The case of Global Communication (GC) represents the problem, opportunities and the harm that globalization and outsourcing creates. Many companies in the west have shifted their backend operations to the Asian and other countries as the labor costs are low. When jobs are outsourced from a parent company, it creates layoffs and this is bitterly rejected by the workers unions.
GC has financial and operating problems. Its market share has been severely eroded and the market is highly fragmented. There is intense competition and the margins are very low. The management staff has come up with an aggressive growth plan that would target the small business segment. The company is also developing alliances and partnerships with other vendors for effective delivery of Internet enabled solutions. The management team has also made recommendations that to cut down on costs, the technical support call center should be outsourced to India and Ireland. Any moves to outsource the jobs will create layoffs and this is not acceptable to the workers union who has threatened to resort to any means to stop the outsourcing. Moreover, the outsourcing move will damage the company’s philosophy of “Our Edge Is People”. The union leaders are against any forms of outsourcing and its union leader Maria Antex has declared, “Global should look at the Union as a partner. Before making this move, all avenues should have been exhausted. Hiring foreigners to do Union jobs is not the answer.” The paper provides an analysis of various Issue and Opportunity Identification, Stakeholder Perspectives and End State Goals and Vision. It also provides a gap analysis between the end state vision and goals.
Situation Analysis
Issue and Opportunity Identification
The case of Global Communication (GC) suggests that for the company to recover from lost sales through competition, it needs to enter new markets. Various Issues have been identified and the opportunities they present have been listed. Please refer to Table 1 for the details. There are
The issues that are identified relate to the erosion of the share price from 28 to $11 in one year. The fall is inline with the performance of industry figures and it has been attributed to increased market fragmentation, increased competition and growth in the small business segment in Internet enabled technologies. Another issue is that there would be worker loss of motivation and the company image will suffer if employees are laid off. The opportunity for GC is it can expand in the small business segment where there is a tremendous growth. But what is required here is expertise in Internet enabled applications. GC has entered into partnership with a satellite provider to offer video services and a satellite version of broadband; partnering with a wireless provider that allows the small business owner anytime Internet access using wireless telephone or PC cards. The company also needs to reduce its service and operating costs by outsourcing its technical support call center to India. The Senior Leadership Team should identify the people who would be laid off and immediately offer them more benefits. Some benefits should be offered as a quick gesture. This will bring the union to the negotiating table and the amount can be negotiated
Another issues is that any outsourcing to India and Ireland will involve lay offs and job cuts and the workers union is not ready to accept the fact that outsourcing is inevitable. They are totally against this concept and will not listen to any reasoning. They are ready for an acrimonious showdown. Industry leaders should use this issue as an opportunity to address the unions fears and ask them to face the realities and accept outsourcing as inevitable. They should show examples of outsourcing in IT and automobile industries, the retail and ready-made products that have been outsourced.
Another issue is that the Union has informed the management that it will bring in government intervention and ask them to stop this process from happening as any decision taken here will effect the while industry. It has been seen in the past that the government tends to support the workers in such issues. The union has also argued that if outsourcing to India and Ireland is allowed, then this will set an unhealthy trend in the industry and all other companies will take up some measures. The industry should take this as an opportunity to put pressure in the government by suggesting that the business would close down if outsourcing where not allowed. The various industrial bodies whose members are the telecommunication companies should undertake widespread counseling measures.
There is another issue and that is the real estate in which the current call center is based. The management should not consider this issue as of now, as any move in this direction would invite immediate reaction from the workers union.
Stakeholder Perspectives/Ethical Dilemmas
There are three main stakeholders in the GC case and they are The Board of Directors of GC, The Senior Leadership Team made of senior officers of the management and the workers union representatives. Please refer to Table 2 for details of the analysis.
The Board needs to show good performance to its shareholders. Board member have also invested money The board wants regain and exceed the share price that was $28 a year back to $11 currently. The Board wants to increase the profit and ensure that there is positive growth through the measures proposed by the Senior Leadership Team. It faces an ethical dilemma, as any moves for outsourcing which is a major method to cut operating costs will result in job cuts. But outsourcing the jobs to India and Ireland will provide high savings in operating costs as the handling costs will come down to 40%. It needs these savings for survival else the company will cease to exist.
The Senior Leadership Team is made of senior members of the sales, operations and the HR divisions. The Board depends on this team to lead the company to success and growth and their main responsibility is to see that the company grows and makes good profits. To achieve these goals, the team has identified growth in small business segment were it wants to enter by partnering with Internet technology companies. To reduce the costs, it wants to outsource the call center operations to India and Ireland and this will cause some jobs to be lost. The ethical dilemma is that if the plans are not implemented then the company may close down since it becomes unviable. If the plans are implemented it will hurt the workers. The team has had very good relations with the staff and the workers have accepted 20% cuts in benefits so that the financial burden on the company is reduced.
The Workers Union has in the past tightened its belt and accepted 20% wage cuts without creating any trouble. They do accept the fact that the company should improve and are ready to further sacrifice their wages or work longer but they are not ready to accept any suggestion that the jobs should go to foreign countries.
