Bluerock Supplement : April 2004

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BR Supplement - April 2004 (267k)
Offshoring: Communication Matters
Keywords: offshore outsourcing, employment, staff, customer service, call centre, human resources


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The Bluerock Review changes in VAT rules, demanding "some kind of tax competitiveness" so as not to "add bias that means that they [the banks] are likely to go abroad." (Note that UK financial institutions are currently required to pay VAT on outsourced services provided from the UK.) Perhaps even more high-profile is the ongoing US election battle between John Kerry, who has stated he would "tear every page from the tax code" to stop US offshoring, and George Bush, who has expressed "concerns", but is rejecting the isolationist stance and arguing in terms of long-term economic benefits to the US. Approaches to Date On the face of it, and typically on the balance sheet, companies who choose to offshore gain considerable competitive advantage, with evidence indicating that cost savings of up to 40% are achievable. Unless carefully managed, though, this approach can backfire, with various companies, such as Norwich Union and HSBC having been the target of a fury of press headlines condemning the move, highlighting the plight of UK workers, and predicting dire consequences for both company and country. Seen by some as the early stages of a backlash, a number of companies, such as RBS and Northern Rock, have taken the opposite tack, declaring that superior service levels offered by UK call-centres gives them a competitive advantage. This message coupled with "strong links to the communities" and "concerns that Despite the plethora of articles already published, the human interest aspect of the offshoring debate has ensured that media attention continues to thrive. Initial concerns which focussed on reductions in quality of service and job losses have now been augmented by sociological arguments, with parallels to the 1980s' demise of the UK manufacturing industry being drawn. This has led to an ongoing battle between companies, unions and the government as to the acceptability of offshoring as a business practice, and the associated social responsibilities of the employer. In particular, Amicus, in association with other service sector unions such as the Communications Workers Union (CWU), UNIFI and Connect, recently launched a campaign highlighting the risks associated with outsourcing work from the UK to the developing world and has called for an independent public investigation. This report is likely to run in parallel to a study which has been commissioned by the Department of Trade and Industry (DTI), due to be published in April. The controversy has proved particularly popular fodder for politicians on all sides. In an Offshoring Seminar held in February 2004, Patricia Hewitt, the Secretary of State for Trade and Industry, stated her concerns over the issue and the need to balance the benefits of globalisation and the importance of fair trade with offshoring countries against the requirement to protect UK communities and livelihoods. In response, on the BBC's Today programme, Shadow Chancellor Oliver Letwin called for OFFSHORING: COMMUNICATION MATTERS Whilst much has been written over the past twelve months on the subject of offshore outsourcing (offshoring) - with vastly different benefits, costs and risks being quoted depending on the disposition of the author - there is one thing which is certain: irrespective of the underlying merits of offshoring, the communication of the offshoring strategy to employees, customers and the media can have a significant impact on that organisation's brand and image. DAILY EXPRESS 13 February 2004 Daily Express, 13 February 2004 Barclays profits head north but jobs go east By Andrew Johnson, 13 February 2004 Barclays is to launch a cost-cutting drive in its UK banking division after unveil- It is likely that some jobs will go to India resulting positions in the UK. With some countries may not have the same level of data protection for customers" provided excellent press headlines. Whether this is seen as sufficiently important to the customers and shareholders to justify the loss in back-office savings remains to be seen. Balancing Act Currently the more politically savvy organisations are trying to balance between the two extremes, both harvesting the cost benefits and attracting positive press. For example, Nationwide in 2003 rejected the offshoring of call-centre jobs on grounds of quality and social responsibility, but more recently - and rather more quietly - announced that any new, discrete pieces of IT development may be offshored to India - an altogether more palatable message. Similarly, when assessing offshoring opportunities, IBM is reported by the Wall Street Journal as having issued guidance stating that managers charged with breaking news to employees should "not be transparent regarding the purpose/ intent" of offshoring, and that all announcements to employees should be "cleaned up" by HR prior to publication. When the final strategy was announced in March this year, the message delivered was that IBM was expanding its workforce both in India and the US. Winning the Hearts and Minds ... A number of companies, however, have managed to go one step further and gain active positive media coverage out of adopting offshoring strategies. For example, Barclays, despite some earlier negative headlines, are notable for having struck a landmark deal with UNIFI to give workers at least three months notice and three months pay if they lose their jobs to low-cost countries. This resulted in much positive coverage, with Patricia Hewitt singling them out for praise in her speech at the Offshoring Seminar in February 2004, and Ed Sweeney, UNIFI's General Secretary General calling it "a measure against which other companies looking to outsource from the finance sector will have to be tested." Similar political capital has been attracted by BT, who sponsored SustainAbility, a corporate social responsibility consultancy, to study the debate on the movement of jobs to lower-cost countries. The resultant report ('Good Migrations? BT, Corporate Social Responsibility and the Geography of Jobs', February 2004) concluded that offshoring is "a legitimate company response to competitive pressures", although it also urged BT that "to earn trust, its stakeholders should be given more of an opportunity to influence such decisions in advance." This possibly reflects that whilst BT has received praise for signing a landmark deal with Connect, the union for professional and managerial staff, which prohibits forced redundancies and ensures that overseas workers are well treated, it has failed to reach a similar agreement with the CWU, resulting in a highly publicised anti-offshoring campaign. Ignore at your Peril Whilst organisations, quite rightly, concentrate on the business process, cost and IT implications, they are ill advised to ignore the HR and corporate communication aspects. The decision of how to communicate a corporate offshoring approach requires as much consideration as the development of the underlying strategy. Despite much economic evidence and research to the contrary, there remains a significant public perception that the long-term effects of offshoring will be damaging to the UK. Regardless of this, the most positive responses have not necessarily been reserved for those companies who have eschewed offshoring, but for those who have demonstrated a social awareness. In all of this, with increasing numbers of companies adopting offshoring strategies, it is highly unlikely that we have heard the last of this topic. For the time being at least, there is sure to be more controversy, and media coverage, to come. Stewart Crane can be contacted at Bluerock Consulting Limited 020 7743 6780 email: [email protected] If you would like further information on offshoring and Bluerock's capabilities in this area, or if you would like to receive Bluerock's Guide to Indian Business Process Outsourcers (being published in May) please contact Tamzyn Furse on 020 7743 6780. Alternatively, e-mail: [email protected].