‘Outsourcing helps companies save cost’
Afam Udeagwu is the Managing Director, XL Outsourcing Limited, which provides various services to corporate organisations including human resource (HR) management, salaries and pension, and a host of others, It also exports its services to the United States, Ghana, Sierra Leone, and Liberia. In this interview with Clara Nwachukwu, he insists that outsourcing is the surest way for companies to cut operations, just as he admits to various challenges facing the industry. Excerpts:
XL Outsourcing has been around since 2004, what are the things it has brought on board in terms of value addition to the outsourcing industry?
Let me start by introducing the company properly. Excel Outsourcing is an indigenous company registered by the CAC, and licensed by the Federal Ministry of Labour and Employment, to provide outsourcing services. We are carrying out operations in the whole 36 states of the federation including Abuja. We also have operations in Ghana, Sierra Leon, Liberia as well as the United States of America, and over time we have been able to build a reputable company. In XL Outsourcing, we see ourselves as a critical link in the development of skilled man power, and we are proud to say that we have succeeded in using our platform to provide thousands of jobs to young Africans. We have been able to build quality, we have been able to build competence, we have been able to create jobs for people, and we have been able to add value to the economy at large. And that’s why recently; we were awarded the African Most Trusted Company, in all sourcing services by the Worlds Quality Alliance, in collaboration with the African Quality Institute.
Despite these successes, XL Outsourcing still has its challenges, what are some of those challenges, and what do you think can be done to overcome them?
One of the challenges that XL Outsourcing is facing today in Nigeria, is some unprofessional misconduct of some service providers. What do I mean by that? You employ a company to provide a particular service, and the company is meant to use a particular procedure; but the company collects the money, and turns back.
The second is inadequate funding by service users. You see companies engaging firms, but they don’t want to pay for these services. They want us to help them create value, but they don’t want to pay for the services, and because a lot of people are looking for jobs, they would take all these businesses, and cut corners along the line to break in.
The third is what I will call insufficient regulation. Before you practice Outsourcing in Nigeria, you are supposed to have met certain criteria, and one of it is that you must have been licensed by the Federal Ministry of Labour and Employment. So you should be able to have the right property to manage outsourcing through people who have built competences over the years. If you are doing HR Outsourcing, you should be able to have chattered personnel managers because that is handled by Chattered Institute of Personnel Management (CIPM). You should be able to have out sourcing experts, and of course there is a society called, Association of Outsourcing Professionals of Nigeria (AOPN). In XL Outsourcing, we have been able to pass through these hurdles, and we have been able to build competences, and we have the right and proper people.
The fourth challenge is what I will call abuse of outsourcing in the sense that certain companies see Outsourcing as a change of pay managers. Yes, everybody is doing outsourcing, and they will call one company and give them the business, but the proper business model of outsourcing is what they don’t want to remember and implement. They just want to use a third party to handle pay, and that’s all. Outsourcing by simple definition, which I love so much was the one given by Akinbode and his team in the 2013 International Journal for Business Basics and Applied Sciences, October 2013 edition. It said, that whenever there is a transfer of work, a transfer of responsibility, or a transfer of decision-making right to an external subject matter entity, that is when outsourcing matter has taken place. So, most companies do not understand this business model, and they want to proceed without thinking through about what they are trying to gain. So these are some of the challenges that we are having because some companies would not understand what is going on, and what they actually want to do.
You talked about easy entry into the industry, what role do you think government policy can play in this?
In the area of proper regulation, by putting in place regulations to check practitioners, to ensure that qualified people are playing properly in the industry, and also ensuring that these regulations are being monitored. There is an association called, Human Capital Probe Association of Nigeria, where we hold corporate membership, and work in collaboration with Federal Ministry of Labour to do some of these things. They are trying, but they need to do more.
How different is Outsourcing from HR?
