gap was, however,

mitigated by the close relationship each incumbent had with a new hire. The second

knowledge gap occurred when the new hire found a mistake that the incumbent made.

The new hire was unsure how to approach this issue, and was not always sure about

the correct course of action.. Lastly, the person training was not a trainer by trade.

Thus, there was no guarantee that the incumbent would train the new hire effectively.

Both parties were learning as they went along and tried to pass on as much information

as possible before the new hire took over the job permanently without any assistance.

Since managers were aware of these issues, they tracked the progress of each

16
individual and tested their operational performance on a regular basis. This allowed the

managers to be confident that the new hires were trained effectively .

Quality

The extensive training that each new hire goes through is a signal of the high

quality standards that Exxon has for the service center in Argentina. Quality is

something that is continually monitored to ensure that everyone is performing at the top

level possible. For several key metrics, management sets targets and tracks the

performance of the center every month in their service level agreement. They set an

accuracy target of 99% and are currently operating at a 99.83% accuracy. For

timeliness, they again strive for 99% and are currently at 99.88%. They also have a

customer feedback survey where they shoot for an average score of 3 out of 5. They

are scoring an average of 4.2. Lastly, when research needs to be done to answer a

question, management wants 80% of questions to be answered within 5 days. The

Buenos Aires operation is able to respond within 5 days 98% of the time. This

compares to a 78% mark that the U.S. team was performing at before the migration. All

of these marks exemplify the high standards that exist for the service center and the

performance that has thus far exceeded expectations.

In cases when the center received poor marks on the customer survey, they are

very active in determining what can be done to improve the situation. Anytime they

receive a score of 1 or 2, they do research to determine the cause of the low score.

They call the person directly who gave the low score and listen to their reasoning. This

allows them to continually find areas to improve their customer satisfaction. Quality is

17
not a static condition, it is something that needs continual improvement and monitoring.

The management team at Exxon understands that their employees are their competitive

advantage. This understanding facilitates the attainment of high quality results.

Compensation

To attract and retain quality employees that perform at a top level requires that

Exxon has a competitive compensation package. This is difficult for the Argentina

operation since they are a cost center that aims to be efficient and cost conscious. If

they pay too much for employee compensation, they lose their cost advantage over

other locations around the world.

For the Argentine center to be effective, they need to be creative in how they pay

and reward their employees. Across Exxon, each country chooses the compensation

package that fits best with the local culture and economy. In Argentina, the primary

form of compensation is cash. They do not have pension plans or health insurance

which helps to reduce the overall costs of the labor force. In addition to the base pay,

the local management team tried to reward employees for quality work. These rewards

can be on an individual basis or on a team basis. Rewards are typically small things

like gift cards or a dinner out.

Not only does the management team have the structured rewards program, but

they also have an informal one as well. They realize that there is a generation gap in

expectations from the workforce. The younger generation has a desire to be

recognized for their work by the management team, and since the workforce in Buenos

Aires is relatively young, this is a big issue. Thus, Amalia and Sebastian find ways to

18
tell everyone that they care about them in a cost effective way. This allows them to try

and keep everyone motivated to do their best work. One example is that Sebastian

brought in a motivating field hockey coach to talk to the team. Sebastian also buys

everyone ice cream from time to time. Small rewards of recognition go a long way with

ExxonMobils employees.

Employee Satisfaction

Since both quality and cost are keys to the success of the Argentine operation,

employee satisfaction is an integral part of the local strategy. A happy employee will

likely not quit and will be motivated to give their best every day. Since the organization

dedicates so much time and energy to training, it is critical that they have a high

employee retention rate. Thus far only one employee has left (approximately 3.9% of

their workforce). By all accounts this is a great figure. However, the service center has

only been in existence for a year so experience is so far limited.

One reason for concern is that other areas in ExxonMobil are suffering from

higher attrition rates. The controllers working in the same building have lost roughly

23% of their employees. Also, Bangkok has lost abut 20% of their people. Attrition

rates have crept up slowly since the establishment of the Bangkok Center four years

ago. The fear is that a similar upward trend will occur at the Argentina location.

