Fundamentals of Management, 8th ed

business

process change

(reengineering)

The radical redesign

of all aspects of a

business to achieve

major gains in cost,

service, or time

204

Part 3: Organizing

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TOUGH TIMES, TOUGH CHOICES

To Offshore or Not to Offshore

From computer programmers in the Philippines and

molecular biologists in Russia to customer-service

agents in India, the practice of offshoring is bringing

workers from around the world into the workforces

of U.S. corporations in a broad range of industries.

When U.S. firms “offshore,” they’re hiring foreign

firms and foreign personnel to perform their business

functions. In so doing, they’re not only increasing the

diversity of their workforces but also altering the pro-

cesses by which they conduct organizational busi-

ness. At Penske Truck Leasing, for instance, drivers

submit their paper logs for data entry to a facility in

Mexico, which forwards them to Hyderabad, India,

where they’re analyzed, and the results are reported

to Penske management back in the United States.

How does a company function with far-flung opera-

tions? As in most other decisions, companies choose

operational partners according to the value-creation

capabilities that they bring to the overall process.

Ideally, of course, offshoring should benefit the

contractor as well as the contracting firm. Take, for

example, the case of Wisconsin-based PCMC, which

designs and makes paper packaging. PCMC had a

problem with its engineering function: Although it

had a large base of potential customers, it often lost

them because its engineering group was too small to

create new designs fast enough to keep pace with

customer needs. Nor could the company afford to

expand its engineering department. To solve the prob-

lem, PCMC entered into an offshoring contract with

an Indian company that agreed to provide a 160-

member staff to support PCMC’s engineering func-

tion. The result? Not only 160 new jobs in India but

more orders and more jobs in Wisconsin as well.

Obviously, offshoring arrangements don’t always

work out as well as the one established by PCMC

and its Indian partner. For one thing, language and

culture differences can make communication diffi-

cult, especially when it’s conducted by e-mail or

phone. When 1-800-FLOWERS tried to expand its

customer-service operation by outsourcing customer

calls to India, the results were disastrous. Why?

When customers call, florists have to do more than

merely process orders: They’re often called upon to

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Many businesses today have offshored various operations to foreign countries.

These offshoring initiatives often involve call centers, and many businesses have

found this approach to be very effective. But others, like 1-800-FLOWERS, have

experienced problems with offshoring and some have even moved operations

back to their home country.

(continued)