The Agyasco Banking Group recently reported that it was offshoring (moving) its back-office operations from Ghana to South Africa where it already has some significant operations. Centralising most back-office operations in South Africa is part of the Group’s plan to grow its international banking business. South Africa is one of the fast emerging economies.
According to an Agyasco Banking Group spokesperson, the move would involve cutting about 500 jobs from its operations in Ghana, but generating a similar number of new jobs in South Africa where it already employs 3,000 people.
Required:
i) Critically assess the advantages and associated problems for Agyasco Banking Group of offshoring its back-office operations to an emerging country. (12 marks)
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Offshoring
Offshoring is the relocation of some part of an organisation’s activities to another country.
Developments in technology have made offshoring feasible in many situations, such as back office support for banking operations. Offshoring has grown significantly in recent years. South Africa is one popular offshoring country, many banks and other companies now have service centres based in South Africa.
i) Offshoring offers a number of advantages to the AGYASCO Banking Group.
- Lower overall cost. Labour and other costs (eg premises) will be lower in South Africa than in
- Ghana.
- Able to afford a more qualified workforce. Call centre positions in South Africa are often filled by better qualified individuals than would be the case in Ghana.
- Investment by host government. Infrastructure (for example communication) in emerging economies has often been heavily invested in by the host governments, in order to attract inward investment.
- Economies of scale / centralised operations. The back office operations will now be able to concentrate its back office operation in South Africa, where it already employs 3,000 people.
- Economies of scale are likely to result. Long-term moves such as this also encourage strategic planning.
- Allows specialisation. Offshoring back office operations to South Africa will allow the AGYASCO Banking group to concentrate on the more complex side of its banking operations and grow its international business by allowing other staff to focus on specialised areas of operation. This is necessary in a global economy where competition is increasing.
On the other side of the discussion, managing operations based in another country will involve a number of challenges for the AGYASCO Banking Group: - Risks associated with currency exchange rates. As an experienced banking group, this should be manageable. Exchange rates will always be liable to fluctuate and this may erode some of the cost savings.
- Language barriers and cultural differences. This may not be such a significant hurdle to overcome for AGYASCO Group as they already have a large presence in South Africa. There may be some resistance by customers based in Ghana, due to perceived problems dealing with call centres based overseas.
- Technical challenges. Staff in South Africa will need to be properly trained to ensure that service levels in the offshored function do not suffer. Some functions may be retained at the call centres in Ghana, so that customer service and satisfaction levels remain high.
- Exercising control from a distance. Offshoring can lead to a loss of control, particularly over quality.
- Dealing with different time zones. This is a challenge that a multinational company should be able to meet reasonably comfortably, although employees may find themselves inconvenienced occasionally (for example the timing of telephone conference calls).
ii) Identify FOUR roles that the Group’s Human Resources Division can play when dealing with employees who cannot be redeployed following the offshoring of its back-office operations. (4 marks)
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The 500 employees of The AGYASCO Group that aren’t redeployed following the offshoring will be dismissed through reason of redundancy. The Human Resources Division should have policies governing redundancy and ensure these are followed.
The HR Division’s role should include setting policies that cover areas such as:
- Selection for redundancy – the criteria for selection must be clear and must be communicated as clearly as possible
- Pre-redundancy consultation and clear communication of where and when redundancies are to occur to enable staff to plan their futures.
- Help with developing a CV and clear guidelines covering time off to attend interviews.
- Clear guidelines on redundancy payments, with clear communication of packages and negotiation where appropriate
- Assistance with re-development of skills, re-training to learn new skills for a new career, or re-location of redundant employees.
- Careers advice, counselling and post-redundancy support.
- Redundancy is likely to be an unpleasant experience. The HR Division must ensure affected staff are handled with care and sensitivity.
- HR should also play a part ensuring remaining employees remain motivated, and morale is as high as can be expected in the circumstances. (Any 4 points)