Services Safari

Loyalty of IT Workers

If 60% of Your Workers Are Looking Around, Should Clients Be Nervous????

"A recent study of the IT hiring and job situation in India found that more than 60% of IT workers in India have their resumes posted on job boards or career Web sites and are open to new job offers, even if they report being happy in their current jobs"

(source: CRN, 4/30/2007, "Is Offshoring Ethical", Larry Hooper, www.crn.com )

Wow! And many writers think worker loyalty is a U.S. problem!

Talk to most U.S. workers and almost every one of them can identify a number of items that could make their jobs (and, by extension, their lives) better. They hate their bosses, their pay rate, their shift, their working conditions, the equipment they use, etc. But, only a small percentage hate their situation enough to be actively open to new opportunities and to be actively seeking the same.

Over 60% is not a question of dissatisfaction. No, it's a cultural response from a workforce that does not feel any commitment to its employers. When I read that CRN quote, I wanted to know:

• Why do so many people feel this way?
• What happened to these workers to skew their loyalty?
• Are employers part of the problem?
• Should clients be concerned?

Wall Street and other investors have been worried about the attrition rates of offshore firms. While these rates aren't as bad as many U.S. retail and fast food firms (i.e., 4-12 times/position/year), a 20+% attrition rate is really scary in an industry where training times are high and clients rely on these third parties to retain knowledge, both tacit and explicit.

Knowledge transfer takes time. Clients hate to explain the same thing over and over again every time a new person is put on the project team. Their dissatisfaction rises when the employer doesn't seem to be able to hold onto its personnel.

I hate speaking with (alleged) customer service representatives as I tend to have to re-explain my problem to dozens of people before a solution is found (if it ever truly is found!). Likewise, clients see service personnel turnover as a destroyer of their productivity, the offshore firm's productivity and to the economics of the deal.

The most insistent clients aren't going to put up with this. Churn in services is bad for business. It says that employees put their interests above the clients and the company. It says the company doesn't do enough or sufficiently care/understand its employees to do anything about it. Clients want and need people who will stick around long enough to see the project through. Clients want someone, anyone, to stick around and be accountable for delivering value.

Selfish, immature workers are a problem unto themselves. Workers who are only motivated by self-interest and growing paychecks need to be pointed out for what they are. Employers who hire these people are contributing to their own support and client satisfaction problems. If you hire these transient types, why should you expect them to stay with you longer than they did with their previous 2,4,8,10+ prior employers? As an employer, I did not like 'grasshoppers'. These workers are mercenaries. They'll leave you when its opportune for them and they don't care about the implications to you or your client. These are not client-facing people - they're wallet-facing workers.

Loyalty with the workforce is definitely a different problem depending which country you live in. For U.S. workers, their bond of trust with employers has been broken. Layoffs, offshoring, merger efficiencies, rightsizing, downsizing, etc. have left many workers disenchanted with employers. For them, trust will have to re-earned by future employers, if it even can be ever earned again. For Indian firms, they've got to develop more insightful solutions to their labor shortages than just raiding competitors. These raids, with the opportunity to earn higher wages, don't promote job stability or higher client satisfaction. These actions only permit the illusion of growth and success within these firms. However, these tactics are hollow, thin, and short-term in focus. These are not the methods that long-term winners use.

Can we expect to see some better HR/Human Capital thinking originate from both economies? Let's hope so....

Who Gets In/Who Stays Out?

                        Behind Visas, H-1B and Outsourcing

Over the last few weeks, there's been a flurry of reporting re: the use of non-U.S. workers in the IT sector. Let's recap some of the more important data points:

A Washington Post piece by Pamela Constable ("Skilled worker visas also stir controversy") showed a breakdown of work visas issued to foreign-born professionals. She showed the visas by country of birth and by occupation (using 2004 data). Those numbers showed:

                 India   123, 567

                China     26,258

              Canada     13,412

            Philippines  11,300

                Korea      8,159

   And, occupation breakouts reported were:

          Computers                                        127,279

          Architecture, Engineering, Surveying   34,595

          Education                                           27,583

          Administrative                                    27,537

          Medicine & health                               17,676

The article also quoted a couple of  worker groups and research firms. One indicated that "very few H-1B workers could be called highly skilled" and that "wages for such workers were on average $12,000 below their U.S.-born counterparts".

The article also discussed the battle looming between advocates for opening up the limits on H-1B visas and opponents for same.

