New frontiers in outsourcing: Sustainable Impact Sourcing
Several ancient philosophies say that only those who make a significant positive impact to the societies in which they operate can sustain over a long period of time. This has been proven time and again for both individuals – Buddha, Shankaracharya, Jesus, Mohammed, Guru Nanak, Sai Baba are all examples – and organisations. A few Japanese companies have survived over 150 years because of this philosophy. Meanwhile, a study shows how only 13% of the Fortune 500 companies for the year 1955 were still on that list in 2011; the others had either merged, dropped off the list or failed entirely. Why did this happen to those companies, and not to the 150-year-old Japanese organisations?
The study in which I read about those Japanese firms attributes their longevity to four main factors:
- They all worked on the principle of “fair” not “maximum” profits.
- They expected to follow broader business cycles (ie, don’t base actions on quarterly growth if the economy around you is tanking).
- They did not overexploit resources, but took only what was required.
- They did not game the system (ie, bribing the government of the day to get benefits).
Having written an opinion article recently on “a new world order beyond automation and offshoring”, I want to follow on from some of those thoughts by focussing this subsequent article on point 1 above.
Maybe it is time to rewrite the management books used for teaching in B-schools to focus not on “maximise shareholder wealth” but on “maximising returns for all stakeholders”. One of the stakeholders is the society in which we live, operate and from which we take out resources, including human resources. So, any sourcing that the organisation does should have a sustainable impact on the societies in which it operates. This includes any agenda for outsourcing or offshoring that companies do to cut costs and become or remain competitive.
In February 2014, I worked with 18 CEOs (Centre Executive Officers) and a few other senior HR/Finance executives of a ruralshoring organisation. This is a company in India with 17 centres across the country, employing 2,500+ people from rural areas. It was a great experience for me to understand what it is to take “jobs to people” rather than “people to jobs”.
This company is all about providing opportunities to rural youth so that they are assimilated into the knowledge economy. Many large companies have started putting administrative tasks into this company. Not only does it make a difference to the society; it also helps to ensure the following:
- Rural youth need not come to cities, which helps with the pressure on urban land.
- The rural economy gets a tremendous boost – for every direct job created, there are three or four other tertiary jobs that get created in the long run.
- There are more and more opportunities to distribute income across the country – in my opinion, unless we are able to put purchasing power in the hands of individuals, consumption will not go up and the economy will lag behind.
To do this, the company uses what it calls “the 4E Principle”:
Enskill: the initial challenge is in skilling people (or even re-skilling them) so that they are fit for employment.
Employ: providing employment opportunities for these skilled/re-skilled people.
Empower: bringing financial independence to people and helping them live with dignity; and
Engage: this is not just about an engaged team within the organisation but also an engaged community around the organisation.
As I conducted the workshop, I heard a tremendous story of how the community turned around to help one of the CEOs during a crisis situation. The State in which this ruralshoring centre was located underwent a split into two States. This triggered massive political and civil unrest and all businesses were forced to shut down for over three days. However, this centre could not afford to shut down even for a day as that would have an adverse impact on the businesses of its customers. So, the CEO talked to the Village Self-Governance Team, the local police and the local politician. The community elders, along with the Village Self-Governance Team, stepped forward and declared that whilst the three-day shut-down would still happen to support a larger cause, the centre would be exempt from the shut-down. The villagers themselves provided security to the centre and its employees to ensure that no one interfered with its working.
This is what can happen when an organisation decides to maximise society’s wealth rather than its own wealth alone. This is also the reason why such organisations will survive in the long run.
Large companies that are willing to outsource their work to such a ruralshoring organisation are actually creating significant social impact – what I term “Sustainable Impact Sourcing” (this is not a new term but has been used by other writers).
I believe that it is time for this ruralshoring (or Sustainable Impact Sourcing) to be embedded in the agendas of all companies, in whichever country they operate. This will help each organisation to make a huge difference to the society in which it lives and operates, rather than looking to save every rupee or dollar by going wherever they can source work the cheapest.