Let me go back to the definition I gave before, Outsourcing is simply a transfer of work, responsibility and the decision making right to an external subject matter expert, meaning that your company wants to concentrate on your key responsibility and manage them. There are also other activities that are important to you but they are not core and you can now decide to give them to a third party and that is out sourcing. Coming to your question, there are different types of Outsourcing and Human Resource is one of them, which we also do, and that is the one you approve by being enabled to a third party. It’s different from technology outsourcing, its different from when you are doing room training, its different from when you are doing background check of certificate verification as a stand-alone service, it’s also different from when you are providing fraud and integrity management solution, and all these areas are what we have in our basket outsourcing services and solutions.
Notwithstanding that you said that there is easy entry into the industry, some will argue it that we still do not have enough outsourcing companies for a big country like Nigeria with more than 180 million people. What do you think?
Contrary to that, by the last count, the Federal Ministry Labour have licensed over 200 Private Employment Agencies (PEAs), and Human Capital Providers Association of Nigeria (HCPAs), with membership of over 150 companies doing outsourcing. So, we have enough companies doing outsourcing, but the challenge is that companies have not been able to embrace this business well despite the benefits that it offers; they have not been able to embrace this concept. Outsourcing offers a lot of benefits, one is that it helps companies concentrate on their key business, and give away the area that is not key to them to a subject matter in order to remain competitive, and increase their bottom-line. This is because a business is open to add, and create value, so any decision to create value should be embraced by business owners.
Two is that outsourcing helps business owners to have access to professionals, who are subject matter experts in those areas. It helps business owners to have access to world class technology at a cheaper rate. They don’t have to own all the facilities they need to do, it’s just to pay for the service, and still get the same quality they wanted. It helps companies to get return on their investments and save cost, and whole lot of other benefits that outsourcing provides.
Still some argue that the cost of engaging outsourcing companies are rising, why is that so?
The person making that assertion is ignorant because when we come in, the first thing we do is to first of all take you from where you are to another stage, so that you can be able to look at yourself properly, because come companies have not been able to look at themselves properly. If we are doing this human resource outsourcing for you, we will first of all look into the cost of owning these personnel that are not core to you. What is it costing your company, and this is not only salary. We are looking at the cost of supervision; we look at their benefits, cost of going on leave, the risk of having these people on your payroll, and having them as your proper employees.
For instance, you have a driver and the person runs away with your car, and the person is your employee, you bear all that risk. But if it’s an outsourced staff, you’ll hold the outsourcing firm responsible. So these are the risks that the outsourcing firms help to carry over. As you know, some companies have not been able to drill down to see the proper cost that they are incurring in having these processes directly under them. So when we help you look at it, you will see that they are real costs that are in your books, and we will now be able to drill down and say that having accepted that it’s costing you A, B, C, to have this process directly, I’m going to save you a certain percentage of it. So anyone saying that the cost is increasing has not been able to drill down.
I have had a look at some companies’ proposals especially in the oil industry, and what they quote for outsourcing seem outrageous, and I ask if they were doing it themselves would they have spent that much?
They would have spent more. For instance, if I’m providing an expatriate to an oil company, if that expatriate were to be their core staff, they would spend times two; but if you are given by an outsourcing firm, you won’t bother about your expatriate quota, you won’t bother about the logistics, and where the person will stay, you won’t bother about medicals, and all these things are part of what outsourcing takes care of.
Economy-wide, there is this problem of matching qualification with skills, and that why sometimes, you have round pegs in square holes in many companies, and then the eventual result is worse. How do you help companies in this area?
First of all, engaging XL Outsourcing to do it for you whether as an HR outsourcing business, or direct recruitment; we see ourselves as a strategic partner. We have the technology that helps us to do the selection. So when we come in, we try to find out what skills you are looking for. Do you actually want to occupy positions A, B, C so that we don’t end up sending people to you, and finding out that this is not what you are looking for. So the starting point is to engage the proper company so that they will help you look at the whole process.
In the process of selection, the first thing is to engage the company to be able to understand the qualities they are looking for in this space. What must this person acquire in order to occupy this space you want me to fill, and once we get that the majority of the work is done. We now go back and match your skill requirement with the right candidate that possesses that skill. So in order words, we are taking that headache off you, and you are only paying little money.
