Ethical Outsourcing & South East Asia

By: Martin Conboy: Publisher of The Sauce, a bi-weekly online publication for executives in the BPO and Shared Services space, and Editorial Advisory Board Member of The-Outsourcing.com.

For the man in the street, the term Outsourcing is often synonymous with corporate irresponsibility. The media loves to focus on the horror stories such as the garment workers in Bangladesh, the Nike workers in SE Asia or the Apple workers in China. For organisations caught up in these scandals, significant damage can be done to their reputation and brand. But there is a positive side to the story.

Map courtesy of ASEAN. Association of Southeast Asian Nations

Map courtesy of ASEAN (Association of Southeast Asian Nations)

It is now fairly well accepted that outsourcing is not just an inexpensive labour arbitrage tactic, but also a strategic business decision. It’s about growth, global expansion and adding values. However, ethics and outsourcing continue to be burning issues for many businesses, government and the general public in western economies.

In April 2013 Time magazine quoted, “the horror of Rana Plaza (Bangladesh) finally made global consumers wonder about the true cost of a T-shirt manufactured halfway around the world that sold for a retail price of $5”. Also in April CBC News ran a story about the Royal Bank of Canada (RBC) who were trying to save money by hiring foreign workers when its own employees were capable of performing the same service.

The public backlash from this coverage caused the company to issue a public apology and implement a new policy that its suppliers must “not hire foreign workers from outside of Canada, when performing services on behalf of RBC, where a worker eligible to work in Canada is available and able to perform the service”.

More recently, we have seen how call centre workers in the down stream supply chain in the Philippines have been treated by unscrupulous operators, whose clients have included charities and church groups back in the USA. It’s important for organisations that are concerned about their reputation and brand to engage with decent service providers and outsourcing partners, who are competent, provide a quality service and are professional and ethical in the way they conduct their business.

In countries like Australia, US, and the UK, organisations must comply with a range of stringent legislation and guidelines when conducting business. The organisation outsourcing its business processes will face the consequences of the inappropriate, illegal or unethical behaviour on the part of a third-party it has commissioned to handle the work.

As countries like Indonesia, Malaysia, The Philippines, Thailand and Vietnam move more into the front of mind of western executives who are thinking about outsourcing, so it follows that the way in which business will be carried out by the BPO service providers on their behalf will be scrutinised.

To meet compliance requirements organisations will need to develop standard processes and procedures to ensure the way they conduct their business complies with existing laws and regulations. Different countries not only have different laws but also have different ways of doing things.

Before planning any outsourcing activity, an organisation must identify and document its own standards and procedures regarding how it operates in relation to the processes and activities that are being outsourced. These standards can be integrated into the contract and form part of the requirement the external supplier must follow.

One of the major causes of failed outsourcing relationships is not being able to
Identify the right provider for the organisation’s outsourcing requirements.

It is important to follow up and ensure that the staff and all those involved in the project from the provider side are trained and understand what the standards are and why they need to be adhered to.

Jose Mercado, the President of BPAP (Business Processing Association of the Philippines) commented: “As an association we try to encourage our members to be as ethical as possible. We work very closely with various government departments such the Department of Labour and Employment and with the Department of Health, as well as with our members in building that ethical element into the industry.”

He went on to say, “We have formed the HR Champions Council within our association, where the focus is on compliance to labour laws. The challenge we always have, regardless of the industry, is that there are companies out there that are not part of the association. They are rogue companies and it doesn’t matter what you try to do they will always be there in every industry.”

Don’t Be Cheap

One of the major causes of failed outsourcing relationships is not being able to identify the right provider for the organisation’s outsourcing requirements. It stands to reason that providers who charge bottom of the barrel prices are likely to be running sweatshops that are exploiting desperate and underpaid workers.

As well as the likely damage to the client’s reputation if reported in the media, the quality of the work will be low, and there may be other issues around security, mismanagement of resources, environmental impactsetc.

Good Service Costs Money!

Customers anticipate a certain level of service from an organisation and when the actual experience doesn’t match their expectations they become unhappy with the organisation. For example, if you were going to a five star restaurant for an expensive meal to celebrate a special occasion, the level of service you would expect would be very high compared to going to a fast food outlet for lunch, where your service expectations would be very low.

The challenge with BPO service centres is that customers expect a certain level of customer service commensurate with the brand and if you have skimped by using “cheap as chips” service providers then don’t come crying when it all goes wrong and you start losing customers.

This will most certainly impact on the quality of products and services being delivered to the client’s customers. Reduced quality of products and services means less sales and ultimately reduced profitability and we all know how that ends.

Social Responsibility

When evaluating a prospective provider you need to look at what they do to help the local communities they operate in. Are they involved with projects that address basics like housing, education and clean water? You will find that successful BPOs with quality reputations will also be socially and environmentally responsible organisations.

BPOs are shifting the social landscape in
Developing countries around the world.

According to a recent white paper and research from Telus International, (www.telusinternational.com) by responsibly and ethically employing hundreds of thousands of people, BPOs are shifting the social landscape in developing countries around the world, while the industry is recognising that success can no longer be defined by bottom-line concerns alone. (Read: http://thesauce.net.au/outsourcing-makes-the-world-a-better-place/)

Focus on Quality

Quality, control and cultural differences are issues that will never go away when one talks about the risks of outsourcing. Cultural differences between the West and Asian countries are huge, and are often a cause for worry in an outsourcing relationship.

But better understanding the cultural sensitivities and how they can affect the outsourcing relationship can bridge these differences. This needs to be done early in the relationship to avert any issues that can crop up later. Ensure your provider has strong programs for cross cultural training and soft skills coaching in place. Check out www.facct.com.au

Work Environment and Security

Poor working environments and unfair HR practices are often cited as a consequence of meeting the West’s outsourcing demands. In some cases this may be true but all quality BPO service providers adopt ‘best practice’ when it comes to HR management and provide their staff with comfortable and modern working environments.

Organisations will continue to outsource many of their functions to stay competitive in a fast paced economy. They will hire specialised companies with domain expertise drawing on local and international expertise to handle tasks better and more cost effectively than they could themselves. Hopefully, outsourcing will finally be viewed in a more balanced perspective and still make the significant contribution it has on reducing poverty and raising the standard of living in a number of developing countries.

About the Author: Martin Conboy is well recognized as one of the leading voices and knowledge leaders of the outsourcing industry and its role in facilitating BPO success throughout the Asia Pacific. Martin has over 16 years’ experience at a senior level in the market research industry and has spent the last 21 years analyzing and publicly commenting on the Call Centre and Outsourcing sectors across the Asia Pacific. He is a strong advocate for the BPO-ICT / Shared Services sector.

Martin is a Director of www.theoutsourcing-guide.com and coauthor of the first eBook about outsourcing “What is this thing called Outsourcing?”

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