Impact of offshoring jobs from Australian financial institutions

Offshored call centres can often produce superior service to domestic ones. But companies already doing this badly should beware thinking that moving it overseas will solve their problems.

We have all had at least one bad experience with dialing through to an Australian firm’s call centre. A long wait. Finally an operator. Answering lots of questions the firm already has in their database. Getting disconnected as they transfer you to another division, and then having to start all over again.

We often assume that these experiences are with outsourced, offshored call centres in India or the Philippines. But this is not always the case.

Sometimes offshored call centres can provide superior customer service (and at lower costs) to Australian call centres, and provide better data analytics.

When we think about the offshoring of Australian financial institution jobs, what questions should we ask?

The first I suggest is why is an organisation thinking of doing it. If the answer is as simple as cost due to Australia’s high wage structure and high dollar, then one probably needs to ask more.

As revenues are harder to come by, there is no question that Australian financial institutions (like all Australian firms) need to manage costs more carefully.

However, the outsourcing or offshoring of call centre and IT jobs should be a more strategic decision.

All firms - including Australian financial institutions - need to consider their long term strategy and therefore how they operate in that context. They need to reflect on the key trends of our time, namely globalisation and digitisation.

In the constrained post-GFC world, Australian financial institutions cannot grow sufficiently to meet investor expectations without the support of offshore markets, particularly in the Asia Pacific region. This insight is reflected in the Government’s recent Asian Century white paper.

As companies consider the optimal destinations for the demand side of their business, they need to also think about where to best locate supply side functions.

This raises the question: what supply side functions are best located in Australia, and what are the sources of our national competitive advantage?

With the finance sector, the GFC has demonstrated we have some real competitive strengths. These include the strength of our banks, our financial regulatory system, our universities and our superannuation system. Given this, what jobs are best located here versus offshore?

There is no question that on face value at least, lower paid roles such as call centre and IT processing can be delivered more cheaply offshore. India and the Philippines come to mind and even our nearest neighbour, New Zealand, guarantees at least a 25-30% cost savings based on wages and overheads.

But then some strategic questions need to be asked. Can these roles be performed to a high standard offshore? Will customer satisfaction data be readily available to drive innovation? Are there hidden costs or risks from having functions offshore? What is happening to wage relativities given wages are rising faster in China and India?

Australian organisations often send offshore the functions that may not be working for them. But you cannot offshore what you cannot manage well yourself.

Organisations also need to consider that by offshoring, they may throttle their employment pipeline of younger workers. Up to half of call centre employees in Australian financial organisations are university-qualified and may likely be suited to progressing to higher level positions in the firm.

If offshoring is strategically right (not just short-term cost cutting), and the whys have been thought through, then it can work. In fact some specialist offshore firms who focus on call centre management or IT processing can offer superior services to some available in Australia or delivered in house.

Outsourcing particularly offshore requires a high level of partnering between the Australian firm and the outsourcer, and this requires the right supplier.

Proactive communication is needed with all stakeholders so as not to tarnish the brand, reputation and image of the Australian firm with customers and employees alike, and affected employees need to be given every chance to be supported and move to a different role.

But there is no question outsourcing often fails and is followed by a period of insourcing and onshoring - we are seeing this happening at present with many US and UK firms.

Many would argue that more regulation is required to stop jobs going offshore.

Australia now ranks 96th in the World Competitive Index in terms of regulatory barriers to business performance, down from a ranking in the 60’s. We also rate more poorly than we should for strategic, people and sales management.

Australia’s focus needs to be on developing high value-adding jobs. That’s why we should only regulate where necessary but educate and develop wherever possible. I am a strong advocate for the ongoing development of those in leadership positions to enable optimal strategic and people management decisions to be made.

To optimise our firms’ performance, business and government need to work collaboratively together. We need to work harder at improving in the areas of management practice, active stakeholder communication, long-term strategy, sales, marketing, innovation and creativity.

Better educated and developed leaders will ensure that the right strategic decisions are made and the right jobs stay onshore.