Thursday, April 11, 2013

Why is outsourcing of banking services just not right?

Companies from Victoria to Halifax have been outsourcing services to Asia and South Asia for years. Why the sudden furor against RBC, the banking giant? Canadians have passively, and sometimes approvingly accepted promises of lower costs from corporations whether they were large retailers, banks, or telecommunications businesses.

News regarding outsourcing by RBC surfaces, requiring Canada’s largest financial institution to issue the very ‘corporate’ and sterile response, “External suppliers with the right skills allow us to introduce new efficiencies, continually improve our service at reduced cost and reinvest in initiatives that enhance the client experience.” The reaction? Something akin to mutiny instinctively stirred across the Canadian landscape. How could the largest bank, which last year posted profits of $7.5 billion on revenues of $29.8 billion, dare to outsource services? Any services? There is not a company on this continent which in its wildest fantasies would dare forecast such ebulliently hyperbolized rate of profitability. So why does it seem so wrong? Why such response to the loss of 45 jobs? 

Canada long ago transformed away from a manufacturing economy, and toward a knowledge and service based economy with the service sector now representing three quarters of the nation’s GDP. Outsourcing by companies in the services sector has a directly degraded Canada’s economic health and will severely impair the country’s future well-being. This damage will be more severe than the impact from transplanted Canadian ‘manufacturing’ to cheap labour regions of the world. The country’s ‘value added’ manufacturing represents less and less of the economy, currently accounting for Ten per cent (10%) of all jobs now when in 2000 is was 15 per cent (15%). Still, whether outsourcing services or offshoring jobs, the harm has been relentless and severe. 

Outsourcing of any sort harms the long term economic health of the country which succumbs to its allure, and it particularly harms the development and education of its own labour force. When one considers this in the context of a country which has, for two decades, been saddled with an out of control and often fraudulent immigration system, the consequence is devastating to the Canadian taxpayer, and to all those seeking satisfactory employment. This situation is particularly worrisome to the many Canadians saddled with overwhelming monthly interest payments, only two weeks of financial cushion, subdued by fear of being just steps from insolvency. 

Unfortunately there are some functions related to our very personal affairs which should never see foreign shores. Banking is one such commission which we entrust to institutions we believe should maintain principles and ethics in direct symmetry with our own. We in effect trust the Boards of Directors and the senior executives to do the right thing on our behalf with respect to our private property, our security and our privacy. Depositors are justifiably upset and their concerns of potential for security breaches are well-founded. Private information located on servers which are being accessed by employees on the other side of the world opens up the potential for mistakes, and worse, it increases the odds of serious breaches in security. 

The CEO of a bank cannot pretend to be incapable of influence on the contractor’s management, its employees and its methodologies. An outsourcing company is in effect the ‘employee’ of the outsourcer. A CEO also cannot disassociate from those foreign employees as if they are ‘out-of-sight-out-of-mind’, and they should not be dismissed for PR purposes with “we cannot be blamed.” Such disavowal is disingenuous and unprincipled. 

The outsourcing bank’s CEO should not only take full responsibility for any actions taken by any part of its ‘outsourcing service,’ but should also be and should feel responsible for such actions. A competent and diligent CEO would ‘know’ and would be intimately familiar of such service providers, just as he would be expected to be intimately acquainted with any department within his company’s structure. 

The current dustup over the banks outsourcing to iGate (the services provider from Bangalore), revolves around IT functions. A prominent excuse served up with some regularity is that there is a dearth of IT talent in Canada. That refrain, used by proponents of loose immigration laws and lax visa rules, as well as firms cutting costs by outsourcing, is old and without merit. 

Ask the graduates of Waterloo Engineering, or of BCIT in Vancouver, of the past 5 years how difficult it has been for them to find gainful employment in their chosen fields with incomes commensurate with their deliverables. Of course if you believe Canada’s mainstream media, you’d be convinced that high tech jobs existed in abundance and were readily available for the picking. You would believe that companies absolutely have to go to India, China, Russia etc., to find IT talent. What you don’t get much of is the ‘intent’ behind the reduction of ‘labour’ costs of Canadian IT personnel, or the lack of willingness to pay talented graduates their worth and commensurate compensation rewarding their risk of conquering absurdly expensive scholarships. 

Let’s admit we do not wish to pay our graduates what they’re worth, instead of pretending there aren’t enough of them, or that they don’t have the qualifications. 

