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Outsourcing Experiment: Values and The Vendor Relationship


One of the big problems about outsourcing is that you don’t know what your vendors are doing when you’re not there. No matter how good your relationship with your vendor, there’s always that bit of doubt that when you’re not physically on-site. Are they following the work rules? Is there favoritism in the workplace? Is it a safe work environment?

Maybe every time you show up to visit your sight there’s a big clean up, and everything runs more to the rule than when you’re not there. On the one hand, you want to know what the outsourcer is doing on a minute by minute basis, especially if you are in a regulated industry. On the other hand, a big part of the outsourcing deal is that manage too tightly or the “outsourced” staff may fall under your control and be eligible for employee benefits. When you step over the co-employment line, there are big financial consequences. How do you maintain the line between managing a group and receiving a service, and still make sure that you get what you need?

The question of on-site management of outsourcing is back in the news due to the fire at Ali Enterprises, a clothing manufacturer in Karachi, Pakistan. The fire killed 300 workers. A century and a year ago, in March of 1911, New York City had the worst industrial fire ever in the clothing manufacturing world: The Triangle Shirtwaist Factory Fire. The fire was so horrific, that in its wake the United States created most of the industrial safety organizations and legislation that protects workers today. The recent fire in Karachi claimed twice as many lives. However, while the US had a horrifying history of the abuse of workers and children in the textile industry, and still does in small sweat shops in major cities, Ali Enterprises was trying to set up a world-class operation. They had recently completed their SA8000 certification, which verifies their policies on child labor and health safety. These and other certifications are very important to the American and European companies that outsource their work to Ali, because they do not want to be associated with firms that look like sweatshops or abuse child workers. Even more importantly, after more than a decade of stories about abused children making clothing for the US and European markets, consumers don’t want to buy the products of child labor.

What’s your alternative? If you go on regular inspections every year, or every few months, that leaves a lot of time for your vendor to do things they might not do if you were there. In the Karachi fire, the managers acted very much like those at the Triangle factory a hundred years ago. They locked exit doors and windows so that workers could not sneak out for a break, which is why so many died. Clearly, they knew to unlock the exists when they had corporate visitors or when they were inspected. This does prove, in a very visceral way, that vendors don’t always do what they say they will. Of course, child labor and safety violations happen in the US, UK, and Europe. It’s not a matter of the location; it's a matter of how the relationship is managed.

You could drop-by your vendor unexpectedly, and not give them a chance to hide errors. But you set up security rules that prevent non-employees from just dropping by. By the time you fill out the paperwork and gain access to the facility, a whole world of violations can be hidden. What can you do to keep an eye on your operations and still maintain a vendor client relationship?

BE UP FRONT: If all you care about is the lowest possible price and that business metrics are met, say so. If issues like worker safety, child labor laws, equality in the workplace, and other issues about work equity are important to you, say so.

STICK WITH YOUR VALUES: It’s one thing to say, “I believe in certain values.’, it’s another to follow those beliefs. There are constantly conflicts between what right and what’s most expedient. You had the same conflicts when you managed the staff, and now your vendor has these conflicts. Your vendor learns from you. Every time there is a conflict between cost or expediency and doing something that’s right for the worker, they learn just how much you truly care about worker safety, equality in the workplace, and other values. When you cease to be concerned, these values cease to matter.

CERTIFICATIONS: As in the Karachi example, certifications alone will not ensure that everything works the way you expect. However, it does set a higher standard. Vendors with certifications will make mistakes, they could even be dishonest. But they will, as a whole, be able to perform to a higher standard. The more that you and other clients discuss the value of certifications, the more valueable the certifications become to your vendor. The more the certification is values, the harder the vendor will work to see that the certification is not lost.

SITE VISITS: No matter what you do, you do need to visit the site. Not just to see the facilities, but also to…

BUILD RELATIONSHIPS: When you visit the site and meet your workers, even if it’s just a pizza party, you build a relationship of trust, AND you show your interest to your vendors. A client who never speaks with workers or doesn’t know a single worker by name is sending a strong message about their true values.

USE TECHNOLOGY: If you’re a good client, you may already be doing all the items above. Now you can also make use of all of these wonderful tablets and smart phones. Make sure that each outsourcing team has one of these devices. Your head of on-site security, or a guard, or perhaps someone else, can be periodically called (once a week, three times a month?) and told to take a walk around the site, while they are on Skype or another video chat application: walk down that hall, hang out here watch who goes into our work area, open up that closet, “Who is that guy and when did he join the team?" etc. Without all the time and fuss of going there personally, you get a pretty good idea of what’s happening. It won’t replace the on-site visit, but it will keep things running cleanly between visits.

If your vendor can fake a good environment when you visit, they can fake it the rest of the time. If they actually do everything you want them to, over time faking it and doing it for real become almost indistinguishable. Certifications and annual discussions about your values may only change the environment when you’re looking at it. Today, there are simple ways to make a vendor, wherever they are located, comply with your value system. However, you need to truly believe in and follow that system if you want your vendor to do the same thing!

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