Running Head: Outsourcing

Alexa Duby 1

Outsourcing Alexa Duby Comm 361 December 20, 2012

Duby 2 Outsourcing Public relations are arguably the most important aspect of any business. Businesses are constantly striving to maintain their public image, while also maximizing revenues and profits. Many public relations issues arise from ethical dilemmas: dilemmas that can prove very detrimental to companies if they do not navigate them in the right way. Outsourcing is a public relations issue that has concerned many people for a long period of time, but has surfaced more prominently recently; in part due to the United States unemployment rates. Outsourcing is simply defined as obtaining good or services from an outside supplier, specifically in place of an internal source. Outsourcing creates ethical issues on many levels; firstly, it entails jobs being shipped overseas. In affluent times, this issue is not so prevalent, but it does resurface when the job market is floundering. Outsourcing does not only create issues on a domestic front; a business that decides to outsource internationally must choose to carefully. The business entity must firstly abide by the laws of the third parties country, while also abiding by the ethical codes of the country it represents. (PRSA, 2000) This can prove difficult, particularly because many foreign laws are not representative of western world ethics. Outsourcing has developed into a more debatable public relations issues due to modern technology and the growth of the monopolizing power of big businesses. Technology has made outsourcing a very viable option. Even small businesses can use modern communication to easily control all aspects of their product management: from the design stage, all the way through to the consumer market. Todays transportation methods and their cost effectiveness, also make outsourcing more feasible. Even if transportation costs are substantial, they can still be a lot more cost effective than the labor and regulation costs in the

Duby 3 US. According to StatisticBrain.com, 44% of companies outsource to reduce or control costs, (Job Outsourcing Statistics, 2012) which means that 44% of companies have found transportation costs a lot more feasible than keeping their whole production method on American soil. Big international businesses dominate their specific markets, and control much of this market. Multi-national companies must produce their goods and service on a huge scale, and so must look to the most time and cost effective methods to mitigate labor and production costs. Big IT companies such as Microsoft also send a lot of their research and development overseas, because of the ability of a large number of specialized personnel in other countries. 43% of IT services were outsourced. (Job Outsourcing Statistics, 2012) There are many reasons for companies to expand, and outsource much of their product management and development to foreign countries, and it is a trend that will continue to evolve with the growth of globalization. Mic Hirtzel, Long Shoreman at Port of Long Beach, understands the battle between reducing costs and maintaining good standing among US citizens. Hirtzel, states that, It is a difficult balance. It depends on the product. Hirtzel is familiar with the fluctuating effects of outsourcing, saying that his union, Used to hire ten people, they now hire two people. The two sides are, we want to keep these jobs in America, and the other side is we need to outsource in order to get better products for a cheaper price. DirectoryJournal.com reinforces that outsourcing does affect people such as Mic Hirtzel, stating It has to be agreed that outsourcing does lead to loss of jobs in the US, especially those that have minimal qualifications. On the other hand, the loss of jobs is not only limited to people with minimal skills, but also jobs of skilled labor that are being outsourced to other countries.

Duby 4 (Saleem, 2008) This is a detrimental aspect of outsourcing, and violates the professional value of loyalty, as companies are not always faithful to those that they represent. (PRSA, 2000) With the US unemployment rate hovering at 9%; loyalty to current employees is an aspect that is important to millions of Americans. An obvious difficulty, which arises from outsourcing, is the language barrier. Although outsourcing from America to other English speaking nations does occur, outsourcing most often takes place to non-English speaking countries such as China and India. Hirtzel recognizes this problem, claiming that he has had, Difficult phone conversations because of people from other countries, and because of the language barrier. This is a frustration many people face, with 12% of call and help centers for US companies being located in foreign countries. (Job Outsourcing Statistics, 2012) Even worse according to Hirtzel is, talking to a machine. A machine now does the job instead of a person. The language barrier between countries will always be an obstacle for businesses, and many companies struggle with advertising campaigns in foreign countries due to different interpretations of images and captions. The Wall Street Journal reinforces the troubles that a lack of competency in communication can bring about, Nearly half the executives at global companies believe language barriers have spoiled cross-border deals and caused financial losses for companies.(Weber, 2012) The losses are not only financial, according to Prlog, When a function that needs handling of calls is outsourced to a foreign location and the first language of that nation is different from the nation which out sources the function, it may lead to low quality call handling, (Outsourcing: Pros and Cons, 2009) which is a consumer problem, leading to a negative perception of the company itself.