In the April 9, 2007 InformationWeek cover story ("The H-1B Limit"), Marianne Kolbasuk McGee reported that the U.S. government received over 133,000 envelopes with H-1B applications (some envelopes requested multiple visas) for only 65,000 openings in just the first 48 hours that applications were received.

To critics of the H-1B program, the massive over-subscription to this program is evidence that many are using it not for attracting the super-talented, geniuses it was intended to bring into the U.S. Instead, companies are exploiting this visa to bring in lower cost workers into technical roles.

This article also stated that "seven out of the ten biggest applicants for H-1B visas were India-based companies, led by Infosys and Wipro".

The data behind that is found in the 5/21/2007 issue of InformationWeek ("Feds Cast Wary Eye On Indian Outsourcers" Use of H-1B" www.informationweek.com/1133/h1b.htm ). They show the top ten companies granted H-1B visas last year. Infosys led the pack at 4,908. Wipro followed with 4,002. Others included: Microsoft (3,117), Tata Consulting Services (3,046), Satyam (2,880), Cognizant (2,226), Patni (1,391), IBM (1,130) and Oracle (1,022).

And finally, see what Eric Lundquist of eWeek (www.eweek.com "H-1B answer: Innovation") adds to the discussion. His take is decidedly more creative than most.   

When you speak with America's educators you get another insight into this issue. Whether fact-based or anecdotal, professors, teachers and deans will tell you that it has gotten much harder to attract today's students into technical careers. Many students believe that it is pointless to pursue a career in one of these disciplines (e.g., IT or engineering) as they've seen too many U.S. outsource their parent's jobs to offshore firms. Why get a career in a field that will get outsourced? Second, they see competition for these positions being lopsided with non-U.S. workers being allowed to work in-country at a wage rate that makes U.S. workers wages fall or stay depressed. Third, U.S. firms that have used offshore or outsourced personnel have shown themselves to be poor employers. These firms don't provide careers to their employees. In fact, they're seen as users of workers not developers of talent. I can't say I fault today's youth for wanting to stay away from such fickle and feckless firms.

As originally designed, H-1B visas were meant to bring the world's best and brightest stateside. The numbers and over-concentration of these visas within software & services firms clearly indicates that the system has been gamed (or abused) by a few firms. Given the focus this issue is getting in Capitol Hill, one can expect more attention, more press and more legislation soon.

Let see how well offshore IT firms can work the Washington influence and lobbying world. Remember, Presidential election campaigning is already underway. Politicians love to point out villains, especially non-voting foreign entities. If these candidates want to make offshore firms their symbol of what's ailing the U.S. workforce or economy, they will. Votes matter these days and it will be interesting to see whether the votes in Congress or in local elections will matter more when it comes to the H-1B issue.

The End of Independent Advice & Counsel

   "We Sell Solutions - We Don't Provide Independent Advice and Counsel"

In the mid-1990s, a senior partner uttered those words to me. It sent a shiver down my spine and actually was a precipitating factor in my decision to leave the Big 4/5/8 world of consulting a couple of years later.

When a consultancy offers solutions, it has made its bed with a handful of technology or other vendors that will provide some portion of the service/product combination that will be sold to clients. When a consultant is truly independent and objective, they are solution independent and will help clients select the best solution for the client (not for the integrator).

Once the transition to solutions has been initiated, consultants find themselves:

• selling what they want to push and not what the client really needs or wants
• sometimes pushing inappropriate or out-dated solutions onto clients
• worrying about how they'll keep their solution partners happy and not how to keep the client happy
• trying to achieve specific marketing targets that enable continued favor, discounts, co-marketing monies, etc. from the solution partner
• representing their solution partner's interests and not their client's interests
• very concerned as to how they'll keep all of their trained product specialists chargeable even if their skills are not needed as much in the marketplace due to the partner's product losing some market appeal

I've seen some really bad 'decisions' foisted on clients but what really takes the cake are the justifications 'consultants' use to fool themselves into thinking that they're doing the right thing for the client. For example:

• "Because we have 3,000 trained XYZ implementers, we can better insure a successful implementation for the client!" What a load this justification is. First of all, if a client hired you to help them select software, you shouldn't steer them to any solution except the one that solves their business problems the best. The client has hired the 'consultant' to help select software not to select and install software. The difference here is significant and shame on any 'consultant' who promises selection objectivity and still intends to steer the implementation work to themselves.
• "Our interests and the client interests are both optimized". This is another one for the hubris hall of shame. Here is an integrator/'consultant' who really thinks that his/her continued chargeability is good for the client. I don't think so. If the client could use a different solution and still be successful, then the alignment of client and consultant interests is moot. It's also irrelevant.
• "With our relationship with the vendor, we can use our buying power to help the client achieve better savings." Those words sound good but most Fortune 500/Global 3000 firms can actually negotiate a better deal without the help of the integrator. Why? Those firms can use the threat of a competitive purchase to drive deeper discounts - integrators can't do this.
• "We have a strategic relationship with the vendor and can use this to get faster bug resolution and influence product direction for the client". No - Vendors only care about the customers to come and not the one's they already have. Also, why would a vendor care about an integrator when it's the user that pays maintenance? Integrators just don't matter that much in this situation.

Clients should do the following if they want to avoid problems with integrators:

• Do not ever let these people call themselves consultants. If they're consultants, then only give them the selection - not the implementation. That's the acid test. If it's the big fee they want, they'll go for the implementation. Consultants should, by definition, not care or be personally or economically vested in the solution choice. If they're not objective, they're not consultants.
• Never award the implementation to the firm assisting in the selection. The selection should be completed by consultants. The implementation by integrators. If the two groups cross, you've got an expensive conflict of interest on your hands that could result in a poor decision.
• Make the integrators fully disclose their relationship with any solution component vendors. Did you see the story in the April 30, 2007 Information Week (The Ticker)? "Federal prosecutors last week charged Accenture, Hewlett-Packard, and Sun Microsystems with operating illegal kickback schemes over the last ten years that have inflated charges in government contracts." Regardless of how these lawsuits play out, be advised that firms often created special joint marketing funds based on the amount and profitability of deal flow driven by an integrator to a technology vendor. Full disclosure, with significant economic penalties for misrepresentation, must be part of any deal with an implementor.
• Don't expect a local project manager/partner to know about the true nature of the implementor's economic relationship with the vendor. Demand that you speak directly with the individual/executive who has overall, global responsibility for the relationship. Only that person and someone in the implementor's legal group may have the full picture.

Audit Problems Continue

HIH Audit Fallout: What Can Professional Service Providers Learn?

Restriction & Compensation Suit Against 180 Former Partners

I was traveling the last couple of weeks throughout Australia and saw a piece by Elisabeth Sexton in the May 16, 2007 Sydney Morning Herald ("Andersen Partner to Restrict Audit Activity").

The bulk of story concerned former Arthur Andersen audit partner Jonathan Pye and an investigation conducted by the Australian Securities and Investments Commission (ASIC). While ASIC found that Mr. Pye's "signing of the FAI (a wholly owned subsidiary of HIH) accounts was 'neither dishonest, nor a result of bad faith, nor reckless'", it did want his next five engagements supervised (on his own nickle).

At the bottom of the story was a paragraph that read:

"In a separate matter involving the HIH audit, liquidator Tony McGrath is understood to be close to settling a large compensation suit against 180 former partners of Arthur Andersen".

Apparently, that settlement proposal is before the New South Wales Supreme Court.

Audit problems have been thorny and expensive issues for CPA firms. My heart goes out to those auditors who are fooled by executives who have very carefully hidden fraud in their own firms and have caused shareholders to sue the deeper pocket audit firms for damages. Audits can only test a sample of transactions and whether they hit upon a fraudulent event is a matter of probability, luck and good guesses as to where fraud may occur.

Auditors are also sued when they:

• take positions re: accounting entries that are inconsistent with current guidelines
• make accounting errors
• intentionally overlook specious accounting methods/practices/standards
• participate in a management fraud.

I have little sympathy for those who knowingly err, are sloppy or are just crooked. They should be sued and run out of the profession.

Whenever the most egregious behaviors occur, it usually pre-dates a sublimation of business and professional standards to those of personal needs/wants. When audit partner compensation is based on the sale of other services, retention of the audit business, or the assumption of greater risks for shareholders, then the audit partner is clearly putting personal interests before those of the client's shareholders. That is just wrong.

My next post will concern the independence issue in more detail. But, stories like the one in Australia are periodically necessary to remind all professional service providers that client needs must come before personal needs. Professional service delivery requires one to remain current on business matters and to deliver an exceptionally high quality solution/service. Anything else is just not professional. If you feel you have a job and not a profession, you shouldn't be in professional services. The stakes are too high for you and your client's shareholders to not take this seriously.