By Madeleine Heffernan
with Ruth Williams

HUNDREDS of Australian jobs have been shifted to New Zealand as local producers try to avoid the impact of high wages, a soaring Australian dollar, and restrictive labour laws.

Woolworths is the latest to transfer jobs across the Tasman. It transferred 40 contact centre jobs to Auckland this week. Imperial Tobacco has also announced it will move cigarette manufacturing from Sydney to New Zealand.

The companies are following in the footsteps of the food production industry, which has been shifting jobs out of Australia to take advantage of New Zealand’s lower wages.

Heinz Australia recently scrapped more than 300 jobs across three states in favour of its large plant in Hastings, New Zealand’s largest food processing and food producing centre.

The International Labour Organisation says Australian manufacturing workers earned more than $US35 an hour in 2008. In New Zealand the rate is under $US20 an hour.

Average weekly earnings for manufacturing workers in Australia are higher than those in Canada, Britain, New Zealand and the United States, says a study which put Australian earnings at more than $1000 a week, versus about $700 in NZ.

Simplot Australia is the last remaining vegetable processor in Tasmania after its rival McCain shifted production to New Zealand in 2010, citing a better return on investment.

Callum Elder, the executive general manager of quality and innovation at Simplot, said penalty rates and wage inflation make Australian processing much more expensive.

”Penalty rates are a significant cost difference to manufacturers, particularly in the agricultural game where you’re unable to properly plan,” Mr Elder said.

This has combined with wage rises that are not matched with productivity improvements, and instead stoked by high salaries in the mining sector and infrastructure projects, he said.

”Our productivity hasn’t increased in the past three to four years, as an industry, but yet we’ve been paying 3 to 4 per cent increases [in wages], which is a large part of the cost. It’s very expensive to put people into Australian factories.”

Mr Elder said base pay of $60,000 a year can leap to $100,000 when overtime, payroll and other costs are included. ”The average base salary is probably around $60,000 and there’s probably another $20,000 in penalty rates, and the rest comes from surcharges and taxes.”

High wages, penalty rates and productivity of Australian workers has come under attack in recent months. Toyota Australia’s chief executive, Max Yasuda, has criticised the culture of his workforce at Altona, Melbourne, where he said absenteeism can be as high as 30 per cent.

Earlier this year the New Zealand Finance Minister, Bill English, told Business Day his country was benefiting from a more flexible industrial relations environment, a lack of infrastructure bottlenecks and stable energy prices.

”The IR environment is pretty flexible and has enabled quite a lot of flexibility to our manufacturing sector, which has in the last while been growing, despite the high dollar,” he said.

The mayor of Hastings, Lawrence Yule, believed New Zealand’s ”more holistic view on employment” appeals to Australian companies.

He cited New Zealand’s lower levels of unionisation, ability to operate outside traditional daytime hours, and greater use of seasonal employees. ”Our labour laws are more relaxed, as I’m told,” he said. ”I’ve been advised that’s part of the mix.”

Peter Burn, director of public policy at the Australian Industry Group, said New Zealand has not followed Australia in ”tightening” industrial relations settings, and labour laws could prove to be ”the straw that breaks the camel’s back” for some firms. ”Labour laws in themselves aren’t going to be the ‘knock them down’ difference, but could make a difference at the margins.”

Agrifood consultant David McKinna said penalty rates during peak times were putting pressure on the sector.
”If you take the cost of labour, it can run anything up to $50 an hour, whereas in New Zealand it’s probably $20,” said Dr McKinna, principal at strategic business consultancy McKinna et al.

Jessica Ramsden, spokeswoman for HJ Heinz Co Australia, said the now-closed plant in Girgarre, Victoria, was small by global standards, and the investment to make it competitive was too great. Differences in labour conditions between the two countries did not affect the company’s decision.

Jason Hefford, from the Australian Manufacturing Workers Union, said shifts to New Zealand were a concern, but pointed to the high dollar and health and safety obligations over the high wages.

Read more: http://www.smh.com.au/business/australian-jobs-on-the-move-to-nz-20120417-1x5jv.html#ixzz1sKfhCVJm

By Iain Thomson

The offshoring of IT work to developing nations has been very popular with accountants looking to cut costs, but the limits are being reached of what jobs can conceivably be sent overseas.

