INSIDE REPUTATION BULLETIN

Transcription

1 (2) The reputational impact of outourcing overea The global financial crii ha reulted in extra preure on Autralian buinee to tighten their belt. The Inide Story ha noticed a greater proportion of companie chooing to outource part of their buinee overea. We interviewed Autralia enior buine journalit to undertand their perception of the brand reputation rik factor in outourcing a well a how buinee can minimie negative impact. Journalit believe two key challenge are influencing overea outourcing: Financial preure are puhing companie to cut cot The current financial environment i putting even more preure on companie bottom line, puhing them to ae their need and enure they give maximum return to hareholder while remaining competitive. The increaingly volatile cot of fuel i preuring airline (for example) and ha puhed Qanta to move ignificant part of it engineering operation offhore. Skill hortage the lack of expertie in the Autralian labour market (for example in IT and chemical) ha led companie to eek thee kill where they are more readily available. White collar outourcing i the area of key concern among buine journalit, particularly in the information technology ector an area which may become more of an iue now the economy i le buoyant. They are worried about the potential impact of thee lot kill on Autralia. At a glance ummary: Journalit undertand companie are under preure to cut cot and eek kill overea While there are clear benefit, there are potential reputation rik Corporate reputation can be impacted negatively Strategie can be applied to minimie reputational damage The trend to outource i et to continue Journalit ugget the benefit of overea outourcing are clear and include: Cot aving a direct return to the bottom line achieved through lower wage and removal of overhead uch a recruitment and training: Mot of the work eem to be going to India at the moment, the current hotpot for it. There no hortage of highly qualified Indian worker with univerity degree, who can peak Englih very well who can work and will work for a much maller wage than Autralian will. They believe, in ome cae uch a manufacturing, there are alo reduced input cot through locally produced part and technology Increaed flexibility can pick and chooe the bet in the market, eek expertie if it i not found locally and take advantage of new offhore product Companie can concentrate on their core trength and work more efficiently You can be much more flexible in term of who you deal with. People chooe the bet in the market rather than having to have that expertie houed internally... Firt publihed October 2008 Copyright Inide Story

2 (2) The reputational impact of outourcing overea It allow companie to be more competitive Outourcing i felt to be particularly beneficial when it i not evident to the end cutomer for example in back office olution management or manufacturing, rather than cutomer ervice. Where do the rik lie? While buine journalit undertand the commercial imperative driving overea outourcing, they till believe it can damage reputation with end cutomer. Rik include: Lack of quality control - overea upplier may under deliver on quality. Journalit ugget it i difficult to acertain the track record of overea upplier and obtain evidence of due diligence : You re very much dependent on the quality of the ervice given by the contractor. There i alway a rik and that ha alway been viewed a a negative. Any iue or problem may take time to rie to the urface due to lack of management overight on a day to day bai at the outourced location Reduction of influence companie have le authority to impact deciion uch a recruitment and management, and uperviing quality of output i a challenge Indutrial relation iue may be difficult to monitor and manage, riking diruption to ervice Higher potential for corruption perceived lower pay and cultural difference mean there i thought to be a greater rik of miue of information or finance. Privacy law overea may not be adequate to overcome iue: there i an averion in the community to the notion that you re dealing with omeone on the other ide of the world if you re worried about your brand you don t want people being uncomfortable dealing with it. (In ome) countrie, corruption i almot econd nature. In fact if you don t do it there omething wrong with you, if you know what I mean, in ome quarter that i. It almot like a cultural right or omething. Cutomer confuion occaionally it i felt language difference can make complex iue difficult to comprehend: I think it i a reitance generally anyway to the call centre being outourced to people who don t know your uburb and can t pronounce your name. When you have a complex problem to explain to them it like you re whitling in the wind...becaue you know in the end it jut going to be handed to another operator who you re going to have to explain it to again and hopefully you ll get omeone who can fully undertand what you re talking about. What i the potential impact on reputation? Journalit ugget there i highet potential for a negative impact among: Companie in the public eye:...a mall buine can do it quite eaily without attracting the ame ort of publicity. Firt publihed October 2008 Copyright Inide Story

