I have on the past occasion written about the pitfalls of outsourcing especially the particular exeperience I have had with Dell. Well after recent experience with another customer service snafu, it got me thinking about the outsourcing, the WalMart effect, under employment and the future of the American workers and American companies in general. The summary is simple, it's not a pretty happy future.
There are multiple trends vectoring toward a step decline in both the quality of the workforce in America and the product of that workforce, American goods. The first vector is the disalignment of the goals of the worker and the company he works for. Let's take an outsourcing example. Outsourcing 1st term customer service functions to firms in India and the Philippines creates a problem because the firms you are out sourcing to and your firm don't have the same economic interests. The outsource customer service firm has an interest in quickly completing calls so that their call numbers look good. They also have an interest in expanding their customer base of out sourced customer support firms.
Misalignment of goals is a common problem in customer support telecenters when they are run internally. Very often promoting people based on the number of calls they close, rather than a measure of customer satisfaction based on the call is always a bad idea. Yet this is a common practice in the industry. Outsourcing this function 1st tier customer support to another company in another country almost always decreases customer satisfaction. In fact I challenge anyone to provide one single example where customer satisfaction has improved as a result of outsourcing. Your goals as a company (satisfied customers) and their goals (high call answer count) are at odds. At best your outsourced firm is marginally competent at service.
Another vector contributing to decline of the American company that the goals of the worker and goals of the company are no longer as closely intertwined as they once where. Chronic underemployment is a problem throughout the economy. This leads to workers holding multiple jobs in order to make ends meet. Loyalty to the company and to the product that the company produces, is diminished. This means workers are increasing more loyal to themselves, or at least they must balance the multiple jobs pulling them in multiple directions. This most certainly has a negative effect on productivity.
Managers often tolerate the decreased quality because their management directive are to reduce costs. Hiring another worker who would work full time would incur costs. Replacing the under performing worker would also incur significant costs (training etc). Managers are often recognize that they cannot demand the same quality of a fully employed worker they can of a part time worker. They may think they might be able to but I would argue any worker worried about eating or making rent is going to be a lower quality worker.
This under employment is a corollary to the Wal Mart effect. Ruthlessly cutting costs means quality at some point begins to decline. Only so much inefficiency can be extracted from a supply chain before you begin skipping on quality of materials. When your only tool is a hammer, everything looks like a nail. Focusing only cost controls means that managers place less importance on other qualitative factors. Anyone that shopped at WalMart would concur, the quality of goods is simply lower. (We have a WalMart here in Las Vegas. I have stopped certain types of goods there such as electronics).
Living with marginal competence of work means that anyone who can beat your cost of goods and labor. This creates a race to the bottom for wages, and raw materials. One good test for this would be the mean failure rate for consumer electronics. Are electronics more or less reliable as a whole now or 10 years ago? I haven't done that research yet. I will do it and report back.
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