By: Jeffrey Puritt, President of Telus International
Though its advent still seems quite recent, the outsourcing industry is going through a noteworthy maturation process. For evidence, one can start by looking at India. Best-known as the largest outsourcing destination for the Fortune 500, India’s outsourcing dominance is now being slowly eroded by other regions with young, educated, lower-cost workforces like the Philippines, as well as locations offering multilingual talent like Latin America and Eastern Europe.
More country leaders are realizing the positive aspects that outsourcing can bring to their people and their emerging economies. For example, though poverty is still a major problem in India, wage increases from the booming outsourcing industry of the late 1990s and early 2000s have helped create a large and growing middle class. The same is happening in the Philippines now, with more young people benefiting from stable, in-demand jobs.
But even as the industry enters into the equivalent of middle age, outsourcing still suffers from a long-standing image problem. As I write this, there is a bill on the floor of the US Congress to explicitly discourage outsourcing in the call center space. Introduced by Congressman Tim Bishop, the “US Call Center and Consumer Protection Act of 2013,” would bar corporations that send US call center jobs overseas from receiving federal grants and loans. (Editor’s Note: At time of publishing this edition of The Source, no major action has been taken on this bill according to the U.S. Library of Congress. It has been referred to several Congressional Committees in both the Senate and House of Representatives.)
While the concern regarding domestic job displacement and the political debate over outsourcing is understandable, I believe that focusing only on the negative is equivalent to “throwing the baby out with the bathwater.” There is another side to this discussion. What rarely comes up in the outsourcing discourse is that there is a growing segment of the industry that is capable of, and focused on, delivering positive social outcomes, particularly in the developing world.
The Social Benefits of Business Process Outsourcing
In the Philippines, the government actively touts the job creation potential of Business Process Outsourcing (BPO) as one explicit tactic to promote poverty reduction. Across parts of Africa, Central and South America, and Southeast Asia, organizations like San Francisco-based Samasource are working to bring the benefits of the digital revolution to unemployed young people through outsourced call center jobs.
Other industry players have even been working to rebrand “outsourcing” to the less controversial “impact sourcing,” a term coined and promoted by Digital Divide Data (DDD), a non-profit social enterprise that offers outsourcing services in developing countries. Like many progressive outsourcers, DDD focuses its efforts on poverty alleviation by attempting to provide access to decent-paying jobs and skills development for folks who might not otherwise be employed in the BPO sector.
In a recent Huffington Post article, DDD co-founder Michael Chertok writes that, “while international aid for economic development often fails, business has the potential to bring millions of people out of poverty. For no enterprise is this more true than the unsung $300 billion industry known as Business Process Outsourcing (BPO).”
Business as a Poverty Alleviation Tool
DDD’s is an effort that I applaud. It offers a tangible model for bringing the benefits of outsourcing to small, rural and remote areas. The spread of modern telecommunications ensures that impact sourcing will continue to grow and provide opportunities for poor people around the world.
Still, there’s no doubt that impact sourcing remains in its infancy. In many ways, it reminds me of the financial industry’s attempts to increase access to credit among poor populations. In the past 20 years, the concept of microfinance (making small loans to poor people, often women) has emerged as a powerful force against poverty. Providing access to capital helps would-be entrepreneurs and small business owners to help themselves.
But to achieve the greatest possible scale of social benefit, some argue that small non-profit microfinance institutions can’t do it alone. Without the protective regulation of banks, they may not be able to attract sufficient capital necessary to meet demand. Thus, their impact could be stunted.
One could make a similar argument about outsourcing. While small players and non-profits can undoubtedly make an impact at the margins, larger players operating with a progressive mindset have an opportunity to drive larger-scale, country-level change. But they must be committed to social impact and not be purely driven by profit.
Of course, some outsourcers will struggle to fully embrace the benefits of engaging in socially responsible business. For them, the status quo of cost-cutting and margin management persists, and they’ll continue to seek lower costs at all costs. But over time, I believe they too will evolve as local employees, communities and the clients of BPO services insist upon partnerships that combine bottom-line results with meaningful social change.
Progressive Business Process Outsourcers
As BPOs have matured, they have realized how community development, corporate social responsibility (CSR) and promoting employee well-being positively impact staff retention and service quality. A new white paper that my company, TELUS International, published with CSR consultancy Impakt Corporation called Outsourcing for Social Good: A BPO Perspective, describes how recognizing the positive impacts of social responsibility have created a dramatic transformation in the way many traditional BPOs operate.