Duby 5 Global companies are usually most heavily involved in outsourcing due to their extensive resources. Smaller companies do not have the same growth and expansion powers, and as Hirtzel states, face many obstacles, Small companies dont have the power to make collective bargaining agreements, so they can not make the same contracts with companies and their labor forces regarding certain terms. Although small companies can buy and sell products to and from other countries, they do not need to meet the same demands as big businesses. If however, a small company sees a market for its product in a foreign country, it may agree to a distributorship where the foreign agent agrees to sell the primary companies product for a portion of the profits. A huge 26% of American companies use distributorships in foreign countries. (Job Outsourcing Statistics, 2012) If the business that employs a foreign distributor thrives, it may look to open a manufacturing plant in the foreign country, which is how a lot of outsourcing begins, and if growth is consistent, leads to outsourcing on a much larger scale. Mic Hirtzel himself has come into direct contact with outsourcing problems, on November 27, The clerical workers of Long Beach Port began striking to raise the ante in a 2 1/2-year-old contract battle over claims that management had been outsourcing their wellpaid jobs out of state and overseas.(Huffington Post) Striking is essentialy a workforces strongest weapon, and can force companies to accept their employees demands. This particular strike is ongoing and in an attempt to lessen the publics backlash, The Los Angeles/Long Beach Harbor Employers Association, which represents 14 shippers and terminal operators, denies the allegation. They say they have offered lifelong job security to the 600 or so full-time clerical workers. (La Port Union Contract, 2012) This trend is common, and it is one of the reason why businesses also send their jobs to less stringent

Duby 6 countries. Because there are less occupational rules and regulations in less developed countries, employers do not need to spend the same money in ensuring that regulations are abided by, and do not need to be so careful in ensuring expansive occupational health and safety laws. Companies and Unions refute these claims of ethical wrongdoing to reduce the impact that the claims may have on their public image. Companies are often found to be dishonest about their policies. Honesty is an intergral part of successful business ownership and also an intergral part of the public relations model, (PRSA Code of Ethics, 2012) and without it, people will lose ther trust in the industry. Outsourcing is an issue which contains many ethical elements. Unfortunately, some companies tend to favor profits over ethics. Hirtzel believes that Companies prioritize business over their workers. Regarding the strike, Ethically Mic understands the workers side, but does not think it is ethically wrong to outsource. This is an interesting standpoint and lends itself to Hirtzels statement about where outsourcing may be in ten years. The trend is that there will be more because foreign countries are so much cheaper. But in stating this, Hirtzel also believes that outsourcing will continue evolving and countries such as China will eventually have the same working conditions as the US. If this occurs then, Eventually I think it will globally level out and we will have to go to another county, maybe Africa. Hirtzels statements reflect the thoughts of many consumers,that companies are only outsourcing in order to maximize profits, and regardless of how unethical their activities are, they will continue to pursue their cheapest avenues of production. Hirtzel believes that outsourcing does not violate particular ethical standards, but the actions of his fellow employees show that many others do. The Port of Long Beach, like most companies, must abide by standards that are contingent with their own interests, and the

Duby 7 interests of their employees. In the event of a breach of the employees ethical code, repercussions may follow. Employees may strike, encouraged by their unions in the Port of Long Beachs case, rendering production impossible, and resulting in lost profits. There are also obvious public relation problems, and US consumers do not look fondly at companies that treat US workers poorly. And a poor public image can lead to a profound amount of problems for any company. Oakley, Inc is international company that manufactures sporting equipment. Oakley has a good public image and is a respected brand internationally. According to an employee of Oakley Inc, Chad Copeland, Outsourcing is the purchase by a company of labor or parts from a source outside the company rather than using the company's staff or plant. Much like many large global companies, Oakley must utilize foreign parts and labor to be effective in such a competitive market. There are many benefits to outsourcing, or the most profitable companies in the world such as Oakley would not use it. One of these benefits is the excellence at which many foreign third parties can provide. According to PRlog Since most of the third party service providers excel at the services they provide, businesses are guaranteed of better quality than an in-house employee would give.(PRlog) Copeland supports this statement, stating, We dont specialize in making a lot of the material contained in our products like the C5 alloy (wire frames) and Acetate (multilayered fibers to make complex designs within the frame) frame materials that are found in our wire and RX frames. This is true for many companies; specifically the companies that are involved in concentrated fields. Other countries can have more access to certain materials, or they can have a high level of skill in certain manufacturing or design techniques. Part of the PRSAs professional values stem from the