To counter a rise in attritiion, Exxon has put in place a set of people philosophies

or principles that they will strictly follow in Argentina. The first principle is work-life

balance. The organization realizes that each person has a life outside of the office, and

that they must take time to enjoy that part of their life. Sebastian had one such example

19
of enforcing this balance. Several months ago his daughter was sick in Chile and he

had to leave town to be with her. While there, he worked online, sending e-mails and

making sure everything was ok. His boss noticed the time that he spent logged on to

the system. When Sebastian returned to the office, his boss called him into his office

and told him he needed to spend less time at work. His work was not in balance with

his familys needs.

Another principle used in Argentina to keep employee morale high is work place

flexibility. Through technology, each employee can work virtually from home.

Employees can adjust their schedules according to their needs. They do not always

have to be confined to a cubicle when the sun is shining. Workplace flexibility is an

unwritten rule, but it is a rule that many employees find advantageous.

Looking Forward

ExxonMobil strives for employee growth and loyalty. They hire people from

college with the hope that they will become long term employees of Exxon. As a result,

Exxon must dedicate resources for ongoing education and to ensure that employees

maintain a focused attitude. ExxonMobil, worldwide, has adopted a long term approach

to people management. The approach is the same in Argentina. In house training is

done by Exxon. Usage of in house training is required for each and every person to

help develop everyones potential each year. In addition to internal training, Exxon

provides funding for outside education. The amount of funding can vary depending on

the relevance it has to the persons current job. The more relevant it is, the higher the

percentage Exxon will pay.

20
 As the workforce continues to grow to roughly 300 people, ongoing training will

become more and more important. Now that the operations are in full force, no one will

be traveling to Houston for formal training. All of the training will now be done in Buenos

Aires. As the workforce grows, the organizational climate will change so management

must be sure to be open to whatever may occur in the future.

Maintaining Culture

The majority of Exxon-Mobils employees are located in the United States, making the

transfer of skills and work culture to Argentina challenging. To bridge the gap between

operations in the United States and the new service center in Argentina several

Argentine employees traveled to the United States and lived in Houston for a period of

3-4 months. During this time each Argentine employee was paired with a counterpart

from the United States and observed their day-to-day activities not only to establish

familiarity with the tasks of the job, but also to hone language skills and learn cultural

norms.

This experience added to the success of the Argentina operation because it

allowed new hires to go through intensive on the job training to learn what U.S.

employees expect culturally and to acquire industry/company jargon or slang. As the

Exxon-Mobil service center expands, it is unclear how or if the work culture will change.

Employees will no longer be trained in the same mentoring process and it remains to be

seen if the current high levels of quality will be sustainable.

21
Finding Talent (Competition and Attrition)

To date Exxon-Mobils Argentina operation has been able to maintain a high rate

of retention of its employees. Exxon Mobil was an early entrant in the market and relied

on its experiences in Asia in order to create a working model for the Buenos Aires office.

As the demand for off-site, call center data continues to grow within Buenos Aires,

demand will also grow for educated, English-speaking laborers with work experience.

Mr. Conde mentioned that in Buenos Aires, every week we hear of a new company

doing some type of center in Buenos Aires. This growth in the industry could pose

potential problems for the human resources managers responsible for recruiting in the

Buenos Aires location.

Although a large pool of talented labor exists in the greater Buenos Aires market

the most capable candidates will be sought after for their skills and abilities. As the

operation for Exxon Mobile continues to expand, human resource managers may see

greater competition for qualified employees. In addition competing human resource

managers could look to the talent pool at Exxon-Mobil for new hires at their firms. In

order to mitigate these risks the HR managers at Exxon-Mobil will have to create a

defensive retention strategy and a proactive talent acquisition program. Exxon-Mobil

has created a positive environment for its employees in Argentina; however employees

can be lured away for increased benefits or compensation.

