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Jul 15 2012

Sermon On The Beach

Lifeguard’s ordeal is parable about outsourcing

By Steven Pearlstein, Washington Post

Published: July 14

Because they are generally free from union contracts and the unwritten norms of pay equality that exist within any enterprise, contractors are able to pay lower wages and benefits – in many cases, a lot lower. That was certainly the case with Ellis and the Hallandale lifeguards.

The second big advantage that outsourcing firms enjoy is the economies of scale. A firm that specializes in one function and does a lot of it can generally do it at a lower cost simply by spreading fixed costs over a much larger base of business.

Simply by having more experience, a specialty contractor is also more likely to hit upon the most efficient and effective ways of doing things and can quickly adopt those improvements throughout its operations.



There is, however, an important trade-off that is made by outsourcing that contractors reflexively deny but is inherent in any firm that derives its competitive advantage from having carefully constructed systems for doing just about everything.

It is these systems – the rules, the procedures, in effect the operational software – that allow companies to take relatively low-skilled, low-paid workers with relatively little experience and have them do tasks that were once done by people with higher skills, higher pay and more experience. And it is the very nature of these systems that workers are discouraged, if not prohibited, from exercising their own discretion. Their only job is to follow rules, stick to the script and leverage the experience and expertise that are embedded in the system.

That’s why the person in the airline call center in Bangalore can’t do what is necessary to help you catch your honeymoon cruise after your flight has been canceled because a co-pilot failed to show up on time. Her computer simply won’t allow her.



The reason these various systems can deliver reliable service at lower cost most of the time is precisely because front-line workers are willing and able to act like cogs in a machine. So when two of Lopez’s colleagues later told supervisors they would have done the same thing, they were fired as well.

If you want discretion and judgment, if you want workers who really understand and relate to customers, if you want the flexibility necessary to respond to individual needs or unforeseen circumstances, then you can go back to paying twice as much to have your own, longtime employees doing the work. That’s the outsourcing trade-off. It may be a good trade-off – most of the time I suspect it is. But it is an unavoidable trade-off, no matter how good the contractors or their systems.

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