Bad BPO’s put Outsource industry and the country at risk

January 25, 2009 at 1:06 pm Leave a comment

In the past week or so there has seen a increase in the number of reports on the back office or BPO side of the outsource sector shifting towards the country. There is good news here – and –  what goes always with that, a need for caution and precaution to ensure sustained growth.

The news of increased demand in the BPO sector, has seen a surge in investments in both the local and globally listed firms on stock markets here and overseas.

There is much a lot of interest in back office providers in the BPO sector in the country. It is a good sign overall the move towards more back office functions such as secretarial accounting, and, legal service shows a increased maturity in the growth for a broader and diversified market.

Yet, where the vast majority of firms providing excellent service are the norm – deadbeats in the industry warrant attention – and are getting the attention of international law enforcement and corporate regulators.

The DOLE, DTI, and Justice Departments, is closely looking into the practises of companies engaged in the sector. Why? to prevent ‘bad egg’s’ who might put the entire industry at risk because of thier own ‘bad business practises’ locally.

In a directive President Arroyo issued last year she wants firms to fully comply with and follow all ethical standards for global business. The directive isued is in part to be closely monitored by regulators to ensure no firm endangers a vital industry to nations economic security.

While indeed government needs to attract investment and see growth in job creation — it also intends to closely monitor that firms doing services are in full local compliance with regulations and global ethical business practises. So Deadbeats… beware and be aware.

The very reason many of the firms are relocating from India and elsewhere to the Philippines is a rash of what can be called ‘bad business practises’ of – some not all – firms there towards their own.

Driven by an effort perhaps to cut costs and get contracts several outsource providers audited by US and UK regulators monitoring the KPO-BPO sector were found to be providing less than world class standards in ethical practises and Labour standards set by global business and Governments around the world.

To U.S. and U.K. regulators and law enforcement it does not matter to if US and UK firms are merely doing what the acceptable in practise in the country where the services are outsourced to and provided.

But that those actions are in compliance with laws where the client companies are based. Since many of the firms that outsource are publically held or traded. A number of which have been bailed-out with tax-payer funds thus making them even more closely scrutinized.

The Obama administration from day one has made it clear that they will hold business to the highest ethical standards after the wake of Wall Streets problems. That, “Public companies will face more scrutiny because tax payer funds have been used to bail them out. More so make sure that those firms follow tooth and nail the letter of the law.” to paraphrase the new U.S. Presidents website.

In some cases per the U.S. and U.K. law enforcement and corporate complaince regulators – the Philippine agencies of Labour, the NBI and DOJ as well as court records and labour department cases show there are a number of firms in the Call Center and BPO sector. “Whose own back office functions fail to meet global standards.”

No, it is not just ISO compliance- but, “basic functions like paying for services of workers and contract service providers.” says a report compiled by one U.S. agency.

While both international and local agenices say it a manageable problem – the Government here intends to make sure that any local firm does not create conditions that have led firms in other countries to relocate elsewhere – no one wants this happening in this country.

As Mr T. used to say on ‘the A-team’ TV series – “I pity the fools’ who screw up and create firms that cause problems for the country.

How? by not running them properly or causing national embarrassment by incompetence in corporate governance. In other words ‘Don’t screw up the economy by not paying your people what they deserve… is the very clear message from Government.” to firms – make sure workers rights are protected is the Administraitions order.

President Arroyo for example citing HSBC and Shell Oil as prime examples of UK firms that have shifted a major portion of back office functions to the Philippines. They have some of the highest standards and repeated awards for execlence among local employers. They know that taking care of business mean taking care of those who work for them.

But also, U.K. business compliance regulators and investigators and law and tax enforcement units are working closely to ensure all those firms seeking to do business here with U.K. companies meet strict standards.

In some case any hint of impropriety would make the British very nervous. Even a mere bounced check or failed payment or delay of salaries or any firm and that which results to legal action which has had some firms in India dropped off approved UK lists there.