End-State Vision
There are three sets of End State Vision that would meet the strategic goals of the company. Please refer to Table 3 for details of the vision and goal. The first end state vision is to ensure that the new business strategies will be implemented. As suggested in the previous sections, it is clear that the communication has become highly fragmented and that there is intense competition in the tight market place. This has severely the share value and the company turnover has been hit very hard. The CEO and the team have researched the market and come up with some suggestions. These include enhancing its presence in the small business segment. Since this segment requires expertise in Internet enabled technologies, it has developed a partnership and alliance with certain vendors. This partnership is designed to make GC the top player in the communication service market. An important note for this vision is that the sales staff and the CEO should be free to devote their time for business development activity. They should be freed from the burden of handling the employee issues that are basically an HR issue.
The second End State Vision is that the operating costs and the call handling costs need to be reduced by almost half. The strategic growth plan of the company means that funds have to be raised to meet the growth plan. But with the current erosion in share price, obtaining funding from the market or getting more investors would be very difficult. So the company has looked to India and Ireland where skilled labor is available at very low rates. The company is thinking of outsourcing its technical support operations to these countries. This would result in substantial savings and would help the company to cut costs.
The third vision is to have an amicable settlement of the employees and they should accept any package that is offered to them. The management has suggested that employees who are willing to shift to the new locations would be absorbed but they would have to take a salary cut of 10%. The company has further promised that the employees who are not suited for employment in the new location will be counseled and benefits would be given to them. To achieve this vision, the management needs to state the urgency of the solution and tell them that if this is not done, then the whole company will go down.
Gap Analysis
The Gap Analysis reflects the identification of the gap or differences between the vision and the goals. The first vision is that New business strategies for expansion will be implemented. The End State Goal is to Provide budget and resources to implement plan such as hiring 1000 qualified people in India and Ireland. Free the technical and sales staff from the burden of solving HR problems and allow them to concentrate on the business development activities. The gap that exists between the goal and the vision is the funding and resources that need to be provided. The company has seen the share value being eroded by more than 50%. There is no money available from investors as no one wants to put in money in an enterprise that is already losing money. The end goal requires that 1000 people have to be hired in India and Ireland and there is a question of from where the money is going to come.
The second end vision statement is Reduce the Operating Costs and the call handling costs. The End State Goal is to Obtain support of the Board to ensure outsourcing is done. The management has found that the operating costs would be considerably reduced if the technical support center is shifted to Ireland or to India. These countries have skilled workers who are available at very low rates when compared to the costs in GC country. There are innumerable incidents in the country where IT and automobile industries where thousands of jobs have moved east. There is a gap in the approach as the Board will have to face to the fact that such a move will mean that the main philosophy of the company ‘Our People are our edge’ will be proved wrong and the company will be seen as one that offers contradictory messages.
The vision is that the new strategic plan will be accepted by the Union without hostility and the company philosophy ‘Our edge is our people’ should not be damaged. The End State Goal is to Provide resources to the Senior Leadership team to avoid any violence. There is a considerable gap here. The union is not ready to accept any suggestion of job cuts. It has already taken 20% cuts in employee benefits and health programs without creating any problems. The union leaders are against any forms of outsourcing and its union leader Maria Antex has declared that “Global should look at the Union as a partner. Before making this move, all avenues should have been exhausted. Hiring foreigners to do Union jobs is not the answer.” The union has also threatened that it would ask the government to intervene. This case would obviously effect the whole industry and has everyone watching. If the layoff and outsourcing were allowed to happen as planned then the whole industry would take up this route. Any government intervention would mean court cases and hearings and this would prolong the issue till the opportunities expired or were exploited by someone else. So the gap in this vision is the main chasm that has to be bridged.
Conclusion
The case has provided an interesting insight into the benefits and dangers that globalization and off shoring creates. For GC to regain its lost market share and to be in a dominant position, it has to expand to other areas and also cut the operating costs. While the expansion and growth in the small business segment should not create a problem, the real problem lies in the management’s decision to offshore the technical support market to India and Ireland. The union is dead against this action as it will mean layoffs at the parent office. In the past, the union has realized this problem and has helped to reduce costs by accepting a 20% pay cut. But it is not ready to accept layoffs. Worker reduction and shifting the jobs is crucial to the success of the plan.
The management needs to offer better benefits and retraining opportunities to those workers who are ready to work in the new locations with a 10% pay cut. Moreover, the management has suggested that as things improve, the pay hike would be given. The Union should take up this offer and work in a creative way. If they do not accept the suggestion then the company will be forced to down. Tasks such as Issue and Opportunity Identification, Stakeholder Perspectives and End State Goals and Vision have been done and a gap analysis between the end state vision and goals has also been done. Actions can be taken to reduce the gap so that the gap can be closed and the new strategy implemented as per the workers satisfaction and the organizations needs.
References
- Bateman, S. & Snell, S. (2004), Management: The new competitive landscape.(6th ed.) New York: McGraw-Hill, Chapter 3
- De Janasz, S. (2002). Interpersonal skills in organizations. New York: McGraw-Hill, ebook collection: Chapter 19
- Gomez-Mejia. (2002), Management. New York: McGraw-Hill, ebook collection: Chapter 9
- Hoch, S. (2001), Wharton on making decisions. Hoboken: John Wiley & Sons, Inc., ebook collection: Chapter 6
- Kreitner, R., Kinicki, A. (2004), Organizational Behavior (6th ed.), New York: McGraw-Hill, ebook collection: Chapter 14, 15
- McShane, S. L. (2005), Organizational behavior (3rd ed.), New York: McGraw-Hill, ebook collection: Chapter 4, 11
Table 1. Issue and Opportunity Identification
Table 2. Stakeholder Perspectives
Table 3. End State Goals