One third of UK employers feel under pressure

A new survey launched today finds the drive to cut employment costs and tackle skills shortages in the UK has led to almost a third (30%) of organisations feeling under pressure to offshore business activity. As a result of this pressure the Chartered Institute of Personnel and Development (CIPD) estimates that 30,000 jobs have been offshored each year since the turn of the century. Although those losses have been partially offset by parallel job gains and have been more than compensated for by the underlying growth in jobs over the same period. Any plans to offshore must involve human resource professionals if they are to minimise the negative effects often associated with offshoring, such as damage to employee morale, UK job losses and difficulties as a result of managing remotely, according to people management experts the CIPD.

Whilst 17% of respondents that have had experiences of offshoring report the benefits are less than they anticipated, more than 60% are very satisfied or fairly satisfied. However, the survey did highlight disadvantages with over half (55%) of employers believing it can cause low staff morale, 48% believing managerial control is more difficult, 44% citing job losses in UK as a problem and 33% stating language barriers as an obstacle.

Ben Willmott, CIPD Employee Relations Adviser and author of the report, says,

ìOrganisations that decide to go down the offshoring road focusing purely on cutting costs, without taking account of the people management challenges and the potential pitfalls are likely to face considerable problems.

ìToo many organisations (42%) donít involve HR when strategic decisions about offshoring are being made with the result that some of the real people management challenges that exist may not be taken into account in the excitement over the potential cost savings.

ìThe survey shows there is more scope for the use of HR expertise in early consultation with union/employee representatives as well as in considering the opportunities for employee redeployment. At the planning stage HR should also already be contributing to the internal communication strategy and identifying training needs.î

The survey finds organisations make 180 UK job cuts on average as a result of offshoring. In spite of these job losses offshoring business activities also leads to the creation of new jobs, with organisations generating an average of 58 jobs in the UK as a result of offshoring.

Considering the survey results in broader context, Dr John Philpott, CIPD Chief Economist, says:

îProjecting these findings onto the whole economy suggests that around 30,000 UK jobs have been offshored each year since the start of the decade. This will be of concern to some, not least those workers directly affected. But as the survey finds these job losses are partially offset by job gains, and they should also be viewed in the context of the 250,000 net new jobs created in the economy during the same period.

îOn balance, if handled well offshoring is good news for UK consumers and will ultimately result in more jobs and greater prosperity both at home and abroad. The key requirement is to ensure that those workers that are adversely affected are given every help to find new jobs.î

The survey findings show a clear discrepancy between the role respondents believe human resource professionals should take in the offshoring process and the role they play in practice particularly regarding communication and training. Around four-fifths of organisations believe HR should contribute to internal communications and play a central role in consulting with unions and employee representatives at the planning phase but about two-thirds actually give their HR professionals this responsibility.

Other areas where there is greater potential for HR involvement during the planning of offshoring projects include manpower planning, designing and redesigning jobs and identifying training needs.

ìEmployers need to involve HR professionals in the offshoring process at all stages if they are to achieve the business objectives they had originally hoped for.

They have the skills and knowledge to help manage some of the people risks involved, and to make sure such initiatives are successful in terms of cutting costs while maintaining positive employee relations. It is important to get those things right or the quality of services or products and the overall programme of the business may suffer,î says Willmott.

Other key findings:

Over a fifth of organisations have offshored one or more business activity in the last five years or are currently considering doing so.

The average number of jobs lost in the UK as a result of offshoring initiatives is 180, while the average number offshored by respondent organisations is 370.

Of those organisations that have offshored or are considering doing so, the models they are going to use include: 43% outsourcing one or more business activities to a third party overseas; 31% have moved or are considering moving business activity overseas as a direct employer; a quarter (26%) say their organisation has moved or is considering moving one or more business activities overseas as an indirect employer e.g. part of a parent group that is providing the business activity overseas.

Manufacturing and production is the business activity most likely to be offshored (34%). This is followed by IT support (24%), IT development (22%) and call centres/customer services (22%).

Almost a quarter (22%) of respondents report that administrative jobs are most likely to be needed when offshoring customer services activities. This was followed by supervisory jobs (16%), technical jobs (13%), middle management (8%) and senior management (2%).

Public sector employers are most likely to consider offshoring as a result of a joint venture overseas and to increase focus on core business. Cost reduction is not a main driver for public sector organisations.

India is the most popular offshoring destination (53%), followed by China (27%) and Poland (18%).