Let me take you back to the cost reduction function of outsourcing. Labour Unions are quick to accuse firms like yours of instigating companies to sack their workers. Where a company would have employed 100, you instead advise for 10, and then force these 10 to do the job of 100 workers. What’s your response to this?
Part of the challenges I forgot to mention is stakeholder alignment, and labour union is not part of it, because they have not been able to take time and understand what outsourcing is all about. In 1997, the International Labour Organisation in Convention 181, embraced the concept of labour flexibility. They defined various yardsticks to which a job can be said to be decent, and part of that was that the job has to be productive and safe. Also, the job has to provide a fair income, the job has to provide social security, the job has to guarantee freedom of employees, which are the rights of the employees, and the last is that the job has to guarantee freedom of dialogue and unionism.
So coming back to your question, what I offer with just outsourcing where I’m a subject matter expert, means I have thousands of qualified people for these different roles. So if a company wants to outsource maybe like their marketing, I am the one to advise them, and tell them what they need to be able to achieve what they want. What the company now does is to engage my services without actually looking at who is there. So if I end up agreeing with them that I’m going to provide five persons, every day, every week, five people must be there. They don’t bother about you going on leave. You can go on leave and provide a relief at no extra cost. If tomorrow all you need to do is to downsize, all you need to do is to notify me, and because I provide this service to other clients, I will draw these people and place them elsewhere.
So, I actually guarantee jobs, and not just make people to leave jobs. You know that there are various things that brought about this business model. One of them is, globalisation, transformation in companies, another is restructuring so that companies will remain competitive in a corporate environment. And because of this, outsourcing has actually helped to create other forms of employment, because what people are looking at is the January to December guarantee. I was an outsourced staff in the U.K. when I did my masters. What did that help me to achieve? I was schooling, and I was working. I had one free hour, so now they call me to know when I’m free, and I earn money only on the days I work, so labour flexibility is a business concern that everybody should embrace, not only for the company but for the individuals.
In Nigeria today, I have a particular team of staff that only want flexible hours, and they are fine with it, nursing mothers for instance. Once you have something call on me, if I’m free, I will work, but if am not free so be it. I think that labour should be able to understand that the concept of outsourcing is to reduce unemployment, and to create decent jobs.
Concerning the issue of the right of employees, increasingly on account of the hash economic environment, employees’ rights are being abused regularly. Now what kind of advice do you give where such rights are being abused?
My advice to these companies is that they should engage a company like us because that is where quality comes into play. It means that they are not engaging qualified people. We take quality very seriously, and we take compliance very seriously; and compliance also has to do with the right of the employee. Prior to the engagement, you will spell out the rules of engaging a staff, terms and conditions of employment. A company should engage outsourcing firm to be able to track these compliance to be able to know that the rights of these employees are not being abused. So for us, compliance is key because we are professionals.
In the case of abuse in the companies that you are handling, what do you do?
We keep engaging and training them. Most of them are done out of ignorance. You will see the level of resistance you will meet when outsourcing takes over in a firm. Most times from the people you don’t expect just out of ignorance, because they don’t understand that you are bringing value on board. You know a typical African man – that spirit of ownership, he doesn’t want to let go, and until you take time and explain to this person the benefits they won’t understand. So it’s continuous education, training, and engagement.
I’m curious that in line with the government’s diversification efforts, you talked about exporting your services to other countries outside Nigeria, even to the U.S. How were you able to achieve this feat, knowing that they would not prefer a Nigerian firm?
Hope you know that all over the world, Nigerians are doing fantastically well especially in the U.S. So, we have the right skills, and the people who are qualified to do these things anywhere in the world, so why can’t we do it in the U.S.? If you are bringing value to any country, they will embrace you because you are adding to their economy. You are creating jobs for the country, so why would the country not engage you? Of course, before they engage you, they would have looked at the people behind the company; they would have looked at your track record. They will profile you very well before they would allow you to set up in their country.
