Offshoring issue is a real threat to corporate reputation

For decades, US companies have exported work to the benefit of shareholders and the economy. But today, offshoring is not viewed rationally; it's emotional.

For decades, US companies have exported work to the benefit of shareholders and the economy. But today, offshoring is not viewed rationally; it's emotional.

In the past 18 months, GCI Group - a global PR consultancy with a focus on issues management and measurement - has tracked an amazing rise in coverage of offshoring. During the first half of last year, the issue got 325 million impressions in our tracking study. During the first five months of this year, the number rose to nearly 4.5 billion. It's virtually impossible to read a newspaper or watch a newscast without seeing a story critical of offshoring. The Wall Street Journal covers the issue almost daily. CNN's Lou Dobbs - a staunch supporter of US business - reports on firms whose offshoring is "Exporting America" and lists on his website more than 700 companies involved in it. The presidential election revolves around conflicting estimates of jobs lost to offshoring. Radio hosts talk about it. Late-night TV jokes about it. The threat goes beyond bad publicity. Companies that offshore jobs risk their valuations, their employees' loyalty, and, in some cases, even their relationships with customers. Look at history. When business issues turn emotional, companies suffer. In the 1960s, when consumer advocates charged that Corvairs were unsafe, the cars were withdrawn. In 1997, when advocacy groups said Nike's third-world manufacturing plants exploited child labor, the company's sales dipped, and its image was tarnished. In 2000, when regulators questioned the safety of Firestone tires on a few SUVs, consumers abandoned the brand, and parent company Bridgestone's share price tanked. Today, offshoring poses even greater risk. Because the issue is explosive, companies want to avoid discussing it publicly - and even with employees. This "less-is-more" approach to communications has made companies seem uncaring about their workers. Companies have been portrayed as being underhanded. And, because companies are reluctant to discuss the real issues behind offshoring, media coverage inevitably reports that it's being done only to fatten profits. The risk is compounded because, in an election year, candidates like to legislate solutions to voters' problems, and these "solutions" could saddle businesses with needless burdens for years. The threat is real; bills to regulate or challenge offshoring are pending in more than 35 states and in Congress. And offshoring is a perfect issue for a presidential race, as it pulls on many heartstrings - national security, competitiveness, jobs, globalization. And unions are using the is-sue to organize workers once thought to be "unorganizable," including software developers. All this is stirring up a potentially poisonous brew for US companies. The decision to move jobs offshore tends to be a difficult one - and is rarely driven by a desire to increase profits alone. In fact, companies tend to offshore when they need to maximize return on resources to achieve other, real business goals. As I've seen with my own clients, offshoring becomes an option when a firm must, for example, speed software development by increasing the number of engineers on the project, or when customer support cannot keep up with customer calls, or when there is a shortage of unique skills and talents needed to complete some project. To protect their reputations, valuations, and - ultimately - sales, companies must take control of their communications on the issue. Old-fashioned thinking has led to the creation of some associations and trade groups to insulate companies from public attention. But associations have not offered much protection in the past when issues have gone emotional. That's why smoking is banned in public places, why seat belts are required in automobiles, why municipalities are regulating the use of cell phones in cars. Companies must protect themselves from backlash by managing communication with their constituents - employees, investors, customers, suppliers, regulators, and communities. I recently advised one client to break the news of a local offshoring decision to officials of an affected community. While the local officials wouldn't like hearing the news, they needed to hear it from the company - to ensure that it wasn't filtered through a biased or ill-informed source. When this company had a frank discussion with local officials, the conversation ended with the officeholder thanking my client for the briefing - and inviting him to lunch. In another case, we counseled a firm to show how its offshoring decision was part of a larger program to keep the company at the technology forefront. While the information was of little consolation to those whose jobs were affected, the company has won significant respect from the business community - and analysts. The bottom line is that companies that believe the issue will blow over once the presidential election is over are only deluding themselves. The issue will be with us for years. Unless companies protect themselves through aggressive - but targeted - communication, they run the risk of compromising their future.
  • Jim Martinez is GM of GCI Group in Chicago

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