By SEGUN AKANDE
Nigeria: Do what you can do best and outsource the rest – Peter Drucker (1909-2005), Father of modern management theory.
OUTSOURCING, a word that came from the phrase: “outside resourcing”, became a key part of international business economics in the 1990s. Wikipedia defines it as” an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally and sometimes involves transferring employees and assets from one firm to another”.Sub-contracting is the practice of assigning or outsourcing specific parts of the obligations and tasks under a contract to another party known as a subcontractor. Outsourcing is prevalent in strong-matrix environments where complex project planning, execution and monitoring are norms. Business processes, people and projects are what companies seek to outsource.
Outsourcing, as against the popular ugly perception, is not done to swindle middle-level managers and entry-level employees. Companies primarily outsource to reduce outlying and non-core business expenses, including taxes, energy costs and excessive government regulation. Maximizing the use of external resources, accessing world-class capabilities, optimum utilization of core staff for other functions, reducing and controlling the cost of operation and maximizing efficiency for time-consuming activities are some of the other reasons companies outsource. The enormous merits of outsourcing cannot be completely expounded here.
In every attempt to explore reasons companies outsource, risk management comes to the fore. The probabilities of occurrence of identified and unidentified cost and schedule risks in tech projects, especially, are always very high. Not even the most robust risk response strategy can guarantee zero risk occurrence and impact. Hence, the need will always arise to plan how to mitigate, transfer or completely avoid all risks when they occur. Only risks resulting from natural disasters are either shared between the client and contractor or between the contractor and subcontractor in pre-defined percentiles or owned entirely by the client with adequate fallback planned. Ownership and management of risks are not burdens any organisation wants to bear. Hence, to shelve the rigour and cost of risk management activities, a large portion of the overall project work, especially at the execution phase, are contracted. Summarily, telecoms operators, for example, pass project risks to telecoms vendors in a legally-binding contract. The contractors (telecoms vendors) may further pass on the risk to subcontractors in another legally-binding contract; a form of outsourcing referred to as subcontracting.
Another form of outsourcing called offshoring affords cheap access to foreign capabilities. In an international project endeavour, a company can source right from its head office in Nigeria, for example, professionals from other countries. This singular benefit of outsourcing can help project owners eliminate additional overhead costs, avoid certain government mandates and regulation, access best-fit employees at reduced costs, yet increasing the efficiency of project’s progress in remote locations.
The exponents of the concept of outsourcing did not intend it to make employees feel inadequate, though that is what is largely obtainable in Nigeria, especially within the telecoms sector where there seems to be no more dignity in being outsourced. An externally sourced employee works on a project managed by a client to his company. The employee is entitled to all benefits, major and fringes, that are available in his company (the outsourcing company). He is a full-time member of staff of his company. He is a subject-matter expert-sourced through an outsourcing company (his company) or one who gets on a project through subcontracting, in which case he is a staff of the subcontractor. He has a parent company to return to on expiration of the client’s project. This is what professional outsourcing stipulates.
Sadly, in Nigeria today, the wanton rate of unemployment has been hijacked and outsourced staff are being widely mistreated. Companies now either establish outsource companies or contract them to recruit project team members on harsh terms. Outsource companies are made to abide by clients’ dictates, however unpopular and nonconforming they are to the tenets of the outsourcing practice. Low salaries, next to no pension remittances, an unreasonable extension of work hours without pay, few leave days and zero leave allowances are a few of the harsh realities of outsourced staff in Nigeria.
In a November 13, 2016 publication by Sahara Reporters, the Nigerian arm of a foremost Chinese ICT vendor was accused of mistreating its staff and the Nigerian state. The company was said to have trampled freely on the workplace quota approved by the Nigerian Immigration Services which stipulates one expatriate to four Nigerians, translating to 75% Nigerians and 25% foreigners. In that publication, as of November 1, 2016, of the 3117-strong workforce, this company has, only 675 have full-time employment contracts. The rest, Nigerians and non-Nigerians were outsourced. Of the 675 staff, 354 were Nigerians, while 321 were foreigners, implying a distribution of 52.44% to 47.56%. This firm, as reported in the same publication, favour rotational and periodic recruitments. After every three months, the company moves almost 80% of newly recruited staff to the outsourcing platform, with the excuse that the staff failed in their probation period, thus giving an impression of obeying the regulations. This is clearly a way to sub-contract the functions of in-house (core) departments to companies that offer fewer benefits. This practice is clearly at the expense of the Nigerian economy.
If this trend is not quickly checked, more regulations will be slighted. The Nigerian Ministry of Labour and the Association of Outsourcing Professionals of Nigeria, AOPN, must begin to enforce strict compliance with existing labour laws. There must be heavy penal charges against organisations that run contrary to the laws guiding the recruitment and management of human resources in Nigeria. Our country, with many outsourcing firms, contribute a meagre $2 billion to the over $500 billion the outsourcing industry generates worldwide, annually. This suggests we are lagging in a lot of ways. Corruption is at the centre of outsourcing practice in Nigeria and we must deal decisively with this menace!
Companies’ projects and operations where unclearly defined activities go on daily, will usually have risks to deal with. Outsourcing as a management process has been proven to be the most effective input to closing these projects on time and within budget. Nigerian outsourcing firms must be strengthened and given absolute independence from their clients. Adherence to existing labour laws must be enforced and new ones made. When outsourcing is practised within its tenets, the disparity between full-time staff and outsourced staff will be completely removed. In the end, companies will remain competitive and the Nigerian economy will stay afloat turbulence.
- Akande, a telecoms professional, wrote via email@example.com