The cause and effects of globalization- an American viewpoint:

(by Ms. Marveen Craig)

 

The invitation to write this piece came at a very critical time.  My son had just

resigned his position after being ordered to conduct a training session with an offshore

company for the eventual transfer of his entire department’s work load to India.  He gave the presentation and, ironically, was asked by the Indian company to consider being a contract worker for them! 

 

His is not an isolated case – as I have heard and read of an increasing number of similar cases and am beginning to sense a growing backlash against American companies outsourcing work off shore. Actually, my son’s experience was a reality check that convinced me how important it is to study not only the theoretical but the practical implications of outsourcing (and/or globalization) in order to decide whether to adapt to it, or to defeat it.  What follows is a contrasting view of the effects of outsourcing and outsourcing.

 

Globalization and Outsourcing became magical buzzwords in the 1990s with . 

Globalization described as “… the increasing interdependence, integration and interaction among people and corporations in disparate locations around the world. It is an umbrella term which refers to a complex of economic, trade, social, technological, cultural and political interrelationships.”  Outsourcing is defined as: “The procuring of services or products, such as manufacturing parts or other services from an outside supplier or manufacturer in order to cut costs.”(Wickipedia)

 

Unlike these definitions the concept of globalization is not restricted to commerce and has both positive and negative effects as well in the ecological, cultural, political, civil and socio-economic domains.  Regardless of terminology, it signifies the process of attempting to link all of the people of our planet economically and socially by trade, investments and governance.  The concept is not new as it has been discussed for over 500 years.  Historically, world events have usually stimulated interest in globalism and also led to its decline.  Globalization’s current popularity appears to have been rekindled by the rapid advances in information, communication and transportation technologies of the 90s.

 

It is simply human nature to try to better our lives and those of our families whether in the Kalahari Desert or thriving metropolitan cities like London or New York.  Globalism, like all values and ethical beliefs, requires active practice in our day-to-day lives.  A primary need is communications to foster understanding, sharing of needed resources on the basis of equity and sustainability, and mutual aid in times of great need. These all are admirable goals.  However, what globalization has come to mean to me is the process of corporations moving their money, factories and products around the planet at increasingly rapid rates of speed in search of cheaper labor and raw materials and governments willing to ignore or abandon consumer, labor and environmental protection laws.  Ideologically, the globalization activities of today appear to be largely unfettered by ethical or moral considerations. 

 

Many trade publications are beginning to carry stories about how globalization and outsourcing aren’t really the expected win-win situation that was promised.  Many businesses are becoming disillusioned with the practice (especially in the area of information technology) and they are bringing those jobs back in-house.  Yes, in the short term there may have been savings, but often they come with a cost of decreased service levels, increased communication problems, customer dissatisfaction, increased complexity, and other issues. Travel and infrastructure costs (e.g., a dedicated communications link from the outsourcer to the client's main office) can easily equal or even surpass any savings in wages. There are often employee resentments over being expected to work late or come in early on a regular basis and to do things like teleconferences with the team on the other side of the world. Experience is showing us that managing in such a widely distributed environment can take quite a toll over time.

While statistics indicate that more than three fourths of companies who outsource are happy with the process, the number of those who are dissatisfied is on the rise.  It’s fair to say that in the U.S. the idea was “sold” on the basis of cost effectiveness, which in turn would mean a reduction in the costs to consumers.  That has turned out to be a pipe dream.  In reality the result is often:

§         larger bonuses and bigger pay raises for upper management

§         local employee dissatisfaction and turnover

§         lost customer loyalty

§         lost customers

§         customer dissatisfaction

§         poor products and

§         bad support. 

In the long run any cost savings begin to vanish, especially when you consider the difficulties in managing groups halfway around the world and the expensive network links to accomplish that.  A future problem will likely occur when the employees in the “lower wage” countries begin demanding more pay as their skills improve.

I’ve become aware of an increasing number of people who refuse to use the services or products from any company that ‘outsources’.  They hang up on customer representatives when they find out that they are outside of the U.S. because many of them are difficult to understand and while they may have a reasonable command of the English language and the scripts they have been given, they are unable to problem-solve or give intelligent and pertinent advice to the customer.  Everything seems to be about short term cost savings, and it doesn’t seem to matter any more if things get done right.  In my view the social effects of widespread outsourcing on this end of the equation seem almost entirely negative.

Recently, New Jersey state Senator Shirley Turner introduced legislation concerning the outsourcing of her state’s welfare-processing contract.  She did so after learning that the Arizona-based company awarded this contract, subsequently moved its stateside call center to Bombay, India. 