Research by The Hackett Group estimates that of the 8.2 million business service jobs available in the US and Europe in 2002, only around 4.5 million will remain by 2016, with the rest moving to India, China, and other global outsourcing centers.

But the limit will then have been reached, with barely a million left that could realistically be moved offshore, and companies that would do so would face “a PR nightmare” and risk losing staff who don’t trust their employers. This would mean an end to the cost savings for Western businesses, and would leave those hosting countries in a bind, since they will have to find new targets if they are to maintain current growth rates.

“In the US and Europe, offshoring of business had a significant negative impact on the jobs outlook for nearly a decade,” said The Hackett Group chief research officer Michel Janssen. “That trend is going to continue to hit us hard in the short-term. But after the offshoring spike driven by the Great Recession in 2009, the well is clearly beginning to dry up. A decade from now the landscape will have fundamentally changed, and the flow of business services jobs to India and other low-cost countries will have ceased.”

The IT profession has been hardest hit by the offshoring of service jobs, and will see a 54 per cent drop in employment between 2002 and 2016. Finance employment will fall 42 per cent, procurement jobs by 36 per cent, and human resource jobs will shrink by nearly a third as part of the drive to lower costs through offshoring and automation.

India remains the top spot for outsourcing, taking about 40 per cent of jobs, thanks in part to having an educated and largely English-speaking population. Eastern Europe has around 20 per cent of the market, but faces rising costs, and China is the destination for around 13 per cent of service jobs.®

Source:The Register

By Cai U. Ordinario

A former Philippines National Economic and Development Authority (NEDA) director general believes that the Philippines’s ailing manufacturing industry may stand to benefit from China’s “lack of appeal” to foreign investors as a result of a dwindling Chinese work force.

Cielito Habito, now head of the Ateneo Center for Economic Research and Development (ACERD), said on Thursday that even Filipino firms operating in China are thinking of repatriating because of the lack of workers in China.

“There is this observation that China is losing its appeal as the factory of the world,” Habito told the Management Association of the Philippines (MAP) Economic Briefing and General Membership Meeting in Makati City.

“I’ve heard a lot of anecdotes, including those from banker friends who have Filipino clients doing business in China, [and these clients are] actually repatriating their factories… to the Philippines. It’s very hard to get workers for their factories,” he said.

Habito added that the lack of workers might have stemmed from China’s one-child policy. The one-child policy caused many families to shelter younger generations, thus making factory work unattractive for them.

The former socioeconomic-planning secretary said there are even stories now that some Chinese factories have to send buses to fetch workers from far-flung villages just to make them work.

“The products of the one-child policy who, of course, became emperors and empresses in their families, were showered with everything. Now that they are of working age, they are in no mood to work in factories and that will lead to a longer change in the labor force of China,” Habito added.

Habito said the return of factories to the Philippines could boost the growth of the manufacturing industry. This will not only increase growth in the industry sector, he added, but also create millions of jobs in the long run.

He said that in 2012, the country’s economic growth would likely be between 4 percent and 5 percent. But Habito added that the government’s 5-percent to 6-percent growth target might still be achievable given that government spending is expected to increase this year.

Other growth drivers include the country’s resilience to external shocks due to the continued inflow of overseas Filipino worker (OFW) remittances, which, according to Asian Development Bank (ADB) Philippines Country Director Neeraj Jain had been the backbone of economic growth in recent years.

Other growth drivers, Habito and Jain said, included the growth of the business-process outsourcing (BPO) industry, particularly in creative industries such as animation and other service-related sectors. 

Habito said he expects inflation to be benign at around 3 percent to 4 percent and the country’s unemployment to be within 6 percent to 7 percent. He added that these are positive indicators that can boost domestic demand and increase economic growth. 

Jain, in the MAP briefing, said Habito’s growth forecast is almost the same as that of the ADB’s 4.8 percent this year and 5 percent in 2013. He, however, added that these estimates are being reviewed and any change or update will be made public in April.