Ask the baristas in any Starbucks how the job hunt is going with their masters degrees. Ask yourself why unemployment among Canadians of ages between 15 and 24 is at over 15%. Actually, ask the young adults in front of the counter surfing the net at your nearest Starbucks, how the job hunt is going. To those who have found jobs, ask if those are full-time jobs making use of their skills, providing all usual benefits. The underemployed college and university graduates are in fact taking up any ‘unskilled’ jobs which might be available, thereby further shoving the ‘unskilled’ individuals further down into the ‘never-employed’ ranks. 

The RBC and other Canadian companies are not contracting iGate because they cannot find skilled employees. As we know, the iGate employees are being trained BY existing employees who will be punted from their jobs. Does that suggest to you that outsourcing is a result of talent scarcity? Not much. A reality facing CEOs, which rarely if ever levitates through the MSM and into our consciousness is the fact that Canada has for some years felt constricting real economic growth and uncertainty. This particular reality has pushed many business leaders to tighten all expenses (use outsourcing where ever possible), and delay capital expenditures. Results have been positive for the bottom line, but not for healthy income increases of the rank and file. 

These moves to improve that ‘bottom line’ are now agitating the ire of depositors whose responses and actions will be felt across the country, and may have long term repercussions on hiring practices of large companies.

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Friday, April 5, 2013

Insight From Jethro Tull’s Ian Anderson

During an interview with The Telegraph three years ago, the musical wizard Ian Anderson, leader of trailblazing rock ensemble Jethro Tull, made an observation which voters might do well to take to-hand for inspiration as they next step into polls determined to anoint a new leader with the gift of substantial power over their lives.

The somewhat insightful question asked of Anderson by Mark Anstead was, “Now that you are better off, are you happier?” 

He answered, “Yes, of course. The contrary position is something I can’t imagine. But if I hadn’t been a musician I probably would have signed up as a police cadet and I don’t think I would have been any less happy doing that. I would just have been working without the same sense of financial responsibility towards others.” 

The answer tells much of the common sense with which the music legend has lived his life. However, for all those of us desperately job hunting and for all those now rethinking what nature of individual is essential to lead a Nation toiling through economic hardship, the answer holds more pertinence. Anderson has always personally managed all of his and his band’s affairs including its contracts, bookings, and accounting, with his wife of 37 years, Shona. He is a superbly talented musician who resisted the lower-hanging temptations to which celebrity rockers so readily succumb, and at the peak of his more entrepreneurial ventures, Anderson managed over four hundred people. 

Ian Anderson’s observation of the “sense of financial responsibility for others” reveals an introspection which can only be achieved through ‘doing’ it – it being the running of a successful business, large or small, and being singularly responsible for incomes of employees. 

Not everyone is cut out to be an entrepreneur nor would the world function if we were, however, when your responsibility spreads beyond your own familial charge and you become accountable for the sustenance of other individuals, something visceral occurs which can be characterized as a teachable moment. When you have to ensure that there is cash enough to cut that check, you know. You know the stress felt and you know the effort infused in all facets of guiding a business to prosperity, any prosperity. You know everything that comes with not only signing those checks, but with having been responsible for assuring that the checks you sign don’t bounce. Society cannot teach you that in a classroom at MIT or at Harvard. You can only appropriate that knowledge through experience. 

In the next private and intimate voting poll, as you bestow your name in support of a Presidential nominee, satisfy yourself that the would-be leader has felt and learned that very powerful piece of knowledge. Confer your vote on one who has seized that “sense of financial responsibility towards others.”

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Tuesday, April 2, 2013

U.S. Leadership Void Squanders Influence - China Steps In

During this period in American history when the economy, business, trade and currency have taken pivotal positions in the Nation’s psyche, the country is led by what may well be the most economically uninterested Administration it has ever elected.

Loudly professing to fight for the vast middle class, the Obama Administration’s actions are taking the Nation galloping toward the destruction of middle-class incomes, toward upwardly spiralling middle-class taxes, toward bloated government, and toward overwhelming debt. 

As the expansive middle-class heads off to work at its one or two jobs each day, it has the right to expect its leadership to do the job it gets handsomely rewarded to do. That job includes paying attention to all matters which affect the long term health and stability of the country. 

We were not surprised to discover ineptitude such as the State Department’s decisions in Libya or in Egypt, nor were we astonished at cover-ups attempting to hide the incompetence. However, of more import to the middle-class is the blundering neglect and disregard this Administration has shown to economic matters which will directly impact the long term health of America – both its economic condition and its military strength. 

After four years of the current Administration’s platitudes, but prevailing economic indolence, we are presented with abundance of tell-tale ‘canaries in the coal mine’ evidencing a methane cloud sweeping across the whole country trying hard to drag it into a state of international subordination. 