Duby 8 acquiring and responsible use of specialized knowledge and experience.( PRSA Code of Ethics, 2012) which creates the question as to whether American companies should be attempting to better home grown expertise. But, in light of current conditions, Oakley must outsource jobs to people and places that do specialize in the specific materials that are required to make their specified products. This specialization is very evident in Oakley. Oakley tend to only pursue outsourcing when their highly specialized and unique products require a service or material which can not be feasibly produced in the US. Copeland states that, All Omatter (Nylon plastic) frames, which make up 90 percent of Oakley glasses made, are produced in the U.S. This is a pleasing statistic for a global entity such as Oakley and highlight that outsourcing can be beneficial, but it should be combined with a strong domestic effort, resulting in a success for an American company. Ninety percent of Oakleys are produced in the United States, and according to Copeland, As far I know, no employees have lost their jobs due to outsourcing. This is potentially the business model that could prove most productive for American companies. As far as Copeland is concerned, outsourcing can be a very useful tool for a global company to use. But on the flipside, we limit new American jobs. This two-sided viewpoint seems to be common among employees and employers, and suggests that a balanced combination of outsourcing and internal production is the necessary avenue to keep both parties happy. Copeland believes that changes in the US workforce may lead to further outsourcing, because, One could argue that as the Baby boomers age and retire, there will be fewer workers to fill those jobs, so you either fill them here or abroad to stay well as a country. But with more and more of our younger generation shying away from engineering and technical

Duby 9 studies and careers for the arts, a global company must adapt and find new avenues for growth. If this change in dynamic occurs, then companies will have no choice but to outsource. Copeland personal opinion of outsourcing is that, there are two sides to every coin, both good and bad. Done correctly and responsibly, outsourcing can be a great thing, both for our economy as well as those developing countries. Copeland realizes that the US economy definitely prospers due to cheaper products, and more profitable companies, (PRlog, 2009) Outsourcing results in a higher profitability for the businesses which are then ploughed back into the economy. This definitely has far better impact than the negative impact of growth in unemployment.(PRlog, 2009) This impact suggests a more neutral approach to outsourcing. Outsourcing should be defined by its fairness, which is essential to public relations in any business entity. (PRSA, 2000) If the impact of outsourcing is positive, then the scrutiny of it may be exaggerated. However, unethical treatment of employees and foreign companies is unacceptable, and companies such as Oakley strive to maintain an ethical approach to outsourcing. My personal opinion regarding outsourcing is mixed, much like the two interviewees. The facts and statistic surrounding outsourcing tell a mixed story. Clearly, jobs on a domestic front are lost to outsourcing. This could be an aspect of the alarmingly high unemployment rate in the US. But the facts also show a positive aspect of outsourcing. Outsourcing does provide companies with cheaper avenue for production, it results in better products, and it ensures American citizens are gifted with lower prices for goods and services. However, the argument does not only weigh on weather or not it is economically feasible, there is also an argument as to the ethical correctness of outsourcing. According to many, large companies

Duby 10 that base much of their production in other companies have improved working conditions for foreign employees. But these conditions can still be far less strict than the health and safety standards we have here in the US. Sweatshops are clearly unethical for many reasons, and although they do provide foreigners with at the very least, a job, it is still wrong for us to take advantage of poorer working conditions. In terms of American employees, it is hard to witness employees hat have served their employer well, losing their jobs to outsourcing. Much of the outsourcing entails white-collar employees who need a job in manufacturing, as they are not qualified for professional positions. I personally think there should be repercussions for companies that do not abide by the public relations code of ethics, and that obvious violations of the code should be penalized, particularly when it involves how persons are treated. Ethical issues are a part of business. Business is an ever-evolving industry that must constantly adapt to new ways of progressing. Part of progression is realizing what works, and what is right. Public relations attempts to strike a balance between ensuring that people receive the goods and services they desire, while maintaining an ethical approach, and good standing. It is a balance that is often strained due to greed and monetary desires, but if companies such as Oakley, and the multiple unions at the Port of Long Beach continue to abide by the public relations ethical code, while maximizing efficiency and profitability, companies in the US will continue to thrive on both the domestic and international front.

Duby 11 Resources Job Outsourcing Statistics (2012, July 20). In Statistic Brain. Retrieved December 17, 2012, from http://www.statisticbrain.com/outsourcing-statistics-by-country/ (La Port Union Contract, 2012). LA Port Union Contract Talks Adjourn Wit [Online video]. The Huffington Post. Retrieved December 17, 2012, from http://www.huffingtonpost.com/2012/12/02/la-port-union-contract-talks-5th-dayvideo_n_2228055.html Outsourcing: Pros and Cons (2009, February 11). In PRLOG. Retrieved December 17, 2012, from http://www.prlog.org/10181084-outsourcing-pros-and-cons.html PRSA Code of Ethics: Preamble (2000). In PRSA. Retrieved December 17, 2012, from http://www.prsa.org/AboutPRSA/Ethics/CodeEnglish/index.html Saleem, H. (2008, September 16). How Outsourcing Affects the U.S. Economy. In Directory Journal. Retrieved December 17, 2012, from http://www.dirjournal.com/business-journal/how-outsourcing-affects-the-useconomy/ Weber, L. (2012, May 1). Language Barriers Blamed for Miscues. The Wall Street Journal. Retrieved December 16, 2012, from Lexis Nexis.