January 14, 2009
The issues surrounding offshoring have become increasingly HR-centric. What role does HR play and how can Australian companies handle it more effectively? Much like someone trying to watch their weight by adhering to the current diet fads, the divergent and seemingly contradictory viewpoints surrounding offshoring - or international outsourcing as it's also referred to - are sure to result in mass confusion and, ultimately, incorrect choices.
Here are just two examples of these divergent viewpoints: earlier this year, a report entitled Off-shore and Off-work, commissioned by the Australian Services Unions (ASU) and undertaken by the National Institute of Economic and Industry Research (NIEIR), found that one in 10 service sector jobs could be sent offshore over the next 20 years. The Australian service sector accounts for four out of five Australian jobs and 80% of our economic activity. It includes banking, insurance and finance, telecommunications, tourism, retail, and many others.
According to the report, only services that require face to face contact (nursing, wait staff) would be tied to a particular location. Yet a 2005 Deloitte Research report titled Annual Survey of Offshoring in Financial Services found that Australian companies are missing out on a savings bonanza because they have been slow to transfer jobs offshore. The report found that 42% of global companies that are shipping financial services overseas have experienced savings of 40% or more.
Public perceptions
While the experts weigh up the pros and cons, the court of public opinion appears to have already reached a verdict: offshoring is bad for Australian jobs; bad for Australian skills; and bad for the Australian economy. It appears the Australian public don't want to be dealing with call centres based in India or have their banking details handled by overseas workers in less regulated environments to those at home. Is this justified?
"I think there's a lot of confusion. The reactions are not always rational - they're political or emotional but it's not really understood what happens in these processes," says Lisa Barry, national practice leader, human capital, Deloitte Consulting. "People imagine that all the jobs that were once in Australian call centres are now going to India and they see it as simply as that. There are other issues at play - for example, the fact that the failure to sustain a call centre in Australia is likely based on the lack of labour - not just lack of talent but a genuine lack of labour."
Stellar is one organisation that has already taken the plunge and has offshored a segment of its workforce. The company is a global business process outsourcing (BPO) provider, with over 6,000 employees across 19 contact centre sites in Australia, North America and UK. However, the company has also faced its own challenges around offshoring with the opening of an additional facility in The Philippines for domestic and international clients seeking a reduction in outsourcing costs.
"There's a growing acceptance of offshore outsourcing due to the benefits it can deliver, although many companies are recognising that the decision to move offshore cannot be taken lightly. Clients need to consider what industry they operate in, the type of service they wish to outsource offshore, comparable operating costs, and customer reactions and their long-term outsourcing objectives," says John Hollingsworth, CEO, Stellar (Asia-Pacific). "It's certainly an attractive option for lower value transactions, and will continue to gain popularity and acceptance in coming years." Hollingsworth believes offshoring is a natural extension of domestic outsourcing, especially for international companies who can obtain cost reductions and quality improvements by consolidating global support needs.
"Offshore options allow these organisations to adopt a follow-the-sun approach to service delivery and to take advantage of a single, low cost location for all their customer service or back office processing needs," he says. Stellar opted to develop a joint venture agreement with an existing call centre provider in the Philippines, which allowed the company to leverage off the call centre capabilities of both companies and bypass many of the difficulties associated with a new set up. "We also spent a lot of time choosing a partner for the joint venture who had the same cultural values to delivering quality service with an emphasis on people first. We both have a very client-focused approach to service delivery and apply the same rigorous implementation and ongoing communication methodologies," Hollingsworth says.
Indeed, it's the culture that can make or break an offshoring arrangement. Barry notes that service level agreements (SLA's) between each 'portion' of the workforce may be essential but can also be mechanical and simply tick the boxes of expected service levels. "If you have a portion of your workforce offshore it's all about how you actually manage the change. Everybody knows how that segment needs to partner with the other. It's a partnering model that's not just about SLA's. It's the culture of how it all works between the portions and the parties. It gets off to a great start if you do the job properly upfront, warming people to the new model and how it works," she says.
Barry notes that many organisations - and HR professionals in particular - are missing the prime opportunity that offshoring creates to restructure and reshape the organisation. In the past, Barry notes that HR's role in offshoring may have been limited to informing people of their pending redundancy. Now, HR's role is far more extensive. "It's a major redesign opportunity, and it's a major opportunity for HR to align where people's talents and skills may slot into a new structure. In the past jobs may have been lost but now they may not be. But if you don't redesign the organisation properly you're not giving real thought to who you could keep in the system doing something different," she says.
In short, workforce planning needs to be more effective than people taking redundancies and then a few months down the track being rehired by the same company. "In a tight labour market that's very short-sighted. HR need to take these opportunities before and during the process because after the fact is too late," Barry says. If the offshoring operation is one of the organisation's own entities there are further choices around whether you use local leaders or whether you set up Australian leaders, and if so for how long. Barry also notes that organisations without sophisticated mobility plans will struggle.
A third party BPO is a different matter, as Stellar's Hollingsworth explains: "We've established a very strong management approach to help our clients with their offshore solution. This includes an Australian-based client services manager who will co-ordinate contractual and change management issues and facilitate communications with the offshore call centre facilities. We establish key operational contact points as well as regular communication forums to ensure seamless service delivery. We encourage our clients to tell us what will work for them and set-up the appropriate mechanisms that allow them to interact with us in a way which best meets their business requirements."
By Iain Hopkins
Source: HCA Magazine
