Outsourcing to High Potential but Disadvantaged Workers Makes Good Business Sense
by H. Karthik and Shyan Mukerjee
Impact sourcing is not just a nice thing to do; it also makes perfectly good business sense. Just ask Tata Consultancy Services (TCS), the India-based global business services organization that employs more than 300,000 IT consultants in 46 countries.
Faced with an increasingly competitive talent market, TCS began exploring solutions beyond its standard model; one such solution was hiring talented people from underprivileged backgrounds.
TCS collaborated with a wide variety of partners—government agencies, research institutes, etc.—to launch English Labs to train and hire from socially disadvantaged groups. More than 35,000 youth have been trained under this program since 2012.
Beyond altruism, has TCS’s strategy reaped any benefits? Apparently so: The company estimates an 800 percent return on investment!
“We have hired 2,500-plus impact workers to date, and attrition among these workers has been 20 to 35 percent lower than regular hires,” reports a company spokesperson, adding, “We have been hiring impact workers for over four years now and have no apprehension around performance capabilities of properly trained impact workers.”
TCS is not alone in declaring the wisdom of impact sourcing as a business strategy. “The Case for Impact Sourcing,” an in-depth report recently published by Everest Group and supported by The Rockefeller Foundation, found that impact sourcing accounts for 12 percent of the overall business process outsourcing market and is growing faster than that of the BPO market as a whole as companies realize the benefits to the bottom-line and community.
In fact, the majority (95 percent) of impact workers are employed by large, traditional BPOs and Fortune 1000 buyer firms. The Everest Group report features hard data and success stories from industry leaders such as Accenture, Aegis, Deloitte, Infosys, Microsoft, Pangea3, Quatrro, RuralShores, SureHire, Teleperformance and Valeo.
Among the bottom-line benefits these organizations have documented are the following:
- Access to a large and untapped talent pools that can ease labor supply constraints. For example, most countries have access to vast numbers of talented but unemployed high school and college graduates; in India, alone, this pool comprises more than 11 million people.
- A stable and engaged workforce with high motivation levels and 15 to 40 percent lower attrition than traditional BPO workers. Careerbox, a South African training provider that specializes in sourcing impact workers, for instance, conducted a study that documented comparable work ethic (measured by attendance and adherence) between traditional and impact workers in South Africa.
- Lower costs. Impact sourcing offers up to 70 percent lower costs than source locations in the U.S. or UK and significant savings compared to traditional labor models in BPO. While upfront sourcing and training costs for impact workers are higher, savings from ongoing costs are lower, driven primarily by location arbitrage and lower attrition levels (therefore, less training overall). (In some cases, impact workers are paid a stipend during the training and probation period resulting in lower people costs during initial months. However, once confirmed after the probation period, impact workers are paid the same as traditional workers.)
Metrics Show That Impact Sourcing Delivers
But what about job performance? Do impact workers pass muster when it comes to SLAs and KPIs? The Everest Group report provides multiple metric-based comparisons which indicate that customer satisfaction for services delivered through impact sourcing is comparable to that delivered through traditional BPO.
Teleperformance RSA, for instance, developed extensive metrics to measure and compare the performance of impact workers and traditional workers.
A pilot program, running over a ten-month period, demonstrated that on most parameters impact workers showed steady improvement in their customer satisfaction levels, bringing them nearly comparable to the average performance of traditional workers.
In addition, qualitative evidence in the form of case studies and testimonials further substantiates that performance delivered through impact sourcing is comparable to traditional BPO.
Pangea3 reports: “We started with a 100 percent quality check, and then reduced it to 20 to 30 percent after achieving a steady state.
This is comparable to our traditional operating model.” Aegis Limited weighed in with similar conclusions, “We believe that with a stringent training, HR and recruitment screening process in place, you can ensure high quality through impact workers. We have impact workers serving international clients with equal efficiency.”
Underscoring the sound business justifications for impact sourcing is the positive social effect it has on the well-being of individuals, their families and communities.
Impact sourcing provides opportunities to individuals who are at a competitive disadvantage to mainstream workers and might not otherwise have access to jobs; examples include refugees and persons who are socially disadvantaged (cultural, ethnic, and religious minorities; gender groups; and indigenous populations), economically disadvantaged, physically disabled, or limited by other health challenges.
Impact workers can realize a 40 to 200 percent increase in income, corresponding to up to a three-fold increase in discretionary spending. Therefore, the total impact on the economy is 3.5 to 4 times that of the direct impact on impact worker income.
Impact Sourcing for Your Business
So, with impact sourcing, we have definitive evidence that what is good for humanity can be good for business too. So how do you make the business case for your organization?
First, understand the role that impact sourcing can play in your global portfolio; briefly, here are some ways that impact sourcing can contribute to your strategic objectives:
- Enable further optimization of global service delivery (e.g., lower costs, provide flexibility to absorb demand fluctuations, free up internal bandwidth for higher order work)
- Provide geographic diversification and support entry into new business markets in the developing world
- Gain competitive advantage in domestic sourcing by accessing large talent pools with vernacular skills and low attrition
- Achieve corporate social responsibility objectives via supplier diversity and employment of disadvantaged communities
On a tactical level, companies can begin their foray into impact sourcing by (1) identifying areas where impact sourcing can be used, (2) running a pilot to monitor performance of impact workers in comparison to traditional workers, and (3) developing use cases to substantiate value to customers. Several resources to support your effort—including
the Everest Group study and impact sourcing case studies—are available for free download at http://www1.everestgrp.com/impact-sourcing.html.
Karthik is a Partner and Shyan Mukerjee is a Vice President at Everest Group, an advisor to business leaders on the next generation of global services. Karthik leads Everest Group’s global sourcing practice, including the company’s work with Global In-house Centers (GICs) and country associations. Mukerjee is responsible for analyzing emerging trends in the global sourcing industry and developing insights on offshore locations. Karthik and Mukerjee are co-authors of the Everest Group report “The Case for Impact Sourcing,” which is part of the Digital Jobs Africa Initiative, supported by The Rockefeller Foundation.