Hence – firms should be wary of unsettled accounts and labour issues or criminal complaints by employee or contractors versus thier corporate officers. Sexual harrasment cases or non-payment of overtime wages, or unsavory practises such as boucned checks to suppliers if done repeatedly might result in blacklisting. Local leaders know this and are watching for errant firms and promise swift prosecution versus offenders.

A move that has been assured by the President herself to U.K. leaders that Philippine firms treat their workers, suppliers and contractors well and that Philippine laws are clear and do not tolerate employee or contractor abuse. The concern over ‘contractual or on demand employee’s is increasingly a concern globally as firms using ‘agencies’ to fill seats instead of regular employee’s will find those considered as regular workers in overseas labour codes.

Among the top concerns of foreing regulators are personal data security issues – that have in some case in India, firms that have fallen short “in ethical terms” often were the same firms,  leaking or selling data.

A UK study has shown “Any unethical business practise on the part of an outsource firm – particularly back-office ones- might show future lack of concern for proper personal data security compliance requirements – hence – when a outsource firm has ‘legal issues,’ clients should shift elsewhere.”

More so the studies have shown over time, concerns of potential local legal problems in light of  a already risky global economic outlook the last thing US, UK, and EU firms need is services in their firms not being properly carried out by any outsource provider who in turn could not even perform those functions for themselves.

Local Business cannot risk these activities taking place here – DTI, the Labour Dept., Congress, as well as the Palace and Industry itself ensure that local firms expected to follow international laws and fair business practises are indeed fully following local requirements.

Beyond paying above minimum wages or providing a needed influx of jobs and investments that stabilty of such firms and legal as well as ethical practises should be fully scrutinized.

One should examine closely to see if the companies who perform services overseas are indeed capable of doing the right things locally and following government and business ethical corporate polices towards their own local employee’s, service providers, and, suppliers.

“One bad Mango”, as the saying goes “can spoil the whole basket”, hence while in the call center sector the issue of service and support can often be rectified by changing a service representatives or firms that provide the service to one more competent or compliant.

In the BPO-Back office and business process  sector it does boil down to does a company follow the proper procedure and ethical rules themselves?

Is a firm it a fair player – it does not matter if they are listed on say the London or NYSE big or small boards – that’s not hard to do – But not only also the press and praise release – for the those companies saying they care about the people they employ but rather they in practise are doing just that But do they provides proper pay and compensation for the people who work for them or contract services to them?

Are local employees and suppliers and the people running these firms fully checked out? Criminal record histories not only here but abroad as well are those looked into?

Credit histories, school records, Or the term ‘deadbeat checks’ -in other words – Perhaps there should be a bench mark for not only international clients that country needs but also a stamp of approval by DOLE, the DOJ, and, local government to see if indeed the firms meet requirements or are hiding ‘problems’.

As Philippine government and business leaders suggest the SEC should also look into if corporate figures not only are qualified but do they have the capacity to provide those services.

Public office being a public trust – a public company one owned by shareholders and those officers running them must fully be scrutinized for the safety and assurance of investors and the country alike.

Look at Wall Street – where crashing firms and bad investments leading to major global markets near collapse, were at time run ineffectively or by officers whose own corporate lifestyles – think Enron and the Auto Industry – led in part to the demise of shareholder profits – and stock values – because excesive greed at times by corporate leaders.

NY Jails will soon be full of crooks in suites as Federal regulators look into weak or improper trade and business practises. In some cases these firms are also outsourcing to at least attempt to avoid corporate reporting scrutiny.

But, the federal regulators have shifted abroad as well.

Take for example the US Government, because of the high presence of outsourced accounting and back office functions. It’s India and even Philippine law enforcement sections attache’s have increased in step with Corporate America’s outflow of jobs.

The regulators themselves have also shifted to foreign shores. Image the impact on the country if those financial watchdogs find the that in some cases the firms providing the ‘outsource functions’ were lacking in things like ethical standards, or labour violations, or discrimination polices in hiring?