Source: Business Mirror

By Pradeep Khanna

In a flatter world, cost of services in Australia could potentially be impacted by how organisation culture is blending with Indian and Philippines national cultures

In Europe, Greece’s parliament approved an austerity package. One wonders though whether financial instability will be replaced by financial and social instability.

The European crisis continues to directly and indirectly impact the Australian economy through slowing global growth and funding pressures for the banks. Significant interest rate differential between Australia and other countries is encouraging carry trade (borrowing at low rates in other countries and investing in relative higher rates in Australia) thereby keeping the A$: US$ exchange rate high. The net impact of all this is a structural change in the Australian economy where cost focus is the dominant theme in practically all sectors of the economy except the resources sector.

However, the major growth engine of the Australian economy (resources sector) employs only around 2% of the country’s workforce. Like most developed countries, Australia’s service sector is has more than 75% of the country’s workforce. Services share of the workforce is even higher if we consider embedded services.

The structural changes in the Australian economy are resulting in onshore job losses, jobs moving offshore or both. The challenge for Australian corporates is now how best to balance benefits of globalised service delivery against additional complexity and associated higher risk. If managed properly, services globalisation can work very well for an organisation. On the other hand, if not managed properly, it can also become a nightmare.

Working well with different cultures is now emerging as critical success factor for globalisation of services. In this context, it is often presumed we are referring to working well with different national cultures. However, in reality, it is a blend of national and organisational cultures – one that can vary significantly from one services provider to another.

A lot of research has been done on culture – both national and organisational culture. By appreciating there is no right or wrong culture and groups of people behave differently (for a variety of reasons) helps in a better understanding of and working with different cultures.

Let’s look at how this combination of organisational and national culture impacts a service provider of globalised service delivery.

Professor Nancy Adler (In her book International Dimensions of Organizational Behaviour), cites researcher André Laurent’s finding – cultural differences were “significantly greater among managers working within the same multinational corporation than they were among managers working for companies in their own native country. When working for multinational companies, Germans seemingly became more German, Americans more American, Swedes more Swedish, and so on.”

Likewise is the culture of Indian service providers like TCS, Infosys, Wipro, HCL, Tech Mahindra more dominantly Indian or an appropriate blend of their national and organisational culture?

Let’s have a look at two leading service providers – Accenture and TCS. I have chosen these two as TCS’s global headcount is now around 90% of Accenture’s and in times to come, it may well equal or be higher than Accenture. A similar analogy will equally well apply to other organisations as well.

Table 1 below gives some comparative information of Accenture and TCS

Table 1 : Accenture and TCS – Global Presence, Comparative Global Headcount * , Annual Revenues **, and People from India & Philippines as % of Global Headcount

* Global headcount above is comparative headcount with Accenture as a base of 100
** Accenture’s revenue is for FY ended 31 Aug 2011 and TCS revenue is for FY ended 31 March 2011
Source – Accenture and TCS websites

Looking at Table 1 – columns (2) & (3) ONLY, it could be inferred that both Accenture and TCS are geographical well-diversified global organisations with TCS being relatively smaller of the two. As presumably none of them appears to have a dominant nationality (when looking at column (2) and (3) only), it could possibly be inferred that both have a dominating organisation culture which appropriately takes cognizance of differing national cultures in the countries these two organisations operate.
However, Looking at Table 1 – column (4), Accenture’s revenues are almost three times TCS’s revenues. It could therefore be inferred that Accenture is more into high end consulting with higher charge out rates. So Accenture’s culture is probably more innovative as required by a successful consulting company.

Now, Look at additional information in column (5) in Table 1 – People from India and Philippines as % of global headcount – this does indeed provide more insights.

In Accenture’s case, people from India and Philippines now account for 40% of their global workforce – with India headcount being almost three times Philippines headcount. These two countries are a major part of Accenture’s Global Delivery Network (GDN). Accenture GDN’s rapid growth has come almost entirely in the last 8 years and more so in the recent years. GDN accounted for 13% of Accenture’s global headcount in 2003 and this has now grown to almost 60% in 2011.

These numbers become important as market feedback indicates global organisations are now including global delivery in almost all deals wherever possible.