3 (2) The reputational impact of outourcing overea Organiation which are very profitable: The bigger public companie that are doing it, people think well hang on, you jut announced a $4.8 billion profit and you are telling u that jut to urvive you need to cut 400 job here and employ 400 Filipino, it doen't ort of tack up. Large employer of Autralian - any time Autralian job are lot to overea worker there i negative media coverage and journalit believe thi intantly impact how a company i perceived: Autralian are tarting to get concerned that their job and their kid job are diappearing to other part of the world. I ve got a friend who probably about to loe hi department to a centre in India, either a call centre or an IT centre, but lo of job, which doe concern worker here, of coure, and cutomer. Organiation uch a Teltra, Qanta and the major bank evoke a lot of publicity and emotion when job are impacted. It i felt the general public i ceptical of companie which move area of their buine offhore. Outourced buine area where cutomer have frequent contact eg banking and telecommunication I think the companie that are mot affected by or mot in danger of having a reputational problem are companie like particularly Optu, I think of, with the late night call from India wanting to talk to you about your telephone. I think that a real danger for thoe ort of companie. I think that a real turn-off for mot Autralian conumer. it never look good when the headline talk about job loe and mention the company name...people want job ecurity and they don t like the idea of job going away... Potential ramification for reputation include perception that the company: I unpatriotic journalit ugget cutomer may look elewhere if diappointed by a company outourcing choice: You rik undermining your retail market by making it eem a if you don t care about the thing that they care about. Companie get conitently criticied for looking offhore and uing foreign worker rather than employing Autralian... If cutomer ee their Autralian job being exported offhore then they may chooe to back omebody ele or change to a competitor or omething like that, if they feel that trongly about it. Ha reduced quality it i uggeted ending job overea can be een a cheapening the ervice at the cutomer expene and the public generally ee it a negative In the manufacturing area there can be quetion concerning quality control procedure and output. The outourcing of the product i not alway evident however, until omething goe wrong uch a in the recent Chinee milk candal which ha reulted in the withdrawal of a number of product from Autralian helve. Firt publihed October 2008 Copyright Inide Story

4 (2) The reputational impact of outourcing overea Doe not take it corporate reponibility eriouly Nike ha famouly uffered for it ue of cheap labour in Aia when it wa publicly criticied for exploiting it employee, paying minimum wage and not looking out for worker right I more economically productive which i poitive for invetor and lead to a company increaing profit and hare price, however thi may be at the cot of cutomer perception How can impact on reputation be minimied? Buine journalit admit they report in emotional term thee torie get picked up and covered by tabloid, talk back radio and televiion and not all ource cover the whole tory, which can reult in damage to companie reputation: It alway quite a dramatic and emotional term offhore outourcing, and that lead to perception that job that could be in the hand of Autralian are going to people who aren t from here. So it a very difficult emotional thing to deal with. Companie outourcing overea know they will come under a lot of media crutiny. Journalit expect them to have made the deciion baed on the knowledge it will ultimately deliver value to the company financially and to their reputation. Journalit recognie it i a challenge to outource overea and minimie any backlah, but do offer ome tip on how it can be done: You ll jut have to wear it for a while and hope people forget about it in time. They ugget companie hould be open and tranparent - provide briefing to invetor and the media epecially when it will directly impact conumer: If you can explain the meage properly and try to avoid the generaliation that happen... It genuinely accepted that outourcing i not a bad thing if you can get the expertie and deliver a better, bottom line return from it, provided it managed properly and it explained that thi i a part of the buine and it done for a certain reaon. [Be honet and ay] We know that we will cut cot by doing thi' and then they probably get out of it eaier in the long run (by being open), even though it eem a harder thing to do. No communication in certain ituation journalit believe it i not neceary to publicie the outourcing, particularly if conumer are not directly impacted. However, journalit believe it will be neceary to have anwer on hand if quetioned by invetor or the media Generally journalit believe companie will need to ride the torm or any backlah a bet they can, tanding by the deciion and it payback to the organiation. Communication explain: The reaon behind the deciion It benefit The proportion of job it applie to Firt publihed October 2008 Copyright Inide Story