The EU leadership’s attitude toward Cyprus bank depositors forecasts the future imposition of punishment on Spaniards, Italians, and other profligate governments. Any word from the White House? This act by Brussels is criminal expropriation of personal property, telling of an imperious inclination. But who cares? Surely the EU’s action cannot be a ‘canary in the coal mine’ for the American middle-class. It’s just those funny Europeans who speak strange languages, and anyway, we’re not like Europe and surely our leadership would not want to emulate theirs. So let’s look at ‘telling’ events elsewhere for more suitable ‘canaries’. 

Let’s skip to the other side of the world where Australia’s Prime Minister Julia Gillard, head of the labor party, is heading to China to slide Australia further into the Chinese sphere of influence through the signing of an agreement to allow for the direct conversion of Australian dollars into Chinese Yuan. Reducing the need for Australian businesses to convert U.S. Dollars (the greenback is the predominant currency middleman), in trade with China reduces some costs incurred by Australian companies. More importantly, this arrangement provides China a more direct and less expensive access to the raw materials it requires to fuel its own growth and increase its wealth. What of Chinese exporters to Australia? China is promising better prices and better payment terms under this new agreement. How perfect is that seduction? This Australian maneuver could be dismissed as a minor ‘canary,’ representing a trivial event relative to the global daily trade turnover of over $US3 trillion. Such an event is nevertheless an economic and political statement, highlighting the progress in the long term internationalization of the yuan. China is buying up all the mining companies and raw source materials it can in Australia, as it is doing elsewhere. It has done a successful job of hiding the reality that the communist party, which controls China, also controls most entities who ‘acquire’ foreign assets, and it influences any which it does not fully control. Down the road, that centrally manipulated ideological mindset will have massive control over foreign economies. 

Brazil is moving in the same direction with a $30 billion currency swap with China. Such arrangements are expected with other Chinese trading partners including the United Kingdom and Japan. This new and consequential trend is about receding the greenback’s and America’s prominence. 

In Canada, the disdain and the disrespect which the Obama Administration has shown for its leader, Prime Minister Stephen Harper, and for its economy, has pushed that country to bend over backwards for China. When the head of CSIS (Canada’s equivalent to the CIA), mentioned that the Chinese government had infiltrated the Federal and Provincial governments at the highest levels, the country’s predominantly liberal media admonished him and shut him down. How dare he talk against a country so busily buying up Canada’s natural resources. How dare he be so politically incorrect? The Canadian MSM actually placed the label ‘racist’ on him. As for Stephen Harper? Since Obama is not only uninterested, but recalcitrant, Harper is determined to forge a trading relationship with China to the point where everything is ‘for sale,’ including the out-of-control indebtedness of Canadians who now on average owe more than the average American. A whole generation of indentured citizens seems apathetic to its plight. China finances construction of hundreds of thousands of pigeon-hole condos, selling them to Canadians who cannot afford them. How is that for a perfect storm? A currency agreement with China such as Australia is entering into, can only be just over the horizon for Canada, further erecting the yuan’s position and sidelining the U.S. dollar. 

As any country’s trade with China increases relative to that country’s other trading partners, China’s ability to dictate trading ‘conditions’ increases. In Europe, the general weakening of the Euro trading block opens the door to sidelining the greenback. China can hardly be accused of being subtle in its efforts toward economic dominance. Here is a statement from a Professor Yu, who was a member of the monetary policy committee of the People’s Bank of China and an economic adviser to the government ”It is a simple case of invoicing and settlement currency, it is not about making the yuan a reserve currency.’’ Of course. 

Australia, Canada, Europe, South Korea, Japan, Indonesia, and, . . . and, . . . and, all depend on America for security. Individuals in much of the world go about their day, conscious that America has for as long as they’ve been alive, been a positive influence on their safety and on their stability, and most importantly on their freedom. The capacity to provide that stability has been financed by the strength of America’s economic engine, the health of its currency and confidence in its ability to lead. Flaccidly standing-by as ‘friendly’ economies become smothered and influenced by a communist government does not augur well for our well-being and our way of life. 

History dictates that maintaining a strong position on the global stage is essential for self-preservation and is imperative for the preservation of freedom and core values. It requires interested, visionary, and inspiring leadership. True leadership cannot be concocted through alchemy, or fashioned on a Hollywood back-lot, or discharged through a teleprompter. It is innate. Before more canaries prognosticate degradation of the Nation’s international stature, America’s taxpayers should make themselves heard, and demand pro-active leadership in Washington.

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