Why Impact Sourcing Is Good for Businesses and Communities
A version of this post also appeared on The Everest Group blog.
This blog is the second in a series of three on impact sourcing. In my first post, I gave an introduction to impact sourcing in terms of what it is, its constituents, and why it matters. Now I’ll focus on its value proposition and business case.
Impact sourcing value proposition
The graphic below provides a snapshot of impact sourcing value proposition, which is based on five key elements, i.e., low cost, reliable delivery, access to alternate talent, stable workforce, and social benefits.
Impact sourcing offers significant cost arbitrage over source locations for offshore BPO. At 70 percent+, this arbitrage is comparable than the arbitrage offered by traditional offshoring. In fact, as compared to traditional sourcing, impact sourcing offers savings across both “in-house employment” and “outsourcing” models. For example, in South Africa, people costs for impact workers are 8-10 percent lower than traditional workers when averaged over a three year period for in-house employment. In India, impact sourcing offers 35-40 percent savings as compared to traditional BPO in an outsourced model.
The drivers for these additional savings over traditional sourcing models vary by location. For example, in South Africa, lower costs are driven by lower attrition and some differences in salaries. In India, the savings are primarily driven by lower people cost and facilities cost in tier-3/rural location for IS operations as compared to tier-1 locations for traditional sourcing. To get a better understanding of cost for impact sourcing across different locations, check-out the detailed report.
Proven and reliable delivery
Our research shows that the performance achieved from impact sourcing is comparable to traditional BPOs with a robust track record of meeting client SLAs/KPIs and expectations. There are multiple examples as illustrated in the case studies of Teleperformance, Accenture, RuralShores, and SureHire. Even in cases where the performance of impact workers is not tracked, there is strong endorsement of performance being comparable to traditional workers.
Furthermore, companies have successfully mitigated the concerns (e.g., lack of talent, data security, and infrastructure) linked to service delivery using impact sourcing by focusing on skills development initiatives and replicating security infrastructure similar to traditional sourcing. For example, Aegis SAprovides 12-16 week training program for impact workers that teaches basic office competencies and behavioral skills. In addition, there are several training institutes (Impact Sourcing Academy, Harambee, Careerbox, Piramal Udgam) that focus on developing the skill-sets of impact workers. Many pure play impact sourcing service providers (e.g., RuralShores) have implemented robust infrastructure to mitigate concerns on data security.
Large and untapped talent pool
Given most locations in Africa (South Africa, Kenya, Nigeria, Egypt, Ghana, Morocco) and Asia (India and Philippines) where impact sourcing is largely used have a high unemployment rate among the youth, impact sourcing provides an opportunity to access this large, untapped qualified pool. For example, there are over 155,000 unemployed graduates in South Africa. Over 35 percent graduate youth (age 15-29 years) in rural India are unemployed. Through impact sourcing companies tap into this alternate pool to augment talent supply. For example, impact sourcing has become TCS’ primary source for entry-level talent during non-campus-hiring season and enables extending its recruitment throughout the year. A detailed case study on TCS illustrates this in greater detail and provides insights on its outcome.
This talent pool is especially suited to serve the domestic market. Companies leverage this talent pool as source of competitive advantage for domestic service delivery, given local language capabilities and cost arbitrage. For example, RuralShores uses impact sourcing for vernacular language support for domestic market.
Stable and engaged workforce
One of the strongest elements of impact sourcing value proposition is the stability and motivation levels associated with impact workers. Our research shows that impact workers have 15-40 percent lower attrition than traditional BPO workers and exhibit high motivation levels that leads to improved performance over a period of time and lower hiring and training costs. This is endorsed by many companies using impact sourcing. A study by Careerbox comparing the performance of impact workers with traditional workers shows about 10 percent higher retention for impact workers measured after 90 days and 180 days of recruitment.
The lower attrition rates are driven by the strong emotional bond and loyalty towards the employer that helped educate, train and provide employment to the disadvantaged worker. In addition, impact sourcing provides a strong fit with personal/family aspirations (e.g., opportunity to work in local community without migrating to urban centers). Furthermore, for most impact workers BPO is a preferred career option compared to alternatives (e.g. agricultural, industrial labor), as it offers higher salaries and better work environment.
These four value proposition elements—low cost, reliable delivery, access to alternate talent, and stable workforce—are built around the fifth one—the social impact. In fact, the value proposition for impact sourcing exists because of the types of employees hired. Impact sourcing employees are high potential but disadvantaged economically, socially or some other way. For example, they may come from a low-income area or not have had the opportunity for a university education. Impact sourcing offers these types of people an opportunity to earn and build transferable workplace skills. As a result, employees improve their well-being, and the well-being of their families and communities. (See my previous post for a full explanation.)
A study done by RuralShores among 650 respondents across 11 of its centers shows significant improvement in the living standards of its employees after joining RuralShores. To illustrate this with a few indicators, 46 percent of its employees purchased mobile phones, 56 percent purchased consumer durable goods, average of 20 percent increase in family savings. This is echoed in Accenture‘s experience of impact sourcing where annual income of impact workers increased by ~33 percent post employment.
Impact sourcing really is a win-win with tangible positive impact on business and on people. Any which way you look at it, the combined value proposition of impact sourcing is compelling, especially for certain types of BPO work.