HR and Homeshoring

There has been much talk recently in the financial markets about the "inflation threat."  For the last few years I thought that we were going to witness high inflation due to all of the money the Fed was printing.  However, I waited and waited.  And waited.  And nothing happened.  So what's going on with inflation and what does homeshoring have to do with it.

I think inflation is not going to be a significant issue because globalization, technology, and more demanding financial markets are not going to allow companies to raise prices (and thereby lose their market share and destroy shareholder value).  Homeshoring and related trends will help companies keep cost under control while still making productivity improvements - in other word getting a lot more bang for the buck.  This will be one way among many that consumer prices will be kept under control.

was given by AlpineAccess CEO in last June's issue of Cusomer Interaction Solutions:

"It is important that the company [that engages in home-shoring] has solid processes, specifically designed to identify those candidate characteristics that will lead to outstanding performance. Once on board, those agents expect a professional and efficient operation, with appropriate training, communications and support. The company that can meet all of those expectations will be rewarded with an agent workforce that is extremely difficult to replicate in an affordable manner at scale with a traditional call center model."

It is wortwhile to note that good process management is frequently cited as both a requirement and a benefit of homeshoring.  However, good process management is increasingly being recognized as a prerequisite of business success in general.  The more business process management improves throughout all of companies the more prepared firms will be for homeshoring.  Thus, it is not only technological changes that are paving the road for massive homeshoring, but also management practices that make companies more capable of adopting homeshoring solutions. 

BW ranks fast growing companies by sales growth, profit growth, and return on invested capital (calculated as profits divided by equity adn debt outstanding).  Sales growth and profit growth are each weighted at 1/4 and return on capital is weighted at 1/2.  Then they throw out all of the questionable companies and rank the rest from 1 to 100.

In this year's list business process outsourcing providers make an impressive showing.  In particular several companies core focus is helping their clients deal with labor management issues.  These companies include: PeopleSupport (#14), Cognizant Technology Solutions (#16), Resources Connection (#21), Gevity HR (#33), Barrett Business Services (#44), Labor Ready (#80), Korn/Ferry Internationl (#82), Kforce (#89).  That's 8% of the BW Hot 100.

This is worth noting because it shows that there is a serious demand for services that help companies manage their human resources.  Of course, one of the growing services in this area are companies that either help firms homeshore their labor or homeshore companies that actually contract with companies to do work and then utilized home-based staff.

In the future it will be unsurprising to see major homeshoring companies on this list. 

Reviewing the growing media coverage that homeshoring has received, it seems as though homeshoring is all about using home based reps for call center operations.  However, it's important to remember that homeshoring extends beyond call center functions and will most likely experience the greatest growth in higher value-added functions such as programming and other activities requiring technical expertise.

An example of a homeshoring company that takes this approach is Aelera.  Aelera's website describes their work as follows:

ur typical engagements are with clients that need quick resolution of critical business issues within their sales, marketing or back-office operations and do not have the ability to engage internal resources and time or budget to call on traditional IT or offshore vendors.

The areas we are most frequently asked to address include:
  Price Quoting/Proposal and Contract Management
  Lead Management
  Service Activation & Service Monitoring
 
  Sales Forecasting
  Win/Loss Analysis
  Business Process Outsourcing
 
  Order Management
  Fulfillment Management
  Field Force Automation
 
  Marketing & Sales ROI Audit
  Data & List Management
  Business Intelligence

Indeed, these activities are higher value-added and more knowledge intensive than call centers.  The main reason I think operations like this will grow faster than call center operations is because there is a lot of underemployed technical talent in small and medium sized cities that have costs of living that are sometimes 50% less than that found in the major metro areas.  By using professionals based in these cities companies can cut payroll costs and simultaneously get better workers.  One thing to keep in mind is that when it comes to homeshoring CUTTING PAYROLL DOES NOT MEAN A REDUCTION IN REAL WAGES.  This is due to the simple economic fact that employees in low cost locales will have a LOT more disposable income than those making significantly more than them in big cities where rents eat up so much of one's income.  This is an important fact that is often overlooked.