So, we come back to the key question we asked earlier in this article – i.e. – in case of global organisations like Accenture, IBM, HP, CapGemini etc., do Indian employees become more Indian and Filipino employees more Filipino when dealing with their counterparts and their customers in other countries ? Or is global service provider’s organisational culture so strong that it becomes the dominating culture in spite of large number of one or two country nationals in their global workforce. While I could answer these questions, for the time being I will leave them with you as some points to consider and to ask global services provider.

In TCS’s case, people from India and Philippines account for almost 93% of TCS’s workforce. However, it comes as no surprise that its workforce consists predominantly of Indians. People from Philippines are less than 0.5%.

So, do Indian organisations like TCS, Infosys, Wipro, HCL, Tech Mahindra have a dominant national (Indian) culture which possibly blends with its organisational culture. Some points to consider and to ask these organisations when you have them as a service provider. And presumably an understanding of and an ability of working with Indian culture would be helpful when they are the service provider. Again, some points to consider and ask your Indian services provider.

Note: There are other aspects of culture that are equally important and these will be discussed in subsequent articles later this year. Also, working well with different cultures is just one of the critical success factors in managing a successful globalised service delivery

This services globalisation insight has been brought to you by GLOBAL MINDSET.

By Chris Zappone

Westpac employees are bracing for the loss of as many as triple the number of job losses already announced this week as the bank adjusts to a weak economy and higher funding costs.

As many as 1500 more positions could be at risk, adding to the cuts of 560 already announced.

“We’re conducting consultations to a number of our employees around changes to our staff,” said a spokeswoman for the bank.

The bank has been cutting jobs since the end of last year, when it shifted about 200 back-office jobs offshore.

On January 19, a spokeswoman for the bank said the bank planned to cull more positions this year.

“We can expect that staff numbers will decrease as we reduce higher cost contract-based staff and reduce duplication in roles at head offices,” she said.

Analysts from UBS tip that as many as 7000 banking jobs may be shed in Australia in the next two years, as demand for loans slows and households reduce debt levels.

Read more: http://www.smh.com.au/business/westpac-set-to-announce-job-cuts-20120202-1qulx.html#ixzz1lBm7oHKx

By Martin Conboy, President – Australian BPO Association (ABPOA)

The final stages of the Australian summer holidays are here, and we are starting to notice that the traffic is getting heavier as Australia gets into first gear and gets ready for 2012. Here’s hoping that Europe can muddle its way through and not bring the whole show crashing down around us. At least the US is showing signs of gentle improvement.

With the US Presidential elections looming, we can expect to hear a lot more rhetoric about offshoring being un-American and saving jobs, etc. until such time as sanity prevails and the Presidential election is over.

The American government offering incentives for firms not to offshore completely misses the point. Somebody somewhere has to pay for the subsidy (usually the tax payers) and all it does is mask an inefficient labour market. How on earth is a government going to force private industry not to operate its own best interests. Having said that, it’s not possible to turn a bunch of skilled factory workers in too much needed nurses as an example. The problem is that America has millions of jobs, but the millions of unemployed American do not have the required skills to do them. So companies look to India and the Philippines for the people with the required skills.

The simple fact of the matter is that global labour markets have restructured and highly skilled and less expensive Asian knowledge workers can and will do the work required of them. Gone are the days when Asia was a place where low value business processes were sent as a labour arbitrage play. The intellectual horsepower in Asia is immense, and it’s understandable that in an age of cloud-based technologies coming into their own, companies would want to tap into these highly skilled workforces.

People in first world nations can complain about it all they want, but the drivers of BPO are very well-known and have been well-ventilated over the last couple of years. The world is governed by self-interest, and that is the nub of the issue.

It’s cold comfort for the man on the street for sure, but the world does not owe us a living, at the man on the street level social dislocation and society restructuring is hard to understand. Be that as it may, we are part of a global market. The world is changing whether we like it or not, and there will be local causalities. Yes, we must have safety nets for our fellow Australians who get caught out, but change is coming and of that there is no doubt.