Progressive BPOs are going beyond increasing employee salaries. They’re increasingly offering programs that help employees and their families fundamentally improve their lives.
For example, some firms now offer onsite post-secondary and college-level education for their employees. Contrary to the expectation that educating the workforce would increase staff turnover, many BPOs are finding the opposite to be the case.
Progressive BPOs are also increasingly mobilizing employees to volunteer in their communities by supporting basic needs like building roads and schools, as well as volunteering for local grassroots charitable organizations. In addition to building concrete value in the community, these efforts engage employees in work they find meaningful, and corporate volunteer activities demonstrate to employees that the company cares.
Social Change – An Investment that Pays Off
Changes like these aren’t rooted in altruism alone. BPOs aren’t compromising their own profitability by contributing to developing-world communities. Rather, they’re taking the long view and understanding that the more investment they put into their community, the more value it will cultivate.
It’s an investment that pays off. According to the TELUS International white paper, when a
business helps improve the lives of its workers and their communities, it enables the business to improve its value for customers far beyond cost savings. Investing in people and communities actually improves the quality of the firm’s products and the effectiveness of its services as their employees reward their employers with a higher degree of loyalty, engagement and productivity.
Increasingly, socially responsible companies like the technology heavyweights in Silicon Valley are aligning with these progressive outsourcing firms for the social change they create, as well as the quality of service they provide. BPOs today are going above and beyond business as usual – getting involved in their communities to produce amazing results. As our industry matures, we’ve got real successes to demonstrate – hundreds of thousands of individuals’ lives and entire communities which have been improved through global business.
Our challenge, however, lies not just in producing sustainable results, but in evolving the public perception of the outsourcing industry, particularly here at home in North America. That means spreading the word, and working with all willing partners to continue to create real, measurable change. Domestic employment opportunities are a real concern; and this issue warrants real discussion and meaningful, progressive solutions. But in my view, putting the outsourcing genie back in the bottle and pretending that we don’t all live and work in a global village, however, is not the answer.
About the Author: Jeffrey Puritt is President of TELUS International, a global BPO provider of contact center outsourcing solutions. With locations throughout North America, Central America, Asia and Europe, TELUS International’s almost 16,000 team members support the customer service needs of some of the world’s largest and most respected brands. At TELUS International, team members enable customer experience innovation through spirited teamwork, agile thinking, and a caring culture that puts customers first. Learn more at: telusinternational.com.
This article was originally published by CSRwire.com on November 7, 2013. Reprinted with permission by the author.
Those persons who tend to disapprove of the outsourcing phenomenon often think of three things when they hear the word: first, that outsourcing necessarily means offshore outsourcing; second, the idea of businesses encouraging inhumane treatment of workers and the presence of sweatshops; and third, that outsourcing is taking away jobs from perfectly capable domestic citizens and giving the jobs to foreigners.
Even though this mindset seems to be on the decline, it is still very essential to address each of these issues as they relate to effective Business Process Outsourcing (BPO).
BPO is the outsourcing of one or more parts of a company’s supply chain to a vendor, either in the same country or somewhere outside of the home country. This approach is now being complemented by business process management—a management approach of aligning a business’ processes with its clients’ wants and needs.
As globalization trends in various industries increases the reach of industry players to many venues, and transparency becomes a more sought after characteristic by consumers, many large multinational companies and even smaller enterprises are now focusing on improving the business ethics of their outsourcing operations.
In fact, the relationship between many American companies, for example, and their outsourcing vendors is evolving to resemble a partnership rather than the traditional company-vendor relationships. This new model is often referred to as the Managed Service Model (MSM).
The shift to a Managed Service Model means that companies are
increasingly relying on the governance of their vendors for success.
The shift to MSM means that companies are increasingly relying on the governance of their vendors for success as up to 15 percent of the value of an outsourcing contract can be lost due to mismanaged vendor governance. This has encouraged many companies to invest in entities, both locally and abroad, which have efficient governing structures and adhere to governance best practices.
Oftentimes the ethical issues connected to outsourcing are generally perceived as the exploitation of workers living in poverty in the developing world. However, the BPO industry has the potential to empower a lot of foreign workers to lift themselves out of poverty and pursue further education. This new trend is referred to as Impact Sourcing (IS) and is steadily on the rise. IS is a perfect blend of Corporate Social Responsibility (CSR) and BPO in order to benefit the companies and consumer while also delivering a social impact.