This article from internetnews.com brings up the concern that although many companies could be prepared to have workers telecommute in the case of an international pandemic, it is not known what sort of strain such massive internet use will put on the internet as a whole.  This is something the federal government should be investigating, but of course, the feds are less prepared for massive telecommuting than private businesses are.

Honestly, I don't know the answer to this question, but major multinationals should definitely be asking this question of their internet service providers.

Finally, when we have a federal agency trying to do the right by encouraging its employees to work from home, the employees' union voices opposition.  On what grounds?  Because the program "forces them[the home-based employees] to give up their individual offices."

Perhaps, the article I link to above misinterpreted the union's reason for opposition.  I hope so, because it would seem pretty damn obvious that if you work from home there is no need to have an empty office space available for you whenever you feel free to waltz into work.  Of course, the program makes shared office space available, but apparently that is not good enough for the union which wants taxpayers to subsidize empty office space in the DC metro area (one of the most expensive areas in the US for office space).

Let's hope that we continue to see more leadership from federal bureaucracies.  As I have said before, I seriously doubt that the federal government will be one of the leaders in the work-at-home revolution and the petty complaints of self-indulgent federal employee unions only strengthens my conclusion. 

This Mondya House Minority Whip Steny Hoyer described the benefits of telecommuting:

Hoyer said telework reduces traffic congestion, promotes conservation and reduces America's dependence on foreign oil, improves the environment, increases productivity, enhances the security of government, and most importantly, strengthens families by reducing commuting times. 

"Telecommuting answers the challenge of today's fast-paced workplace while allowing employees to work much closer to home," Hoyer said. "As Marylanders continue to face pain at the pump, I will continue to promote this viable and successful alternative." 

Hoyer was responsible for helping to pass the 1993 "Treasury-Postal Appropriations Act through Congress which included $5 million in funding for three telework centers in the Washington Metropolitan area."  The article goes on to describe the impact of the centers "The centers serve over 570 federal and private sector employees."

570 employees?  Out of the entire federal workforce?

That's pretty pathetic and it shows just how far behind the curve the Feds are.  I wonder if these telecommuting centers encourage employees to work at home some days and at the center on other days - this rotation would allow the centers to cater to more workers.  I am pretty sure this isn't the case as the Feds would look askance  at anyone working at home.

It is important to remember the central lesson of economics here: "People respond to incentives."  The incentives in federal bureaucracies is to protect your ass and not shake the boat - no one has the incentive to actually do productive work.  Why should they?  Federal employees' incomes are guaranteed regardless of how they behave. Government bureaucracies have no need to respond to competitive pressures in order to maximize the return to shareholders.  They continue getting revenues as long as the IRS continues collecting taxes.  This is the major reason why I believe the working at home revolution will begin among profit-seeking corporations who are forced to get their act together by shareholders who are sick and tired of receiving mediocre returns.

TeleCommuting Jobs is a website that matches employers with telecommuters.  Their press release yesterday provides more information on how they go about this:

* Provide complete job skills and experience requirements in the job listing. So critical to narrowing the field to only those you want to apply… yet so often not given the little additional time it takes.

* Know the level of professionalism of the applicant's home workspace. All applicants at the Telecommuting Jobs website are required to include a link to their InSiteOffice in all applications, which shows how well-equipped they are for the job.

* Pre-screen. Narrow the field of applicants even further to those most suited for your job by including pre-screening questions in the job listing.

* Skills-test. Have top applicants you receive take the many free skills tests available and send test results to you. Or use the many other tests available to skills-match applicants for your specific needs…and even work-attitude test them.

* Interview applicants online. There are free, web-based collaboration tools to easily and almost instantly invite your applicant in for an interview. With a meeting room, real-time whiteboard, desktop screen capturing and Instant Messaging. Just one of the collaboration tools now being used to work with, supervise and time-manage TeleCommuters. Some available for free, most for free trial so you're not guessing at what works best for your situation.

