The Joy & Sorrow of Outsourcing

This morning, I read an article in the NY Times titled “To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now“. The article compares the story of Gail Evans, who worked as a janitor at Eastman Kodak in Rochester, NY in the 1980’s and Marta Ramos, who currently works as a janitor at Apple’s headquarters in Cupertino. Ms. Evans was an employee of Kodak and received full benefits, including help with college tuition, and she took classes at night. Upon graduating, she was promoted to a professional-track job in information technology and now has an executive position at Mercer.

Ms. Ramos works for the company that was hired to clean Apple’s offices. She makes a little over $16 an hour with no vacation pay and no help with college tuition. She may get small raises every year, but the likelihood of her moving from an outsourced janitor position to a professional-track job at Apple is pretty much nonexistent.

Ms. Evan’s experience at Eastman Kodak reads like the classic American story where you, by working hard, can rise through the ranks into middle class – and beyond. Part of that story that is often left out is that you need an employer to support you on that journey. With companies outsourcing so much of their labor, essentially anything deemed nonessential, the support system is lost.

It’s easy to sympathize with Ms. Ramos’ situation and it helps me understand the desire to “Make America Great Again”. Working hard and still struggling to make ends meet is a hard existence, but easier to withstand if you know you’re on a path that will eventually lead out of it. Yet, I am also sympathetic to the companies who decide to outsource so much of their labor because I have done that myself.

First let me say that I think that there is far too much emphasis on short term results to please stockholders.

Second let me say that I think CEO’s, venture capitalists, many people in tech, etc make way more money than they need. Yes, it’s a way to lure talent but seriously? This guy pays over $20,000 in rent per month for his apartment. It appears to just instill a superiority complex in people who aren’t superior.

pantos_logistics_-_warehouse_picture

Back to my outsourcing story. I used to have employees but I let them go in 2015 to give me the space to focus on what was working for the company, and what wasn’t. Going from a 3-person company to a 1-person company meant that I had to eliminate, automate, or outsource a lot of things. Currently, this is what I have outsourced:

  • Manufacturing of my product
  • Overseeing the manufacturing of my product, including sourcing materials and finding new vendors
  • Warehousing and order fulfillment
  • Customer service
  • Product photography

Some of these things I didn’t know how to do. Some things I thought someone else could do better. Some things I thought someone else could do for less money. Once I started outsourcing, I became kind of addicted to it. It just seemed to make life so much easier.

I no longer had to “mind the shop” and could travel as much as a I pleased. I could take a weekday off and make it up on the weekend because I didn’t feel the pressure to set an example for anyone. The biweekly stress of having to make payroll was gone. I had less rent, and fewer expenses related to it. Besides the freedom of not having employees, I was free to focus on making Po Campo grow. In theory.

Common business wisdom tells us that companies grow when they can focus on what they’re best at, and do more of that. Yet, for me, my company has not really grown since outsourcing. Either I am doing outsourcing wrong and it has not liberated me to focus on growing the company. Or, my employees were contributing more to the company’s growth than I was accounting for.

I expect the answer is a mix of the two. While it is nice to feel liberated from a lot of the humdrum of running a business, and a lot of the stress of managing human resources, I also find myself obsessed with optimizing the outsourcing rather than moving onto to other things. Also, before, when I had employees, I had a team.

Which makes me wonder: do Apple and its employees lose out on something intangible by having its lower-end jobs outsourced to another company? Or is it true that in this world, the lowest price always wins? I hope it’s the former, but it sure feels like the latter a lot of the time. One of my mottos is “Beware of the high cost of saving money” and I feel like that could ring true with outsourcing too.

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