Currency Crisis and the Recent Economic Boon

22
 There are several implications of the currency crisis. As mentioned earlier in the

case, the Currency Crisis in 2002 created a period of economic turmoil and

uncertainty, but there were several positive outcomes that created the recent,

substantial growth in the Argentine economy. For one, the cause of crisis was the

default on the countrys debt, allowing the Argentine government to eliminate its

burdensome debt obligations. Secondly, after the peso's devaluation at the beginning

of 2002, Buenos Aires went from being the most expensive city in Latin America to one

of the cheapest. This has created a boon to the export market, especially in agricultural

goods. The prices of many agricultural goods around the world have increased in

international markets, largely due to increasing demand in Asia. Argentinas farmers

have reaped the benefits as has the government by collecting on a growing stream of

cash flows from taxing this business. Overall GDP for Argentina has grown for over 8%

in the last four years levels not seen since the early 1900s.

The strong track record of growth has not come without consequences though;

inflation grew at 1.1% in the month of January following the replacement of the head of

the National Statistics and Census Institute (INDEC) and a subsequent adjustment.

Private economists estimated that the number was in the 1.5% - 2.0% range. In

addition the government froze prices with many businesses, which has created

imbalances in markets. Argentina's price controls were imposed by President Nestor

Kirchner to contain surging inflation spurred by rising consumer demand amid a five-

year economic expansion. The government last year put price controls on hundreds of

products while banning beef exports and limiting wheat sales abroad to force producers

to sell more in local markets. As Kirchner seeks a second term, inflation remains a key

23
political issue for the election, which will be held in October of 2007. Argentinas

citizens are very sensitive to inflation, the majority having lived through the period of

hyperinflation that occurred in the 1970s and 1980s. In fact prior to the currency crisis

in 2002, when the peso was pegged to the dollar, Argentina was the most expensive

country in Latin America.

As is the case in developed countries, a policy aimed at decreasing the rate of

inflation will require a rise in interest rates and decreased public spending. Further

inflationary pressures may lead to an appreciation of the peso. It is unclear whether the

peso will appreciate, or ever reach levels on par with the dollar as seen earlier in the

decade, however this remains a large risk for ExxonMobils call center. The efficiencies

gained when relocating to Argentina could be eroded by a change in the valuation of the

peso relative to the dollar or other foreign currencies.

Creating a Lasting Strategy

Understanding all that has happened in the last year, Sebastian and Amalia have

a lot on their minds. They feel confident that the right choices have been made.

However, there are numerous risks that can be detrimental to their operation. What can

be done to prevent these from happenings? Are they doing the right things? Will the

labor pool dry up? Do they need to invest more in training? What will happen if the

facility gets hit with a fire? What if inflation spikes? All of these are very real

possibilities that need to be taken into account.

24
 The service center is designed to save money for ExxonMobil. However, they

are also dedicated to high customer service. These two goals are not consistent all of

the time. Tough choices need to be made to ensure that all of the centers objectives

are met, not only today but tomorrow as well. As Conde and Amelia look back on the

accomplishment and their personal ties to the Buenos Aires location, they continue to

brainstorm about how they can build on the success and continue it into the future.

Exhibit 1

Organizational Virtual Organization Traditional ExxonMobil

Attribute Organization
Streamlined Outsource much of Fully employ all Although much of the most of the
the work beyond core functions companys functions are kept in
competencies inside/outside of house, a few activities are being
core business outsourced by the organization. For
example, ExxonMobils HR
department has outsourced a number
of administrative tasks to countries
such as Thailand, and Argentina.
Flexible Able to shift focus Decision-making The decision making process is still
and change to meet structure and very traditional in form. However, I
market and customer specialized roles technology is making the approval
needs. make shifts slow much faster and less time consuming.
and often difficult.
Focused Clearly identified Works on a Embedded HR has a clearly identified
customer and variety of customer and market that they
market; concentrates opportunities at service. Global HR (Shared Services)
on core once, no clear works on a variety of opportunities at
competencies. identification. once and there is no clear definition
between clients.

25
Communication Free flowing w/out Occurs through Thanks to technology, employees no
regard to level or role scheduled longer have to wait for formal meeting
in org; decision meetings; in order to conduct meetings. Email
making happens b/w decision making and Net-Meeting are just two
EEs at all levels and is done at top and examples of how ExxonMobil is
customers. communicated increasing the speed in which
down. information travels through the
organization. However,, decisions
making is still done at the top and
communicated down.
Hyper Time Internet, intranet, Formal process Information gathering and analysis is
quick moving thru for info gathering much quicker due to technological
info and decision; advances but the formal decision
gathering/analysis/de making, longer making process often increases the
cisions time period. time this area.