According to Senator the point of the contract was to save money assuming that the people overseas could do it cheaper and more efficiently. But she calls this practice a ruse because…” we're supposed to help provide jobs to the unemployed people here."

"Neither the people in India who have the jobs, nor the people who are unemployed here in the U.S. are giving anything back in the way of taxes or buying and consuming U.S. goods and services. That is what stimulates our economy. By outsourcing these jobs to other countries we're helping the poor remain poor in this country. We have a $5 billion deficit in New Jersey and outsourcing these jobs to foreign countries only adds to the burden that the state must pick up when our citizens need [welfare] services. When people lose their jobs, and their unemployment benefits run out, the state must step in and take up the burden to provide the services. That's not cost savings and it really just snowballs when jobs are taken offshore."

Senator Turner's legislation has run into stiff opposition from lobbies representing companies that exploit not only cheap offshore labor but their own consumers.

The following are comments that echo Senator Turner’s thoughts because they have been affected by the practice of outsourcing.  The first individual interviewed said:

“If companies enjoy the rights and privileges of being an American business, and grew to the size they have on the backs of American workers, they have an obligation to continue the partnership with Americans too. Consider also that it is primarily Americans whose blood and courage provided a safe, stable country in which both business and labor can thrive. If businesses do not honor American labor, (a) we ought not to buy their products and (b) we ought to revoke their incorporation papers when their overseas payroll exceeds (say) 50%. Let them incorporate overseas and outsource to Americans if they need us.  Bottom line: BUY AMERICAN!”

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The next individual described the day to day problems created by outsourcing in a large company’s information technology division:  

The final interview was with a person who has personally been affected by outsourcing:

Recently our outsourced call center ended up having major customer backlash over that change. In this situation, the outsourced call center didn't care at all about the contracted company's customers.  What they cared about was the contract metrics (call volume, average talk time, maximum talk time, abandon rates, etc). So, the outsourced call center would do whatever it took to make sure the metrics met the contracted levels. In order to fulfill the metrics, their tactics included hanging up on customers in the middle of the conversation after the 'average talk time' had been exceeded, picking up calls and then hanging up on the caller to prevent abandon rates, giving bad advice or simply not helping the customer... just to name a few.

The only exception to these bad behaviors occurred when an audit day was announced and someone from the company would visit and listen in on conversations from the outsourced call center. On these days, the people would actually help, they wouldn't hang up (or conduct any other metric related shenanigans), they would talk as long as necessary to the customer, etc. But, as soon as the audit was over, it was back to the bad behaviors to make sure the contract commitments were met and that they got paid.

The bottom line is that a company wanting to outsource cannot control what the outsourcing company will actually do (especially in customer service positions) even if written into the contract. Most outsourced companies overbook their services and end up playing tricks to make sure that they get fully paid from all their contracts.

When outsourcing programming staff, you can end up with good staff as well as bad. If you're looking to develop or fix an application, using a short term in-house contractor may be a better option than outsourcing the entire project off the property (or out of the country). The old adage still fits:...'out of sight, out of mind'. When the outsourcing company isn't in day-to-day control by the contracted company, there will inevitably be problems, delays or simply bad results.

Worse, outsourced staff doesn’t understand (or really care) about the day-to-day workings of a given company. So, there will be no new ideas to improve service levels, create new solutions or invent something to help the business along.

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I believe that it is admirable to provide sustainable capital to any struggling country to create work that will lift up the people and give them the opportunity to improve their lives and allow them to achieve the basic needs of food, shelter, medical care and education.  However, we should be aware of the pros and cons of any such undertakings before entering into them, and require oversight in the form of performance benchmarks. Such projects need to be revisited routinely and the results on all evaluated.  Only with that kind of attention can any major form of change ensure that the good is maximized and the bad is minimized.

We share one fragile planet and the survival of its inhabitants will ultimately depend on the mutual respect and careful treatment of all of its peoples.  But, that respect and treatment has to be practiced by all, regardless of their station in life, ethnicity, religion or country of origin or.  I will not live long enough to see this lofty goal accomplished, but I pray that our grand children will.

_____________________________________________           Marveen Craig

 

References

The jobbing of Americans.  Insight Magazine, July 8, 2003

Cheap labor at America’s expense.  Insight Magazine, May 27, 2003

Not in my backyard – State Lawmakers Fight Offshoring. CIO.com.  March15, 2004.             

Beck, U. (1999)  What is Globalization? Cambridge: Polity Press.

Globalization's last hurrah?  Foreign Policy, January/February, 2002.