5 (2) The reputational impact of outourcing overea Which companie have done it well? ANZ, Teltra and Commonwealth Bank are thought to have handled their outourcing querie well thoroughly explaining the reaon behind deciion and managing the proce carefully. Journalit recall that ANZ bank wa one intitution which felt the brunt of negative cutomer entiment when the media incorrectly reported two year ago that it wa ending it cutomer call centre offhore. The bank threatened legal action againt New Limited for mirepreentation and the tory wa withdrawn. It actively boltered it reputation by talking publicly about it policy to keep cutomer contact in Autralia in pite of being one of the firt companie in Autralia to outource it IT function overea ome year ago: You get companie like ANZ actually deliberately telling people they are not doing that (outourcing call centre overea), which in their view obviouly will lift people etimation of the company it ha decided to upport Autralian job and the economy here. However, American Expre i one organiation which i felt to have dealt with media backlah the wrong way: They were the one who ued the excue that they couldn't find the labour here, and then the next thing you have all thee people coming up and aying; I could do the job and I wanted the job' and then it lead into more and more negative backlah... What i the future of outourcing? Journalit believe outourcing will continue to be the way of the future, and it will become more commonplace to outource a companie look to cut cot and remain competitive: Top buinee have to continually look at way to ave money. They ve got to invetigate thee thing and it might mean in the end that a aving of $10 million i not worth the negative publicity, but a aving of $50 million or $100 million might be worth ome negative publicity. You can only weigh that up on a cae by cae ituation, but there ll be more of it in the future for ure. I think the globaliation of the workforce i an ongoing phenomenon...it will continue and there ll be more of it. We ll have a more globalied workforce within and without the country. Some journalit ugget we will ee the development of outourcing upplier broker who will pecialie in finding kill and upplier overea, puhing to increae the quality of outourcing kill et. For white-collar work in particular, the development of a local Autralian workforce i deired to help atify demand and help tem the ue of offhore kill: They re truggling to get enough of the right ort of people to do thoe job in thi country. Journalit believe the Federal Government ha a reponibility to help partially tem the trend by: Up killing and encouraging young Autralian to remain in Autralia Encouraging company training policie through grant Inveting in the education ytem Firt publihed October 2008 Copyright Inide Story

6 (2) The reputational impact of outourcing overea Incentiviing companie to houe their call centre regionally: State government ued to offer incentive for companie to place call centre in their tate. I don't know if they till do that, but I know in South Autralia and Tamania they ve previouly offered companie to pay for call centre, they remain in Autralia but they re at a cheaper rate than you d probably be paying in Sydney or Melbourne. Encouraging more killed worker into Autralia through a killed migration policy In certain indutry area uch a manufacturing, it i thought there i no way to revere the trend which ha been progreing for many year, and it i believed thi will continue. Some journalit ugget the general public will get ued to dealing with people from other countrie and the negative perception of outourcing cutomer facing function overea will leen over time. Journalit recommend companie be careful to evaluate beyond the bottom line aeing reputation cot and aving veru the quality of product of ervice before making the deciion to houe buine area offhore. The Inide Story ha ued it bet profeional endeavour to enure the accuracy of thi document a per the code of profeional behaviour of the Autralian Market and Social Reearch Society. About the Inide Story The Inide Story ha been a key player in the Autralian reearch environment for more than 25 year. With a reputation for being innovative and at the forefront of inight technique we launched our firt Inide Reputation reearch tudy with journalit in November Since then we have conducted more than 30 tudie with Autralia enior buine media. In addition, we have poken to many other takeholder group for our client, including government, buine influencer, financial analyt, key blogger and of coure the general public. If you are intereted in hearing more about our tudie, would like to brief u on your reearch need or jut want a chat, pleae get in touch! Contact Catherine Anderon on +61 (2) or on catherinea@inidetory.com.au Buine journalit New journalit Twitterer Print Televiion Wire Internet Blogger Oppoition Politician Fan NGO Communit y group Conumer advocate Advior Bureaucrat Regulator Union Regional communitie Autralian Internation al viitor Aociation Member SME Student & graduate Large buinee Enterprie Employee Academic Firt publihed October 2008 Copyright Inide Story