DESPITE THE significant savings achievable by offshoring and outsourcing business processes, executives and HR divisions need to ensure their management is fully integrated with the company’s operations if it is to avoid the risks inherent in transferring work overseas, a recent study has warned.
Despite the significant savings achievable by offshoring and outsourcing business processes, executives and HR divisions need to ensure their management is fully integrated with the company’s operations if it is to avoid the risks inherent in transferring work overseas, a recent study has warned. In offshoring, companies face “a wide range of people management issues both overseas and at home”, according to the report, developed by US-based global research organisation, The Conference Board.
“Does cheaper also mean riskier?”the study asks. “As labour demand rises in offshoring markets, offshorers and potential offshorers would be right to wonder how long the arbitrage opportunity will last. Will labour supply continue to meet growing demand?” The offshoring landscape has already begun to change – in India, for example, increasing demand for IT skills is driving up pay levels.
“The ongoing trend towards offshoring and outsourcing, and the reliance business have on external suppliers to run their own business could also be an emerging risk issue,” said Ross Castle, risk services provider Aon’s national manager, client research and development. “Many companies have followed the trend towards concentrating on their core business – outsourcing and offshoring for cost and efficiency reasons. But have they considered all their risks and dependencies and are the implications of interruption factored into these business decisions?
More traditional complications associated with offshoring include the reaction of workers in the ‘home’ country who lose their jobs to outsourced labour. Companies are, however, learning they can quell discontent by designing plans to aid employees who lose their jobs, overcoming resistance from disgruntled workers and maintaining morale among remaining employees, according to The Conference Board.
“All of these groups must be considered if a company wants to protect its image as an employer of choice,” said Ton Heijmen, senior advisor to the Board on Offshoring and Outsourcing. “Meeting these and other challenges calls for innovative approaches and developing specific leadership qualities.”
Leaders of offshoring projects require project management skills; interpersonal, networking persuasion and technical skills; and should be able to manage relationships with empathy, according to the Board. They also need to be good integrators and capable of managing conflict and inspiring group and individual cooperation.
“While manufacturing has a long history of being managed from afar as a discrete process, business processes and other services that touch many integral parts of a company’s operations involve a higher degree of coordination and integration with different parts of the organisation,” said Heijmen. “In addition to operational issues, executives should consider the special processes they’ll need to institute to manage people and projects, drive behaviour, and resolve conflicts half a world and many time zones away – regardless of the offshoring structure they choose.”
Before embarking on a major offshoring project, ensure you are familiar with:
• The essentials of local employment law
• The requirements and obligations regarding termination
• The standard contractual terms that apply
• The costs of hiring and firing
• The procedures prospective vendors follow to screen employees, including background checks and references
Source: The Conference Board
