Following the decision of Lloyds TSB to close its call centre in Mumbai and bring the work back to the UK, the Chartered Institute of Personnel and Development (CIPD) is urging organisation to consider the people management challenges and potential pitfalls of offshoring.
The CIPD’s offshoring survey reveals that 15 per cent of organisations with experience of offshoring have brought back to the UK business activities which were previously transferred overseas.
The most common reason is an unsatisfactory level of service or product quality, followed by difficulty with management control and rapid turnover of overseas staff.
CIPD employee relations adviser Ben Willmott says: “Organisations that decide to go down the offshoring road focused purely on cutting costs without taking account of the potential difficulties and pitfalls are likely to face considerable problems.
“Organisations must take into account the potential difficulties created by language problems as well as the risk of disruption to the supply of services or products. The introduction of offshoring is also liable to have a negative impact on staff morale and lead to UK job losses because all too often organisations (42 per cent) don’t involve HR when making strategic decisions about offshoring.”
Key findings from the survey, which had 600 respondents, include:
- One-fifth of organisations have offshored one or more business activity in the past five years or are considering doing so
- 30 per cent of respondents said their organisation was under some pressure to offshore a business activity
- 86 per cent of respondents identified cost cutting as the main driver for carrying out or considering offshoring
- Although 17 per cent said that the benefits of offshoring were less than anticipated, more than 60 per cent are very or fairly satisfied
- 55 per cent believe the decision to offshore can cause low staff morale, 48 per cent say managerial control is more difficult, 44 per cent said job losses in the UK were a problem and 33 per cent said language barriers were an obstacle
- Manufacturing and production is the business activity most likely to be offshored (34 per cent), followed by IT support (24 per cent), IT development (22 per cent) and call centres/customer services (22 per cent).
It’s the fashion
Sadly so many business decisions are taken “to go with the flow”. It is common knowledge that you can save money by outsourcing IT support and call centres to India, or manufacturing to China. Common knowledge but not necessarily true!
People equate the difficulty of managing big organizations with managing armed conflict. There is a good excuse for the “fog of war”, people are trying to kill you! But why don’t we know what is going on in our organizations? Everybody gets paid to help don’t they?
Bad decisions are based on bad information. If you know your information is bad, and CEOs are not fools, then why not go with the flow?
We need a way to make our organizations work properly.