Organization Peer relationships, Hierarchal, ExxonMobils global network make it

Structure sharing of info w/out decision making possible to transfer information
regard to title or at top, mgt through all levels but there still a
level, decentralized needed to move hierarchy that exists in the information
teams work together project forward transfer process.

Management of Blurred lines Hierarchical The Hierarchical structure in this

work and between personal structure of organization is clearly defined. It is
workers and work time. managers and truly traditional in this aspect.
employees
reporting to
managers.
Career path Lateral movement Moves into With HR moves are very flat. There
opportunity. Less management or are shorter levels or step between
hierarchical, more supervisory role management and advisory HR roles.
projects, oriented are coveted. An HR professional career path at
career path. ExxonMobil is based more on the
variety of experiences held with the
span of years rather than the titles
held.
Information Constantly shared by Held by a few; ExxonMobil has mastered information
many distributed transfer. Through the use of the
formally internet and various networks
information is shared quickly with
members of the entire organization.

26
Office Building Part-time, off-site, All workers and To remain competitive the company
telecommuting, open management at a recognizes that they must keep up
work space single location with growing trends. ExxonMobil has
adopted many policies that increase
work-place flexibility. Up to two days a
week employees can work Part-time,
off-site, or telecommute.

Professionalism Assessed by Assessed by In terms of Professionalism,

contribution on attire, meetings employees are rated based on both
projects important to invited to and their contribution and the manner in
customer invitation to and which they represent themselves in a
formality of formal setting.
presentation and
participation in
meetings
Customer Very close to May be working Embedded HR is very customer
Relationships workers. to identify focused. They know who their client
customer. groups are and they work to serve
them. Global HR Services is
traditional in that they serve such a
large client base, they often have to
work to identify who their customers
are and what is it that they need.

Exhibit 2

Economic structure: Argentina

Jan 10th 2007
From the Economist Intelligence Unit
Source: Country Profile

2002(a) 2003(a) 2004(a) 2005(a) 2006(b)

GDP at market prices (Ps bn) 312.6 375.9 447.6 531.9 641.4
GDP (US$ bn) 102.0 129.6 153.1 183.2 209.7
Real GDP growth (%) -10.9 8.8 9.0 9.2 8.3
Consumer price inflation (av; %) 25.9 13.4 4.4 9.6 10.9
Population (m) 37.5(b) 37.9(b) 38.2(b) 38.6(b) 39.0
Exports of goods fob (US$ bn) 25.7 29.9 34.6 40.1 45.6
Imports of goods fob (US$ bn) 8.5 13.1 21.3 27.3 31.8
Current-account balance (US$ bn) 8.7 8.1 3.4 5.7 5.8
Foreign-exchange reserves excl gold (US$ bn) 10.5 14.2 18.9 27.2 29.3
Total external debt (US$ bn) 149.9 166.1 169.2 117.5(b) 108.5
Debt-service ratio, paid (%) 16.4 37.2 28.5 39.4(b) 42.2
Exchange rate (av) Ps:US$ 3.063 2.901 2.923 2.904 3.059
(a) Actual. (b) Economist Intelligence Unit estimates.

27
Origins of gross domestic product % of total Components of gross domestic product % of total
2005 2005
Agriculture, forestry & fishing 9.5 Private consumption 61.3
Mining 5.9 Government consumption 11.9
Manufacturing 23.3 Investment 21.5
Construction 4.9 Stock building -0.6
Electricity & water 1.7 Exports of goods & services 25.1
Commerce 54.7 Imports of goods & services -19.2

Principal exports fob 2005 US$ m Principal imports cif 2005 US$ m
Processed agricultural products 13,172 Intermediate goods 10,376
Manufactures 11,935 Capital goods 7,092
Primary 7,916 Consumer goods 3,164
Fuel & energy 6,991 Fuels 1,543

Main destinations of exports 2005 % of total Main origins of imports 2005 % of total
Brazil 16.6 Brazil 33.8
US 11.2 US 15.7
Chile 10.9 China 5.1
China 8.6 Germany 5.0

28