Outsourcing makes sense if the workers are treated fairly
Bernard Chan says subcontracting jobs is often the best practical solution
The recent strike by Hong Kong dock workers again highlighted the practice of outsourcing. Critics say this method of subcontracting the supply of particular types of workers to an employer leads to exploitation, or at least unfairness. Yet the practice is widespread; two organisations I am connected with do it. It seems to me that a lot depends on an organisation's motives.
Outsourcing made the modern Hong Kong economy. In the 1980s and 1990s, hundreds of thousands of factory jobs were transferred across the border, where labour and land were much cheaper. The rise of the Pearl River Delta as a manufacturing base led to the development of Hong Kong as a modern services hub.
Consumers in some Western countries criticised "sweatshop" working conditions in factories in some developing nations. That led to the threat of boycotts, which, in turn, led big brands such as Nike to require overseas suppliers to meet minimum standards. As we have seen with recent tragedies in Bangladesh textile factories, poor conditions still exist. Ultimately, it is about whether consumers in the developed world are willing to pay more - and the experience with goods like "fair trade" food shows many are.
Hong Kong's biggest single employer, the government, saw outsourcing as important to cost-control in the 2000s. An Efficiency Unit survey in 2010 showed that most government contracts went to the lowest bidder. This sounds like good news for the taxpayer. But by forcing contractors to squeeze costs, the government risked forcing pay down for some contract staff. A scandal about badly paid cleaners boosted calls for a minimum wage, which has since been introduced.
A company might outsource simply to cut costs. If it wants to profit from poor conditions, that may damage its reputation. Alternatively, it can publicly sign up to a code of practice or a campaign such as Unashamedly Ethical. If workers themselves feel conditions are intolerable, they can go on strike, and that will usually damage the company's profits as well as possibly its public image. A company can outsource work, but it cannot outsource its responsibilities.
Two organisations I work with outsource certain functions for a completely different reason: it simply makes management sense. One is my own company. As with a large number of office-based workplaces, we outsource the basic function of daily cleaning to a specialist company. The alternative would be arranging our own part-time cleaners to come in for a period every day. We would also have to find an extra person to help if one was off sick or on holiday. It's a lot easier to outsource.
However, this raises some possible concerns. The contract workers are in the office with the rest of us, and everyone treats them pretty much as colleagues. But are they treated the same in terms of pay and conditions? What if they are treated unfairly? Responsible employers must ask themselves this.
The other organisation I work with is a university which outsources its security and cleaning. A university does not have specialist expertise in security, and the contractor is supplying people who have been trained for the task.
Interestingly, some politically aware students speak up for the contract staff if they feel they aren't being treated on an equal basis with other employees on the campus. This is a reminder that the use of outsourcing can be sensitive, and that the university, as a socially responsible institution, has to be mindful of its responsibilities.
Outsourcing is just a business practice. Short-sighted or unscrupulous employers can use it to exploit employees at a distance. But any responsible, well-run company will use it to obtain flexible or specialised labour efficiently - not to duck its responsibilities to ensure fair pay and conditions for all.
Bernard Chan is a member of the Executive Council