I’m an American working for a Danish company, my boss is in Spain, and we have colleagues and clients all over the world: am I “outsourced?”
The answer doesn’t matter, but what does matter is control: of your work's quality, your reputation, and your company’s culture. Sourcing drives all three.
Far too many companies look at the overabundance of international sourcing options and simply take the lowest quoted price -- something they would never do when hiring locally. In doing so, they lose control and end up with a higher total cost of operation (TCO).
That higher TCO comes from inefficient communication, high turnover, poor work quality, and lowered employee morale at home. In a worst-case scenario, outsourced workers are being exploited and your snap business decision is actively harming people and your brand.
You can keep control while sourcing, but to do so you need to make principled decisions. That’s why we believe in impact sourcing.
Impact sourcing results in a more engaged and motivated workforce for companies, and enables them to increase their global competitiveness.
— The Rockefeller Foundation
At Pixelz, we approach the sourcing challenge from both sides: people outsource to us and our 800+ employees, and we also partner with NGOs and vocational trainers to source talent. The lessons we’ve learned may seem obvious, but you’d be amazed how often the word “outsourcing” causes people to forget everything they ever knew about human resources.
Successful outsourcing to us boils down to putting in research that will reveal if a company actually cares about and invests in its talent. Here are four rules to remember when you’re sourcing:
- Sourcing is about people, not numbers
- Long-term relationships are better business
- Quality is a product of invested talent
- Only you can fool yourself
We’ve been investing in South-East Asia for over seven years, primarily in Vietnam. Socially responsible sourcing was never a question for us, but we’ve found that there’s an international movement that’s put time, money, and the weight of intensive study towards sourcing best practices.
Impact Sourcing is Gaining Momentum
That movement, led by groups like the Rockefeller Foundation and Business for Social Responsibility (BSR), has given smart and ethical outsourcing the name “impact sourcing,” which Rockefeller defines as "an inclusive employment practice through which companies intentionally connect high-potential, disadvantaged youth to available jobs." For example, impact sourcing may target underemployed demographics like women with disabilities, and provide job training along with opportunities for higher education. It is not all about social benefits: impact sourcing has proven benefits to the buyer, as Accenture found in their report “Exploring the Value Proposition for Impact Sourcing."
We are an impact sourcing company because we have learned the following lessons.
Lesson #1 — Sourcing Is About People, Not Numbers
It’s a fallacy to think that sourcing is simply solving an equation that multiplies price by manpower, divided by error rate. Your work isn’t going to be done by a machine: it’s done by people, and it’s a mistake to treat sourcing much differently in-house and out.
For a real-world example, let’s look at Digital Divide Data (DDD). DDD is a non-profit BPO (Business Process Outsourcing) provider that has a staff of over 1200, with employees all across Asia, Africa, and North America. They rank in the Global Outsourcing 100 list by IAOP, and are consistently placed in the Top 100 NGOs by Geneva Global. In 2013, DDD won the Google Award for Innovation in Business Process Outsourcing. DDD has supplied Pixelz with hundreds of talented image editors over the past couple of years.
Jeremy Hockenstein, the CEO of DDD, has an MBA from MIT’s Sloan School of Management. He was famously (in sourcing circles, at least) cited as statistician and author Thomas Friedman’s “favorite example” of social entrepreneurship in The World is Flat.
Hockenstein’s resume screams numbers guy, but he knows that what drives successful sourcing is not an algorithm, but humans.
As Hockenstein told me, “We're giving companies access to a talent pool of very motivated people. We're giving our employees, more disadvantaged youths from the slums and from poor areas, the access they don't have to job opportunities. It's not really about numbers, it's really about people and talents.”
In that sense, outsourcing is a word that draws a line where there doesn’t need to be one — it’s simply your hiring process, with a broader reach. Your company’s values shouldn’t change because you’re hiring in a different country than you have been before.
“Companies, organizations, they've always been about hiring people and getting work done together, in different arrangements and different geographies,” Hockenstein told me. “To me, outsourcing has really been about the people that you're hiring.”
Whether you’re hiring a CEO, an Art Director, a receptionist, or a retoucher, you need to go through a thorough vetting process that ensures a skill and culture match. That leads directly into our lesson number two.
Lesson #2 — Long-Term Relationships Are Better Business
You’re running a business, not a charity. You shouldn’t turn to impact sourcing solely for the warm and fuzzy feeling it gives you -- you should look at the bottom line.
As Hockenstein says, “No one pays us extra or accepts lower quality because we're doing this in a socially responsible way. People consider us because of the social impact, but at the end of the day, they choose us because we can deliver the quality they're used to, and the price.”
It’s been proven time and time again: motivated, happy workers are more productive. They stay with the company longer, become more skilled, and get more work done in less time. And the best way to motivate someone is with opportunity.
“We have basically four to five year retention built in for a lot of entry level kinds of work,” says Hockenstein. “These kinds of work have usually a hundred percent turnover in a year, if not higher, if they're being done in India.”
