FEATURE: Offshoring reputation

As corporations outsource more jobs overseas, the emotion of the issue is setting off sparks in the media.

As corporations outsource more jobs overseas, the emotion of the issue is setting off sparks in the media.

Early this year, Network Appliance CEO Daniel Warmenhoven went on a media tour in Bangalore, the Indian city known as a growing technological outpost for many US-based companies. Warmenhoven's address focused on his firm's commitment to India, where, besides already operating a technology center, the enterprise network storage provider plans to hire as many as 300 software engineers within the next year or two. The announcement was picked up by the major Indian newspapers and wires, which sent the news on a speedy trip around the world. Within ten hours, Eric Brown, the Sunnyvale, CA-based company's worldwide PR director, was taking a call from USA Today. Careful to distinguish the business rationale for the overseas strategy from basic cost-cutting, Brown explained to the reporter how expanding the Indian work force was about being closer to overseas customers and how NetApp is expanding in America, as well as on the subcontinent. But the lengthy interview was lumped into an article headlined "India Makes Silicon Valley Struggle," about companies saving money by shipping jobs to India, where the cost of labor is significantly cheaper. "I thought, 'This is not what we spent 30 minutes talking about,'" Brown says. Over the past several months, offshore outsourcing has once again shaped up as a highly charged economic issue. But where in the past it was portrayed largely as the plight of the working classes, whose low-wage manufacturing jobs were being shipped to Far East sweatshops, this time around offshoring is being framed as a middle-class problem, a job drain that's taking a toll on the educated workers. Coverage of the issue has dominated the front pages of major newspapers and newsweeklies, and is squarely focused on the loss of once-coveted jobs, such as software programming, to educated work forces abroad, usually in India. And this time, it's companies like NetApp, rather than Nike, that are being dragged into the fray. But the fact that offshoring is a complex matter that causes ambivalence in any executive doesn't mean the media has treated it with a sober approach. The body of accurate reporting on the often intricate economic motivations for moving jobs abroad is dwarfed by the more emotional, even sensational, reporting on the effects of offshoring on American workers. "A lot of mainstream newspapers in the US have already made up their minds about what offshoring means," Brown says. "When they call you, they don't have an open mind. They have a definite bias for how the story is going to go. Any message you try to deliver is filtered through that bias instantly." For PR teams at any company with an overseas work force model, the media's and politicians' fascination with offshoring yields a host of internal and external challenges. At least one of the US' largest PR agencies, GCI Group, has responded by creating an offshoring practice. The agency held a conference on the issue earlier this year, just as Presidential candidates and reporters began venting their frustrations with the jobless recovery by kicking dirt on US corporations that have moved jobs overseas. Jim Martinez, who heads the GCI practice, calls offshoring a "perfect storm" generated by a number of political and economic factors coming together at the same time and with the might to thrash the reputations of unprepared companies. He says, "This is an enormous issue because the economic recovery hasn't delivered the kinds of jobs that were hoped for. A lot of companies are going to have to confront the issue this year. They're going to have to make decisions, and when companies make decisions, inevitably there's going to be communications around it." Internal comms challenges Martinez and other PR pros working on the offshoring issue, either in-house or for clients, agree that internal communications is perhaps the most important component. Robert Cathey, VP at Ackermann PR, which represents TPI, the world's largest sourcing advisory firm, says that this is the case because outsourcing communications should follow a crisis management model that is forward-looking. Not only should a variety of functions, from legal to investor relations, be represented, but also there should be highly refined messaging for internal audiences who will be there over the long term. "The news cycle will move on. November will come and go. The economy will recover; jobs will come back. And people will move on to something else," says Cathey. He compares the internal communications environment during an outsourcing deal to that during M&A activity. Rumors that management is about to lay off a number of employees so their positions can be moved to another country can spread like wildfire. The only way to head off gossip is by keeping in touch with the work force. "Much like nature, employees abhor a vacuum," says Martinez. Cathey recommends a number of tactics for ensuring that the rumor-mongering vacuum doesn't develop, from intranet and newsletters to executive-led town-hall meetings. "By employing these tactics to share the information - why you're doing this, what the process is going to be like, what we know and what we don't know - and acknowledging the emotions there, you defuse a great deal of potential problems that could have made the transaction less effective." The NetApp PR team learned from the dot-com bust and recession that unidirectional communication isn't as effective in fostering meaningful conversations with a work force as interactive techniques, like executive video broadcasts, brown-bag lunches, and other face-to-face meetings. These tools also are paying off now. "With offshoring, it becomes more personal because people feel their individual jobs are in jeopardy," Brown says. "Dialogue-based interaction is more important now." Nevertheless, Brown admits, employee communications are not the only source from which workers get their news. "No matter what we do there, broad-based media on TV and print and radio reach people faster than our corporate intranet does," Brown says. "No matter what you're communicating internally to employees, there's a cynicism or skepticism - especially in Silicon Valley, which is just recovering from the dot-com bust." Any executive planning to duck the issue of offshoring need only look at Lou Dobbs to see just how misguided that strategy is. In PR circles, Dobbs' nightly show on CNN, with its rundown of American companies that are sending jobs overseas and the host's high-profile tongue-lashings of anyone who disagrees with him on the topic, offers a sample of the tone of reporting on offshoring. In reality, Dobbs is hyperbolic, but not by much, and, in terms of reporting quality, the media world is pretty much split into two factions on the issue. There's the consumer press, which tends to take a more emotional tack on the subject. Then there's the b-to-b media, which is more interested in hearing business motives for an outsourcing decision. As Martinez sums up, "The quality of reportage has by and large been accurate, but it has not been as complete as it could be. Context has been missing to some degree. We talk about jobs being offshored, but we don't talk about how many jobs as a percent of the whole. There's a lot more in-US outsourcing going on than offshoring." A few PR pros note that there's some evidence that this is changing, with strong coverage in The Wall Street Journal, The Economist, and Business Week. Last month, the Journal published its periodic economist survey with the key finding that only 16% of the 55 economists polled felt that offshore outsourcing was a significant factor in the lack of job growth. Putting the story in context Still, companies need to be careful about the information they release, Martinez says. They have to be open, but not to the point that they just throw everything out to the media in one big press release. "The only thing that will dial this down is the creation of jobs in the US economy," he says. "There's not a lot of traction on that front. We also need to start explaining the larger benefit of making these kinds of decisions. Some companies can reallocate resources in ways that will have considerable impact on a regional economy or national economy as a result." One company that was successful in communicating the local benefits of its overseas work force model is iCode, a software developer for small businesses with 80% of its work force in India. The Chantilly, VA-based company turned to Indian labor in 1994, when it had to convert a product from DOS to Windows and couldn't afford the 20 or 25 developers it would take to complete the task. By employing less expensive Indian counterparts, iCode was ultimately able to create jobs in the US. "We've only created jobs in the US; we've never sent jobs overseas," says Steven Toole, VP of marketing. "We're trying to differentiate ourselves not just as a company but as a repeatable model that other small businesses can also adopt. For small startup businesses that need a lot of labor this is an option - not only to survive, but also to thrive." Toole took that story to the Nightly Business Report and Investor's Business Daily and scored positive media hits. But despite that favorable coverage, the company did get slapped, which underscores just how emotional the issue has become. Following the exposure on these business-friendly media, iCode's website was hacked.

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