Department of Human Resource Management The Changing Landscape

Department of Human Resource Management The Changing Landscape of Global Sourcing: Challenges for HR Leaders Professor Phil Taylor University of Strathclyde CIPD Student Conference University of Edinburgh 21 February 2015

Department of Human Resource Management Introduction • The geographical dispersion of business services • Contact centres (front office) and the back office and shared services • Developments in Information and Communication Technologies (ICTs) have been ‘distance shrinking’ • Most well-known - call centres to India, but a host of relocations e. g. IT to E. Europe, shared services • Doesn’t this demonstrate that globalisation has become a reality?

Department of Human Resource Management • Globalisation has threatened to become the cliché of modern times • The world has become borderless (Ohmae, 1995) • Capital, technology and knowledge flow unhindered across the world (Castells, 1996) • The state now a just a transmission belt for global capital • ‘The World is Flat’ (Friedman, 2005) • The ‘death of distance’ (Caincross, 1997) • If this is a true account of how the global economy works then people management has is now much less important – TNC’s have conquered space and place

Department of Human Resource Management • Globalisation exaggerated - regionalisation as world evolves into 3 blocs: Europe, Asia-Pacific, N. America • TNCs are still products of their home states • Globalisation is not an end state • Old geographies of production, distribution and consumption continuously being disrupted • …a process (or set of processes) which embodies a transformation in the spatial organization of social relations and transactions – assessed in terms of their extensity, intensity, velocity and impact – generating transcontinental or integrational flows and networks of activity, interaction and the exercise of power. ’ (Held et al, 1999: 16)

Department of Human Resource Management • Globalisation is much more contradictory and complex than the received wisdom would have it • Study of Human Resource Management too often takes place without sufficient contextualisation • This weakness is more important when the global economy is in turmoil and flux • International HRM was largely concerned with managing international managers – now about managing HR processes within global businesses

Department of Human Resource Management Three Themes • How the international HR strategies and practices have to be more place sensitive than ever before particularly in the aftermath of the crisis of 2008 • The HR challenges faced by international firms whether onshoring, offshoring, nearshoring or homeshoring • Why more reflective and more critical HR practitioners who recognise the unique qualities and contribution of their people will make the best future HR leaders • Through prism of global relocation of business services

Department of Human Resource Management Global Service Delivery • Offshoring is now a core element in cost-reduction, re-structuring, re-engineering programs • From tactical or responsive outsourcing to strategic and even transformational offshoring • A radical shift in perspective from 1 -1 migration to global service delivery in service chains/networks • Increasingly, multi-locational, multi-site strategies • Differing mixes of accessible skills and resources in diverse locations reduced risk, time zones • For most a ‘best fit’ scenario – ‘horses for courses’

Department of Human Resource Management • Variable mixes of offshore, onshore, nearshore sourcing – what should matter is rightshoring • Location decisions are multiple, nuanced, complex • Human resource considerations are central • Rationale is labour cost plus skill availability, labour pool depth, performance quality, tacit knowledge, attrition levels, accommodation costs, technostructure, political stability, risk, industry maturity, financial assistance, vendor capability etc. • Phase 1 - Cost arbitrage • Phase 2 - Talent and quality arbitrage • Phase 3 – Efficiency/excellence arbitrage

Department of Human Resource Management

Department of Human Resource Management • India remains most important (938, 000+) for BPO, but not for voice 500, 000 (Nasscom, 2014) • Philippines overtook India in 2010 now 600, 000 • Why India overtaken? Why reshoring? • Reduced cost differentials over time in contexts of rising labour costs and tight labour markets • Shallower labour pool = attrition often staggering • Concerns with quality and ability to deliver complexity • Firms may ‘lift and shift’ a business service but people cannot be ‘lifted and shifted’

Department of Human Resource Management • The persistence of onshore/nearshore employment e. g. contact centre growth in Scotland – from 46, 000 (2000) to 86, 000 (2008) to 90, 000 (2012) • 55 centres provide dedicated foreign languages • Ability to access high quality skills at relatively lower cost than more expensive metros • 30% lower than SE England plus technical ability, tacit knowledge, empathy, linguistic sensibility etc. • Nearshore may be cheaper in sense of efficiency • Globalisation actually heightens the difference between places (Harvey, 1990)

Department of Human Resource Management Employers’ Cost Reduction Strategies Post 2008 Outsourcing/ Reduced Offshoring Terms and Conditions Automation Work Intensification, Lean, PM and SAP

Department of Human Resource Management Simplistic Solutions • Cost-cutting strategies sometimes translated into a straightforward intensification of work • Equivalent or larger volumes of work being done with the same or - more likely - smaller workforces • ‘Doing more with less’ as ‘the new normal’ • Crude Performance Management • PM now not periodic and retrospective, but continuous, backward looking and forward looking and with a serious shift to disciplinary purpose • Performance Improvement, PIPs, Managing Performance, PIMs, IIPs – the real bite in PM

Department of Human Resource Management • Micro-measurement and micro-management of individual performance – facilitated by technologies • Quantitative outputs and targets – AHTs, CHTs etc. • KPIs, SLAs – determined at the top, ‘cascade down’ through tiers of managers, to TLs and then workers • BOHICA – DYFT- JFDI - SNAFU • Removes discretion of the FLM and HR Manager • Targets often for numbers of underperformers, SAP actions and even ‘managed exits’ • Obsession with measureables, deliverables, metrics, stats – no substitute for flexible people management • What is measured is what is measured

Department of Human Resource Management The Performance Management Bell Curve Meets expectations Below expectations Above expectations Excellent performance Serious under performance 10% 15% 50% 15% 10%

Department of Human Resource Management • A priori or forced distribution does not reflect actual performance • Management should aspire to universal excellence • Creates climates of fear amongst many employees and fails to incentivise • ‘Round table process’ or ‘calibration’ to prevent FLMs inflating scores – fixed pot of money • Discriminatory distributions • Scale of intimidation – in one bank 10% on actions • Mc. Kinsey model get rid of bottom 10% each year

Department of Human Resource Management ‘There was quite a sinister practice that we were to use – the car-park conversation. A manager would be expected to take an employee, who had received poor performance score, outside for an informal discussion. The manager would then start a conversation along the lines of, ‘You know your last review. It’s only going one way, isn’t it? You should perhaps think about coming to an arrangement’. It was important that the manager would never make any explicit suggestion that the worker should leave. We were given training in how to conduct these conversations; a one-day course on employee relations for HR managers, where we would go through the best mechanisms for ensuring that an employee would voluntarily suggest a compromise agreement’. (Ex-HR Manager, BT)

Department of Human Resource Management Conclusions • Post-2008 – cost reduction, productivity gains plus continuous quality improvement • Holy Grail of Kaizen of Customer Satisfaction scores and quantitative metrics • To deliver on this requires skilled workers and empathic HR not the Bell Curve and rigid targets • Opposition in business circles to PM now e. g. PWC • http: //www. strategy-business. com/article/m 00027 ‘Kill Your Performance Ratings’ • HRM is not a universal set of tools and practices that managers can apply any time and any place

Department of Human Resource Management Conclusions • Inter-relationship between the global and the local, between TNCs and the specific character of places • Global value chains and global production networks enhance significance of using judgement • The reflective practitioner – give a person a fish, team a person to fish • HRM not ‘plug and play’ – no one best way • Reflect, evaluate, apply different perspectives e. g. sickness absence management reports • Critical, holistic thinking in graduate entry jobs is preparation for HR strategic leadership