I was looking over my company news today and saw that we are further expanding into India with a significant R&D center, complete with many of the activities that we engage in at my home facility. Except, this Indian center will have about 15 times more skilled workers. This, after layoffs at my own building.
First of all, let me say that I am not against globalization. I believe that it is inevitable and that we all have to consider that our jobs are up for grabs at any time to people not only in our own regions, but virtually to anyone all over the world as well as technological replacements. It’s not personal, it’s economics. I realize that companies today have loyalty to employees so long as it is economically advantageous. Smart workers reciprocate this attachment.
Though it upset me initially to see that my co-workers are being given severance packages while low-cost regions are hiring on, it also got me to thinking: Why couldn’t we also outsource our presidents and CEO’s?
Go with me on this for a minute.
Consider first the huge cost savings. Who has a higher salary than the top American executives? I saw that the top 25 executives from failing companies who receive TARP funds must accept a salary cap of $500,000. This indicates that they were making significantly more before their firms began failing. Wouldn’t it be a huge cost savings to the business to pay a low cost supplier as a manager? No more multi-million dollar bonuses, reduction in the bloated salary expense and perks could probably be reduced as well. You could pick up a few people to do the job for significantly less than the payment of a single CEO! Add this to the fact that most of the growth in the world is in the emerging markets where these new low-cost CEOs would be located and you pick up valuable travel expense and travel time reductions.
Of course, the argument is going to be made that the educational and cultural background may not be suitable to deal with Wall Street and work with the American culture of business. Isn’t that a little ethnocentric? There are thousands of well-educated managers in India and China who would be more than up for the challenge of managing a multi-billion dollar business. Many of these people have been educated at Western universities and have advanced degrees to rival any of their American counterparts. If we can accept that our front line of customer service (and not only in B2C transactions, but many B2B as well) can be handled by off-shore contractors, why can’t we accept that outsourced managers would be just as capable as American executives?
Another advantage of my plan is that business executives of emerging regions are better suited to understand climates of growth. As indigenous members of the societies that are being catered to by a growing number of Western businesses, who better to manage and become the face of the corporation? Rather than laboriously taking the time to have armies of analysts prepare briefs on the best way to reach a market, outsourced executives could be ready to pounce on new opportunities and grow the company and the stock price, thereby increasing the value for the shareholders.
How many languages does the CEO of your company speak? By outsourcing our executives, we can take advantage of their abilities and reach a greater number of customers who can identify with the head of the company.
I’ll admit, my plan has its drawbacks. We would likely be dramatically shifting the standards of living, raising the emerging countries’ while potentially lowering our own. This would lead to a necessity to later move the executive’s position from India or China elsewhere, perhaps to Vietnam or the Philippines. However, if we lower our standards for labor enough, it will become enticing for foreign companies to start to invest in the unskilled labor in the US and begin manufacturing here for export and possibly even a few of those executive positions we’ve shipped out.
While I’m not claiming it is a perfect plan, we must make these hard decisions in this time of difficulty and economic turmoil. At a time when the actual unemployment rate is near 15.8%, the time for cost savings is now to prevent it from going any higher. Sure, a few top-level managers will need to take reduced roles, but they can assist in the transition, mentoring their successors and showing them the ropes. Cutting costs everywhere in the company needs to happen at all levels of the firm and trimming the fat is the first action we should take.