The company

My job is being outsourced, but I'm not whining about that today. Instead I'm going to whine about the bigger picture, and try to see the layoffs from the company's perspective. The people in charge aren't dummies, so let's figure out why they're doing what they're doing.

Obviously, outsourcing reduces the expense of payroll, and the cost of employer-provided benefits. Those are numbers easily quantified. There are other factors at play, though. 

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Imagine, if you will, an independent insurance company, with several hundred employees. It’s a small but successful business, known in the industry for treating customers, agents, and employees well. The company has rarely been sued by customers, never been sued successfully, and had no layoffs through its first 110 years. 

But now it’s the 21st century, and things have changed!  The company is being “transparent” — that’s their word, mentioned in every memo — about a three-year plan to transition as much work as possible from employees to contractors. My department and three others will be closed in January. Eight additional departments are “in the planning stages” for outsourcing.

The first layoffs were six months ago, when the investments department was closed. Now, think about that:

A life insurance company takes your money when you purchase your policy, owes you nothing until you die, and for all the years in between they have your money — and invest it. Investing is what keeps the business profitable, and the company has always had employees who researched such stuff and invested the company’s funds. Now those employees are gone. Their work was outsourced to Goldman-Sachs.

Goldman-Sachs is well-known as one of the world’s most evil entities, but even disregarding that, does it make sense for an independent insurance company to hire a giant corporation to control and decide its investments? 

Seems to me, Goldman Sachs will give the company the same investment advice they’d give to any other paying customer. Doesn’t that tend to eliminate any possibility of investing more wisely and more profitably than the competition?

My employer thinks it’s smart to eliminate all those wages, but they’ve also eliminated the “give a damn” factor. Folks in the investments department gave a damn about the company. Goldman Sachs doesn’t. And the essence of that is true for any department, for any job that’s outsourced.

Let's say you’re working for the company, in the claims department, or the legal department, or the mailroom — any job, anywhere in the building. If a little problem comes up, you'll try to solve it before it becomes a big problem. When there’s a new hire, you’ll take the time to answer their questions. When you see something that looks unusual, or seems wrong, you’ll ask about it, won’t you? These and many other little things you do, if you’re a decent employee, because you give a damn.

When the work is done by someone who isn’t an employee — by people working for the lowest-bidding subcontractor — that out-of-company worker isn't going to ask as many questions, isn't going to understand the work as well, and isn't going to care — or even know, probably — if he/she does something wrong.

There’s also what’s called “institutional knowledge.” That’s a fancy way to say, people know stuff when they’ve worked at a job for a while. For example, I know all the common mistakes to look for in the documents I handle, and many uncommon mistakes, and how to correct them. I know that despite looking identical, new policy applications from Indiana and Michigan need to be processed a little differently, due to state requirements. When the company's antique software occasionally explodes, I know what to do about it, without opening a ticket with the I.T. department. All this, times 1,000.

My co-workers know most of this stuff, too, but my boss doesn’t. These are ‘details’, and the boss never knows the details. When this department is gone, nobody will know such details. And the one guy in I.T. who understands those software glitches, and explained it to me? He'll be gone soon too, but the glitches won't.

Without the give-a-damn factor, and without the institutional knowledge, the company’s internal mechanisms will misfire more often. Little problems, unsolved, will become bigger, more expensive problems. Finding a solution will be more costly, and the people working on the problem won't be employees, so they won't really give a damn, and won't have the institutional knowledge that comes from working on a similar problem a few months earlier.

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For as long as the company has existed, customers and agents could always call and quickly talk with an employee, to make an address change, or have an error corrected, or file a claim, etc. The phones rang at half a dozen desks on the third floor of the company's main office, under a big sign that said, "Customer Care Center."

There were often internal memos bragging about the company's stellar customer satisfaction surveys, and several years ago, a successful ad campaign was filmed there, among the ringing phones.

Beginning early next year, all incoming calls will be routed through a voice mail system. If you select the correct options, you'll be able to hold for the next available operator, in Latvia.

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Philosophically, is it still an independent insurance company, when everything about running the business depends on outside workers?

Other than in the legal sense, is it really a company, or only a folder full of contracts with sweatshops overseas, and 'consultants' flown in to offer advice? 

Are there any employees who can’t be outsourced? Managers (who also give a damn and have institutional knowledge) will have no-one to manage, so they can be pink-slipped. Executives aren't guaranteed tenure, and several have already been given golden handshakes. Toward the end, the company might not even need all of its fourteen vice presidents.

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Perhaps it's worth mentioning that the company is very profitable. Last year, despite the pandemic, was the second most profitable year in the company's history. Each of the past five years has been among the company's five most profitable years, so the outsourcing isn't a response to financial peril.

What's driving the change is a new CEO, and the people he brought with him. Young bucks with "new ideas" have replaced the stale, old-fashioned thinking that kept the company profitable every year since 1929.

So what's the new management's motive? It's hard to say, because they're not "transparent" about that, but closing the Customer Care Center seems like an obvious clue, eh? The company no longer cares about customers.

Clearly, all this outsourcing won't make the business stronger. It won't make customers or agents happier. It won't be the basis for a great ad campaign, with a photographer walking through the empty phone banks on the third floor.

What it will do is make the company look better, on paper. That's the goal, I think — to make the business more attractive, as a profitable acquisition for some giant conglomerate.

The grand conclusion of a strategy built around layoffs is that in a few years — probably five, but certainly not ten — the building itself will be an unnecessary expense. No-one will be working there, after Goldman-Sachs or a private equity firm buys the company's collection of outsourcing contracts, and shutters the business.

8/12/2021

itsdougholland.com 

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