The company Impact Hub serves as a liaison for companies and BPO service providers that hire and train disadvantaged women and youth in developing nations. Impact Hub estimates that there are 560,850 IS workers today. Even though studies show that both workers in the developing world usually approve of the presence of multinationals and that these same multinationals are aiming to enhance the working conditions of their foreign employees, the unfortunate reality of sweatshops is still something that needs to be addressed in a concrete way.
The American Prism
As expanded exposure of unethical behavior by outsourcing vendors in other countries continues, and more stakeholders learn more about certain practices or companies, American companies are forced to consider working only with vendors that practice ethical treatment of their laborers.
The news is not all bad. In places like the Philippines and El Salvador, the booming outsourcing industry has helped create a growing middle class as more people are benefiting from jobs that are stable and abundant.
Additionally, the existence of a growing middle class and the availability of higher paying jobs means a decrease in the “brain drain” phenomenon as less people are forced to leave their countries in order to make financially stable lives for their families back home.
So why is it that so many Americans may still fear the mistreatment of employees in foreign US subsidiaries or vendor operations in the developing world? Is it feasible to expect a company to pay their foreign workers in a developing nation the same wage that they pay their American workers when we are looking at completely different economies, spending and saving cultures, and living standards?
It is important to understand the weight behind the use of the word “sweatshop.” Sweatshops are more than just businesses paying below living wages; they are also places that practice child labor; have inhumane and unsafe working environments; and are noted for the constant exploitation of workers’ poverty to work them hours on end without breaks or time for sleep.
An article on foxnews.com (2004) mentions that sweatshops for laborers in the developing world “…may actually be the best of a series of bad employment options available to them, and/or the only or best option for supporting themselves and lifting their families out of poverty.” If developed countries are to live by this standard, than we can just as easily say, for example, that the best option for American youth in poverty is to obtain a high school diploma so there is no reason to aim for anything higher.
It is understandable that child labor is a different matter in the developing world as it is in the United States. In many developing nations, removing a child from their job can result in much worse fates for them and their families. Not abiding by Western child labor law ideals does not change the economic setting of the developing countries and instead can make matters worse, sometimes resulting in child prostitution or crime.
The global community can do better to alleviate abuses on several fronts.
This is where Corporate Social Responsibility can play a large role.
The global community can certainly do better to alleviate these abuses on several fronts. This is where Corporate Social Responsibility (CSR) can play a large role. Rather than drastically eliminating certain aspects of outsourcing operations or completely ending these operations, companies – especially those that are financially able – can use their R&D resources to promote education, child and health care, and other community benefit programs to support their offshore outsourcing.
The decline in the use of sweatshops and increasing wages for workers employed at foreign companies in the developing world can be attributed to two trends: (1) the increased demand for ethical behavior and transparency from consumers, and (2) the better understanding of the benefits of CSR.
A company that engages in CSR and practices good business ethics, can make a better case for its clients who may not believe that outsourcing is a good thing for either the company or its foreign workers. The CSR program can serve as a mitigating factor in some of the perceived negative aspects of BPO. It has been shown that companies who have formal CSR strategies have happier and more efficient employees, which means that a company that supports its BPO activities with a CSR strategy, should be able to reduce some of the potential risks related to outsourcing by creating a more welcoming environment for employees to thrive. Employees who work for companies committed to ethical practices and engage with their communities in a positive and impactful way often feel more values, happy, and safe, which results in higher productivity levels and lower risk of attrition. Indeed, a 2012 Net Impact survey showed that 45% of respondents would take a 15% pay cut, with all other factors equal, for a job that makes a social or environmental impact.
An active CSR strategy has been proven to serve as a positive financial benefit to company – Unilever is a well publicized exampled of this. However, more than just financial gains, CSR engagement results in better branding for companies and can mitigate the negative perceptions that many have on outsourcing. As more companies ensure that their BPO activities are ethical and socially beneficial, those companies that are left behind will need to find ways to catch up in order to maintain customer retention rates and remain as going concerns. BPO has even higher impact potential with the influence of CSR and IS.
About the Author: Yekta Karimi is a GRI Data Partner Report Analyst at Governance & Accountability Institute (the exclusive GRI data partner in the US, UK, and Ireland). She is also a graduate student at Columbia University’s School of International and Public Affairs, pursuing her Master’s degree in international affairs with a focus on international finance and economic policy.
Prior to coming to New York, she worked as a program director for a Small Business Development Center in California. Having lived and traveled all over the world, Yekta has invested her interest in international relations and sustainability looking to fuse the private and civil service sectors.
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