Will Outsourcing Kill Employee Engagement?

Posted by Allan Steinmetz on 16 February 2017

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According to a recent front-page article in the Wall Street Journal entitled “The End of Employees”, US companies are shifting work once considered to be core company functions to contractors, which is pruning costs and job security for workers. The article states, “never before have American companies tried so hard to employee so few people. The outsourcing wave that moved apparel making jobs to China and call center operations to India is now just as likely to happen inside companies across the US and in almost every industry.”

The piece goes on to explain how companies such as Walmart, Pfizer, Virgin America and Google are outsourcing jobs to temporary staffing agencies, who in turn use contractors to perform the majority of the work that is not customer facing or core to its strategy. This industry has even adopted an acronym called TVC’s, which stands for temps, vendors and contractors. Rough estimates by economists say TVC’s range from 3% to 14% of the nation workforce, with as many as 20 million people falling into this category.

This shift has the potential to radically alter what it means to be a company and a worker. More flexibility to shrink the size of their employee base, pay, and benefits means less job security for workers. Companies believe that this strategy draws less scrutiny from the press, public and government officials, as it is easier to end a TVC relationship than it is to layoff a full time employee. It’s all about having more control over costs, and being lean and flexible enough to adapt to new ideas or changes in demand.

The stock market and Wall Street analysts are also putting pressure on the outsourcing business when they look at corporate “cost per employee”, data. The lower the cost per employee, the higher potential for profitability. According to the article, consulting firm Accenture predicted last year that “one of the 2000 largest companies in the world will have no full-time employees outside the C-suite” within 10 years. Along with many of its rivals, Accenture is pitching chief executives on the idea that their company’s core business is smaller than they think. “We’ve shown we can do core parts of their business better than they can do it themselves,” to one former Accenture official.

How could this be? And what is the impact on enterprise engagement? For workers who are TVC’s it puts them in limbo. It takes away their purpose and makes what they do just a job, rather than a career that has value in society or in their own lives. It becomes a 9 to 5, a paycheck.

I rarely take strong points of view in our blog posts. Here, now, I must take a stand. I think this trend is a huge mistake for our country, for productivity, for corporate identity and customer facing experiences.

  • In previous blog posts you have heard us say that people innovation and creativity are the fuel of change and disruptive technologies. How can this occur if half the workforce population is not employed by the company?
  • Research shows that 73% of the US workforce are not presently engaged according to Gallup. I imagine that this number will only rise if the outsourcing trend of professional services jobs continues to rise. Low employee engagement in the United States contributes to over $730 billion in lost productivity and monetary value. These number dispute the trend for outsourcing
  • People need self-worth and identity with their company and their role in society. Outsourcing jobs will alienate individuals and make organizations, potentially more efficient, but less creative and interesting to work at
  • The “gig society” was created by a necessity of people to find work during high unemployment. It was never intended to be a replacement for how people perform jobs and become affiliated, working together.
  • Also we know from a variety of research studies that companies who have high levels of engagement are more prone to be more productive and generate more revenue and perform better that the S&P average.
  • As we at Inward have always said, “your people are your brand”. Without people at your core, the behavior and experiences that they provide your customers and organization have no brand or differentiation in the marketplace. You become a commodity with little to no value.

No doubt, this is a contentious topic. We would love to hear your points of view and opinions. Let’s start the dialogue.