* Project-trial your top choice for the job. The beauty of hiring a TeleCommuter is that the final litmus test of getting the best person for the job can be a trial on a small project…without a lot of cost or long-term commitment.

This looks good on paper.  I have no idea how well they execute this, but if they don't do a good job I am certain a competitor will emerge to take advantage of the growing needs employers have for hiring home-based workers. 

Importantly, this press coverage is in the Washington, DC area, which has the potential to become a leader in telework because of its technological culture and the presence of major federal contrators and agencies.

The rising price of gas is cited as a powerful incentive to telecommute:

William Mularie, who heads the Telework Consortium, said gas prices have elevated the conversation about telework. He gave an example of why it is beneficial to work from home.

"If I'm a GS-12 federal worker and commute 20 miles into the District, I'm taking two months of my take-home pay, my take home pay, to pay for commuting to my office each year."

Productivity caused by lower stress levels is also cited:

"I don't have the stress level. I can focus more on the tasks I need to work on, and what I like about it is I'm not constricted by a 9 a.m. to 5 p.m. schedule," Hayden said.

Unfortunately, the biggest obstacle to working from home are power-mad bosses:

….Some workers said their colleagues have gotten tired of waiting for their bosses to offer it.

"I've had guys take buyouts and if they had option to work at home, they would have stayed," said commuter Hyungwon Kang.

It's nice seeing the local media pick up on the increasing recognition that working from home makes economic sense. However, massive change will probably not occur until major corporations undertake large homeshoring initiatives with the expressed purpose of increasing productivity while decreasing costs and freeing up capital. Such a trifecta is rare in the business world, but as I have indicated elsewhere on this blog, it is possible with homeshoring and other work at home solutions.

The Valencia County News-Bulletin has an article that does a great job in explaining the benefits of telecommuting:

"Telecommuting: The Ultimate in Homework"

The article cites several of the significant reasons for telecommuting, including saving mooney on gas and the cost of housing as well as better family relationships:

"(Telecommuting) is certainly becoming more and more viable, and one of the reasons, especially nowadays, is rising gas costs," says Barnette, adding that his family finances are also improved because he can live outside the metropolitan area without worrying about the commute. "Housing costs near your workplace are becoming so expensive that it doesn't pay to live close to work anymore. You can't get ahead that way."

But the benefits of telecommuting extend beyond money. According to Barnette, a father of three, his ability to work from home "certainly means closer family ties, because you're not an unknown in your household."

It also briefly mentions what I think is one of the most important, if not the most important benefit of working at home, the psychological effect of freeing the mind:

There's also a psychological boost associated with working outside of the office, Barnette says.

"You don't have this attitude that you're linked by a ball and chain to a desk in a cubicle. It's a thought that kind of frees the mind, and I think that's a motivating factor," he says.

Finally, I was impressed that not only did this article mention the significant productivity gains in working from home, it also described why those gains emerge:

And get it done he does. Barnette estimates that he puts in a solid 60 hours per week — probably more than if he worked at Sandia Labs' main site. "There has been research that shows that working from home — and I would even generalize that to working outside of the office — is two to three times more productive than working from the office because of the interruptions," he says. "You can control your interruptions when you telecommute. You cannot do that when you're in an office."

In addition to sheltering him from lengthy — and unnecessary — conversations with co-workers about the latest hit movie, Barnette's home office allows him to work more flexible hours. If he needs to call someone on the East Coast at 9:30 a.m. their time — 7:30 a.m. here — it's no problem. If he worked in Albuquerque, he'd have been on the road instead. If there's a job that requires extra time, Barnette says he's more likely to devote extra energy toward it.

It is nice to see the constantly increasing amount of positive press coverage of working from home. It is only a matter of time before homeshoring shows up on the big media's radar screen and becomes one of the big buzz items in business. Once that happens there will be a huge demand for transforming large sections of the office-based labor force into home-based labor. The killer combination of lower costs and higher productivity make this transition a no-brainer even for the most backward executives.