A case in point is the Australian Car Manufacturing sector which is being propped up by government subsidies. For the foreseeable future we will still keep throwing money at it, and yes people will argue that there is the multiplier effect of all of the allied industries that making a living supplying the industry. But the reality is that people in other countries make better cars than we do and they cost less, so it does not make sense to make cars here because the market will buy the better-made cheaper cars anyway. So all we have done is thrown good money after bad, instead of retraining our workforces to get them ready for the future.

It is subsidies and government policies supporting economical unviable industries that got Europe into the mess that it’s currently in.

So it follows with BPO, if companies can access talented and less expensive labour in somewhere like the Philippines, why would a business pay more for the same thing in their own country?

The shareholders of businesses expect to pay the least amount that they can to operate their business and have a duty to employ the least amount of people necessary to make their business work.

Australian bank Westpac confirmed 188 local jobs would be affected by a shift in its technology sourcing strategy which is slated to see some internal work handed off to external suppliers.

Last week the bank’s chief executive Gail Kelly revealed it was in the advanced stages of working through a change to its sourcing strategy for application development services. Although at the time Kelly acknowledged some jobs would be affected, the executive didn’t go into detail as to precisely what the bank’s new strategy would entail. Yesterday some of those details started to become clear, with the Financial Services Union, which counts some Westpac staff amongst its members, issuing a statement claiming the cuts were slated to affect 188 staff.

“Earlier this week Westpac announced to staff that we were changing the way we outsourced some roles for Enterprise Testing Services in one part of our technology business,” confirmed a statement by Westpac this afternoon. “As part of the initial consultation process, we outlined that there will be around 188 roles in scope as part of the new sourcing arrangements we are transitioning to.”

The union claimed the job cuts were part of “an 18 month-long program” of reducing Westpac roles, and replacing those roles with outsourced and offshore providers. And, it pointed out, the cuts came in the wake of Westpac announcing a record net profit of $6.9 billion.

Furthermore, the union claimed Westpac had attempted similar outsourcing initiatives previously, but failed. “What makes this announcement more surprising is that Westpac itself has recognised that past outsourcing and offshoring of jobs has failed, as evidenced by 600 jobs previously outsourced to HP in Adelaide being returned to Westpac,” the union wrote. “Short term cost savings don’t add up in the long run, and Westpac should recognise that this is also the case with this latest decision to outsource and offshore IT jobs.”

The bank said the future of its outsourcing initiative was not yet clear. “The final impact on our Full-time staff will not be known for a number of months as we work through the transition,” the bank said. “Where there are reductions in roles, we will use natural attrition where possible, redeploy employees to other roles, and reduce temporary/contract staff first to minimise the overall impact on our technology workforce. The majority of these in-scope roles will come from head-office in Sydney.”

Source: Delimiter

Salmat has launched a company-wide program aimed at bridging the gap between indigenous and non-indigenous Australians. The Reconciliation Action Plan (RAP) will see the implementation of a range of activities supporting indigenous Australians over the next 12 months and is one of the ways in which Salmat is contributing to the reconciliation process in Australia.

‘Our Vision for Reconciliation is based on compassion, respect, commitment to diversity and acknowledging the significant role of Aboriginal and Torres Strait Islander people play in Australian society. As an organization we are committed to closing the gap between indigenous and non-indigenous Australians, by breaking down barriers, establishing relationships with local Aboriginal and Torres Strait Islander communities, creating opportunities, celebrating and welcoming all Australians and most of all promoting inclusion throughout our workplace,’ said Grant Harrod, Chief Executive Officer of Salmat.

‘During the next year we will be recruiting more Aboriginal and Torres Strait Islander employees and helping indigenous business from around the country take advantage of our business experience and expertise,’ he said.

The Australian Government has thrown its support behind the initiative with the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP, commending Salmat for taking the initiative to prepare a Reconciliation Action Plan.

Salmat’s RAP program builds on the company’s strong commitment to local indigenous communities. Initiatives in place include supporting indigenous businesses, increasing employment of indigenous Australians and volunteer programs for staff.

Salmat hopes to employ 30 Aboriginal and Torres Strait Islander people across the business and rollout an indigenous work experience program by August 2012. Other initiatives include developing an Indigenous procurement policy to engage Aboriginal and Torres Strait Islander businesses, provide staff with secondment opportunities to work with indigenous communities and widespread cultural education programs.