04.12.2017 | Posted by Erik

A World Without Employees: What Does It Mean for You and Your Business?

“The End of Employees” was the title of an article that appeared in the Wall Street Journal in February 2017. The outsourcing of employees has been a topic of discussion since the 1990’s when companies began offshoring production processes to countries that provided cheap labor. Following that, companies started outsourcing call center work to countries like India and the Philippines.

More recently, American companies have found ways to outsource employees in various departments that in the past were handled in-house. Of course, the reason for this movement is primarily financial, through significant cost savings, but also the elimination of the many complex issues dealing with employees in general.

Supporting this process is the improved ability for C-Suite executives to monitor outsourced processes through greatly improved technology that allows for detailed monitoring and reporting that heretofore was hard to calculate. Some of these firms utilize outside contractors, some use firms that have businesses that specialize in certain tasks, and others use staffing companies. But in the end, the result is the same…the elimination of the difficulty in managing employees and the resulting improvement in the bottom line.

Why Companies Outsource

When outsourcing began in earnest in the 90’s, most of what was outsourced was production, apparel, furniture, electronics, etc., since the cost factors with off-shore production were too economical to ignore. There were, and still are, some negatives attached to this off-shoring; longer timeframes for manufacturing to account for shipping and customs, increased logistics costs, and the need for high-level employees and owners to make numerous visits overseas to monitor production at manufacturing facilities.

There has been a relatively small resurgence in companies bringing back some manufacturing to the US to take advantage of faster turnaround times and have local control.  Some of this is due to automation which requires less human labor and many of these companies still outsource some of the processes to other US firms. As long as there is cheap labor, much of the manufacturing processes will continue to be off-shored, but now we are seeing a new trend in outsourcing, what the WSJ calls ‘The End of Employees’.

As businesses evolve, new ways to find cost savings without sacrificing quality are examined.

“Never before have American companies tried so hard to employ so few people”, says the WSJ.  “The outsourcing wave that moved apparel-making jobs to China and call-center operations to India is just as likely to happen inside companies across the US in almost every industry”.

The difference this time is most of these outsourced jobs are staying in the US, just no longer directly managed by the companies that want to reduce their employee footprint and the challenges they can bring.

When you consider the myriad issues involved with a large staff; hiring process, training, employee evaluations, absenteeism, poor performance, increasing benefits costs, annual pay increases, layoffs, firing; all signs point to this trend growing in the future. C-Suite executives are realizing that the management of employees is a high-cost, high-maintenance endeavor and are looking for ways to eliminate internal office positions when they feel the potential gains are justified.

Outsourcing Across Industries

Outsourcing is now occurring regularly in many fields; accounting, human resource, IT, accounts receivable, accounts payable, marketing, advertising, and logistics. What were once seen as ideal positions in large companies are now recognized as ones that can be handled by other companies. Easy access to technology and focusing on their trade allows companies to manage their processes more efficiently, while easily providing transparent real-time reporting back to C-Suite executives.

“Few companies, workplace consultants or economists expect this outsourcing trend to reverse.  Moving non-core jobs out of a company allows them to devote more time and energy to the things it does best”,  says the WSJ.

Outsourcing firms often have economies of scale and concentrate on a limited number of job types, sometimes just one, like accounts receivable management or HR.  Plus, outsourcers, to ensure competitiveness and low costs, develop sophisticated software to provide efficiencies that most businesses won’t or can’t spend time or resources on.

The Future of Outsourcing

As more companies, large and small embrace this shift, new companies will spring up to fill the need.  These firms will be more specialized and they will become experts in their field.  They create their own economic benefits in the hiring and training of specialists to do the work while using dedicated software to keep their own costs down. This allows them to streamline processes and provide on-demand reports that prove their worth to their clients.  These companies could be as small as a single person working in the “gig” economy or can be larger in scale but all have the same goal; be the experts in the field and provide a superior service to each client.

Companies that don’t recognize or conform to this change in thinking will be at a disadvantage, compared to the streamlined operations of their competitors, and could find themselves falling behind by not driving down to the only issue that is essential to their success, what they sell. Think of the improved resource time in a day if owners and managers are concentrating on how to develop, build and sell their product, without the time-consuming side issues of managing individual employees.

Technological advances and computers are pushing businesses forward at warp speed. The best C-Suite executives recognize that they must be forward thinking and be the best they can be at their core business. This does not include managing a host of internal jobs that in the new world can be outsourced to companies or individuals with more expertise in those areas, at a lower cost.

Are we headed towards a world without employees?  What would your day look like without the added stress of non-essential tasks?  Is this future possible and is it where we should be?  Time will tell.

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