Okoh: Outsourcing is a Viable Means of Managing Cost
Chairman, Resource Intermediaries Limited, Mr. Alex Okoh, whose firm will celebrate its 10th anniversary, spoke with journalists on the benefits of the outsourcing business model as well as challenges in the industry. Obinna Chima presents the excerpts:
I won’t use the word profitable because every business is set up to make a profit. But I think that it is extremely viable. In fact, it is even more viable now than ever before. Outsourcing, at least the way we practice it, offers a win-win proposition for our clients. And if you look at the cost structure of any business, personnel cost usually is a key component of the operating cost of most businesses. Now, when you have a downturn, typically the first sufferers in a situation like that are personnel. This is because you want to cut cost by laying off staffs because you see a downturn in the economy. But if you were subscribing to outsourcing model, that challenge will not be critical for the business organisation. This is because in the first place, the personnel would have been managed by an outsourcing partner in the first place and the critical cost that hit your bottom line would have been moved to an outsourcing vendor who helps to manage all of the personnel cost that usually becomes a challenge for businesses in a downturn environment. Now, when you look at even the personnel cost that we are talking about, there is a stated cost on the book and there is also the unstated cost that the personnel incur for the business, which is over payroll. But if you adopt an outsourcing model, all of that is left for your vendor to manage as they relate to the personnel that is under their management. So is a more cost effective way of managing your personal input into your business. So, both in boom and bust, it helps to manage your personal cost more effectively, more efficiently.
Outsourcing is not a contract staffing and is not casualisation, if it is practiced the way we do and in a professional sense of it. Why? That is because these staffs that are deployed to the third party clients are actually the staffs of the outsourcing partners. So, at Resource Intermediaries, the personal under management are actual staff of Resource Intermediaries, enjoying all of the benefits that regular staffs would be enjoying. What is just different is that their places of redeployment where they render the services are not within the office of Resource Intermediaries. So these staffs are ours, they are employed by Resource Intermediaries, they have the term of engagement defined by Resource Intermediaries and then deployed to our clients to render those services for the client. So, they are not causal staffs, they are not contract staffs and as far as we are concern they are staffs of our company and then those staff are now deployed to the services they render to the clients. So, is not casualisation. However, the concern you expressed is valid because that was what pervaded in the industry pre our entrance and that created a negative image for outsourcing firms. So we are not contract staffs provider, we are an outsourcing company providing services and personal to clients relative to their needs. Contract staffing means that you don’t have fixed terms of engagement, you can laid off tomorrow, you can be laid off in six weeks. So there really nothing fixed in term of engagement and benefit. Contract staffs typically don’t have a pension scheme; they don’t have a health scheme, so there are various benefits that a regular staff would enjoy in a regular engagement. However, if RIL were to engage that service on an outsource basis, the staff that will be coming to serve you will be permanent staff of RIL enjoying the full benefits of pension, medical or whatever it is from us. However, what you pay for those services to us is fixed.
Over the years, through various programmes such as our annual outsourcing expo which is basically to get the public to be aware of what the core services and benefit of outsourcing are. In terms of how we also engage clients, there have been all kind of public advocacy programmes and initiatives that were have engaged in to bring the core knowledge of outsourcing to the market space. And also, when we engage our clients, we try to distinguish for them, so that they can understand the advantage and competency that we would bring to the table for them. We try to distinguish for them, the difference between outsourcing, contract staffing and casualisation, so they also do not have a problem with their unions or various groups that they have in the organisation. So, over the years, we have tried in various ways to do public advocacy and just bring the knowledge of the core professional outsourcing to the markets.
I know that there are sentimental views in term of how employments are contracted. But personally I will like to give a macro view on it. So if in aggregate terms, the company is not losing the number of the employed people, I would not see a lay-off as been negative. Let me explain that. If in aggregate terms the personnel that need to run operations of Bank A is 5,000 personnel. However, all of the 5,000 were directly on my books initially. But for various strategic reasons, I now decide that perhaps a 1,000 of those staff are not core and in terms of direct engagement, I rather look for another model to manage how they are rendering the services in my organisation and I will put them on outsourcing model, but the outsourcing firm still provides the 1,000 staff to me. In aggregate terms, macro wise the economic has not lost jobs. Those jobs are still within the system, but it is just that in terms of how they have been defined or redefined, you may say Bank A laid off and RIL employs 1,000 people. However, the 5,000 people are still productively engaged in the market. I think that is what is macro critical than this sentiment of i used to be in Bank A and I am now in RIL. The reality is that once the issue of operational cost hit me as a bank manager, I have to make a rational decision in terms of how best to accommodate this cost without compromising the service level. And those decisions are being driven by the fact that I am accountable to body of shareholders who will rate my performance in term of the dividends that I have pay or the profit before tax. So, in term of how I then response, I have to be very strategic and realistic about it. So if you talk about tellers, bulk counters and other staffs that typically were on the core personnel payroll of the businesses, but are now been managed by an outsource staff, but they are still in the bank rendering those services, I really don’t see any challenges on that.
I think that we need to bring some order, structure and government regulation into how outsourcing is practiced. At least to take out the charlatans and those who are taking advantage of the market. So I think that by stronger regulation by government would be helpful to this industry. So, we want to be able to set the standard for those who can practice outsourcing and perhaps push that process to lead to some licensing framework. Not everybody who knows how to keep money can be a banker, not everybody who knows how to cover risk can be an insurance company. There are processing that you will follow that will lead to some official certification and endorsement and then licensing. I think that if you have that, that is the kind of policy that we will like to see to be brought in the outsourcing industry, so that they can monitor how it is practiced to ensure that there is serious professionalism in the industry.