In exporting your services, what are the issues that you face?
The main issue is that we need our government to support us. Currently there is a bill in the National Assembly on Outsourcing, and they are yet to pass that bill. I think they have abandoned the bill. Funding is another issue. Government shouldn’t look at the immediate; they should look at the long run, what benefits these exports would add to the economy. The Nigerian Export Promotion Council should also try more. Currently, they are engaging stakeholders, taking advice and solution on how to move these services.
Increasingly there is this issue of fake recruitment agencies and they are duping unsuspected job seekers daily. What do you think can be done to checkmate this?
Remember that earlier I spoke that beyond having licensing in place, there is monitoring. Government is trying through the Federal Ministry of Labour, but we want them to do more. I’m looking at a situation where somebody works into an organisation from the Ministry and demands to have their book to see the outsourcing firms, and their compliance certificate. These are some of the things that will make them to stop using quacks, who are spoiling business for us because these people are offering cheap rates. They can accept anything from these companies because they know that they are not properly registered. So if the Ministry can implement this monitoring process properly and vigorously, it will drop down the use of quacks. They should also fine these companies that are patronising them, and discipline them very well.
Will the Outsourcing bill help?
Yes, it will help because it is urging government to implement this monitoring mechanism, and to encourage both the government and the private sector to use outsourcing companies.
Your company recently won an award, how would that enhance your operations going forward?
First of all, the award is a testimony that over time we have been able to build a reputable company that is able to offer services of international standard. It is a testimony that we have credible individuals managing different positions in XL Outsourcing Ltd. It is a testimony that we are complying with all regulatory payments in the country, so to us, it improves our brand. It makes our brand more visible.
Let me start with the private companies, it assures them that here you have a private company that can outsource your services, and you can go to sleep. So it is a boost to the confidence the companies are going to have on us. Now to the economy, when they outsource more services to us, it creates more jobs, and when more jobs are created, the economy is better off. Also, to employees or jobseekers, it shows that over time we have been able to create different forms of employment that can allow you to be flexible if you want to be, and you can be permanent if you want to be. This award will sell our brand the more. It will help reaffirm the confidence companies have in us. It will help jobseekers to know that we are a company they can work with and go to sleep because we will not infringe on their rights, because we are key to providing decent works.
How big is the outsourcing industry in terms of its contribution to the GDP and what are its potential?
First of all, looking beyond Nigeria, in India alone, within a few years they have been able to provide a minimum of 20 million jobs, and they have added to the economy in U.K. In Nigeria, getting data you know is an issue, so the data I’m giving you is the number of companies that belong to HCPAN, and that’s about 90,000 jobs. All these jobs were created by companies who are currently their members, whereas the Federal Ministry of Labour has licensed more than 200 firms, so I am sure it’s more than 90,000; just that the statistics is not there.
But the future is bright I can tell you. If companies embrace outsourcing, and we are talking of about 180 million people in Nigeria, every year, fresh graduates are churned out, and outsourcing helps create different types of employment for them, and once they gain employment, thy are adding to the economy.
Currently, we are in three African countries, and the U.S., and within a few years, we also intend to enlarge our scope and our footprint in other African countries. The reason for this is that if you are using us in Nigeria, you don’t have any business with looking for another outsourcing company in Ghana. So, if we are able to do the services in Nigeria, we will be able to deliver such services outside Nigeria. So the future is bright and wide, and we see a lot of opportunities in this business.
Finally, you talked about providing jobs for fresh graduates, but there is this perception that most of our Nigerian graduates are not employable. How do you help in bringing them up to employability level?
Recently we just opened a centre that we call a Knowledge Exchange Centre, and the aim is to bridge the gap between finishing school and getting a job. So, we are able to provide the right skills you require to work. This way, we are able to make them employable within that space of time; we have that in our bouquet of services, making Nigerian graduates employable. This is part of what we are adding to the economy, and getting young people employed, and we are happy that under our platform that thousands of young graduates are beginning to get gainful employments.
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