The hiring process is time-intensive, and training can take even longer. There will be false starts, mistakes, and miscommunications. If you use a cut-rate shop with high turnover, you will find yourself stuck in an infinite training cycle as the people who actually perform the work change continuously. That’s how you end up with frustratingly inconsistent work.
You need a long-term relationship to achieve consistent quality, and to scale.
Lesson #3 — Quality is a Product of Invested Talent
Take the time to find out who’s doing your work and why they care. What is motivating that person? What are they working towards?
The ability to advance needs to be obvious if you want ambitious workers. At Pixelz, we offer free English and soft skill classes, and have defined pathways that employees can take to reach specific positions. As a result, Jakob Østerby, COO at Pixelz, says, “If you look at our leaders and department heads, they were almost all recruited internally, so people know that isn’t something we just say.”
Talent is not geographic: smart workers gravitate to companies that value and challenge them.
Østerby says, “Because our CSR offers a lot of value to employees and the way we treat employees is becoming more and more well known, we are able to continue to recruit some of the best talent in the cities where we are located. We need that special talent in order to operate the way that we do: we rely on the professionalism and expertise of our managers and our team leaders and staff, and the only way to get that is to make sure that they feel valued and comfortable and are proud of coming to work. “
At Pixelz, we’ve scaled our talent search by partnering with local organizations like REACH, a Vietnamese NGO specializing in vocational training and employment for disadvantaged youth.
Hang Nguyen Ngoc is the Business-to-Youth Coordinator at REACH. She is responsible for connecting REACH students to businesses, career opportunities, and improving REACH training with the support of local businesses. She is also one of the main contacts between Pixelz and REACH.
“When our relationship with Pixelz started,” explains Nguyen, “Pixelz was just an employer and REACH was just a trainer. Over the last 3 years, Pixelz and REACH have grown together in various areas. Pixelz has helped improve REACH’s training curriculum, their trainers guest lecture at REACH, and they help provide our students with valuable industry insight.”
“Pixelz and REACH share a belief in the young talent in Vietnam. We work together with the vision that training and education can change people’s lives, and the dedication of staff from both parties makes the relationship effective.”
Tùng Nguyễn Thanh has been at Pixelz for almost 3 three years, and regularly works with REACH students as the Technical Training Director.
“When you work with REACH students, it quickly becomes clear they see studying as a gift and understand education is an important opportunity for them,” says Thanh.
Lesson #4 — Only You Can Fool Yourself
When outsourcing horror stories do emerge, like exposure of unsafe factory working conditions or child labor, there tends to be a lot of head-shaking and tongue-clucking and people saying, “But how could we have known?”
Hockenstein doesn’t buy that. “You can always be fooled if you want to. Most people aren't lying to you... Take a look at what their people strategy is. Is it really about developing people? What happens to their graduates? Try to go and visit, and talk directly with several employees. You'll be able to tell.“
The difference between an ethical, intelligent sourcing company and an exploitive one is obvious. An on-site visit should provide immediate evidence, and even if you don’t have the resources to spend on travel, a minimal investigation provides ample data.
Hockenstein says, “Ask questions. It's not that hard; talk to people. Try to have some genuine conversations with people. Find some people you trust who are motivated to both have a sustainable, profitable enterprise, and also are genuinely committed to the people. You can tell. Look at turnover rates. Look at where their former employees are.”
Nguyen Huong is Pixelz Country Manager for Vietnam, and has been with the company since the very beginning. She says that even though our CSR wasn’t explicitly defined in the early days, there are simple steps a company can take to look out for the welfare of employees.
For example, Houng says, “Things like having formal work contracts, air-conditioned comfortable office space, making sure they were doing work that was inside the scope of their job, providing them training once they started working with us, treating them with respect. Those are things we did from the beginning and still do to this day, and that you often don’t find in, say, a private Vietnamese company.”
And how did that morph into a formal CSR policy?
Houng answers, “In 2013, once the company really got going, we looked back at previous years and our CSR and began to look for ways we could improve the working lives and personal lives of our staff. Doing things like providing fresh fruit at work, beginning a more formal and significant partnership with REACH and in turn hiring more of their graduates, improving our office spaces to make them not just nice but really modern with an international feel (in fact, our Vietnam offices are much cooler and nicer than our headquarters in Denmark), providing more team bonding events for staff, all the little things that really make a big difference in the daily lives of our staff. “
Not too complex, right? Ask a company you’re considering partnering with the type of questions you might ask if you were interviewing for a job there. Then ask yourself a simple question: would you want to work there?
If the answer is “no,” then you shouldn’t partner with them. Simple as that.
There’s no logical reason to accept lowered workplace standards with international partners, and there’s every reason to think that doing so will negatively impact the quality of your product. Don’t lie to yourself in pursuit of the lowest quoted price.
Impact sourcing, on the other hand, can contribute to both improved product quality and company culture. And that’s the way all sourcing should be.