The impact could have a devastating effect on the economic future of the country. I remember at a US embassy cocktail a few months back meeting a whole new section to forward deployed regulators of a US Federal law enforcement agency here.

Whose entire unit was to ensure US firms compliance with US laws while outsourcing or engaged in trade and services overseas. The ‘Officers’ all lamented one fact – why does the government here allow discrimination in hiring – in particular age and sex.

All clearly written in the labour code they point to age and sex discrimination in advertising of available jobs.

The mere publication of which is evidence of corporate policy of  discrimination. US firms that do this – while even overseas are still liable to Federal labor laws and those of the countries they are in they point out – if the firm is owned or controlled in part or whole by US citizens even located overseas they have to follow US law.

Going back to local back office providers, While many firms show high numbers of seats and service areas, even whole floors or buildings even.
But in the bottom line is performance.

It would be a potentaily national economic securty issue to the country and its firms engaged in the outsource business industry performing badly or worse criminally.

In these tight economic times globally the President, the NEDA,  DTI, the Media and Makati Business club, labour unions and the foreign chambers of commerce all one thing in common they want business to thrive- to survive – and get over the hump in this global economic slump.

Hence when local providers cant even take care of thier own business practises – in spite of ISO certification their own business actions show at time that some firms bounce checks, fail to pay overtime, lack the proper faciltieis to employee’s – while presenting a ‘perfect’ ISO certification record to the world – one must also ensure that indeed the companies are deserving of those certifications.

Imagine what would happen if in these times of global crisis a company fails to perform and causes the collapse of firm say in the UK and USA – its record here must be scrutinzed, verified, and re-checked to ensure that government can be certain that those offering ‘back office’ functions are indeed functioning well themselves here.

What if the companies are found to have string of fraud or estaffa cases? Due dillegence and disclosure must be followed here – are the corporate officers indeed following ethical rules of global business or are they just playing lip service to the industry that is currently the fastest growing.
I think the trade and labor attaches of the various embassies should also work to protect the companies who indeed outsource here from abroad as any bad performance on this end could impact already tight economies and industries back in thier home countries.

As ISO certification often only shows that system is in place – it does not show when or if that system is actually used to its fullest performance.
In recent days while working on a corporate project – I realized – some form of verification must be designed to ensure that services offered and indeed these all important jobs, billings, salaries, collections, sales, are truly being performed with full capacity. As well ensuring compliance with accepted norms of business practice. Oftentimes the ‘bahala na’ or ‘let it be-let it happen’ attitude were followed  creeps in and things are overlooked.
If this were to allowed – not only local companies would be affected but indeed the already hurt and sick global economy could suffer more pains by overzealous sellers of services that a simple background check into some firms business practises could show they themselves do not perform in thier own corporate practises.

Oftentimes many companies show high ISO certification marks – only to fail miserably locally.  Tens of thousands of jobs depend on a industry that is growing and daily seen in reports a potentail economic boom for the country.

But perhaps people like my province mate Cong. Antonio Alverez and my former Co-Anchor Juan Migeul Zubiri in the senate as well as fellow FIl-Am Sen. Richard Gordon should as chairs or members of committees on trade and industry as well a as Labour and Employment and Government.

Perhaps they too should conduct hearings and seek some form of regulatory action to make sure that firms offering back-office services and for example litigation services and legal procedure are indeed fully competent.

Also that labour conditions are met and if needed regulatory inspections performed to while not hem in industry’s growth ensue that the country’s various out service providers are competent in the task are also indeed good corporate citizens of Philippine economy.

There is a need to clearly ensure that firms who seek to provide services on global scale to a world market looking for the competitive edge in providing services that hiring local employee’s are themselves good payers of services to local suppliers, that they follow labour laws and most important that the SEC check to ensure no major legal problems exist for these firms in the form of violations and cases filed or complaints filed by local employee’s who after all work beyond the midnight oil are indeed properly compensated and obligations made good.


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