Article 43

 

Thursday, October 11, 2012

Bring Jobs Back Home

your_job_is_next.jpg

Last year our elected officials stalled THE AMERICANS JOB ACT that would have done some good getting Americans back to work.  Earlier this year they killed the REBUILD AMERICA ACT that would have done even more good. 

Today - things haven’t changed much.

But there’s still hope.  Even disposable call center jobs can stay here.

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Tax Break for ‘Shipping Jobs Overseas’ - Explained

By John D. McKinnon
Wall Street Journal
October 5, 2012

Amid all the confusing clashes over taxes in Wednesday’s presidential debate, there was one topic where the two candidates seemed to be talking right past each other - what Barack Obama terms tax breaks for companies that ship jobs overseas.

“I want to close those loopholes that are giving incentives for companies that are shipping jobs overseas,” Mr. Obama said at one point Wednesday night, repeating a plan hes been pushing for months in speeches and budgets. “Right now you can actually take a deduction for moving a plant overseas. I think most Americans would say that doesnt make sense.”

Mitt Romney expressed bewilderment: “You said you get a deduction for getting a plant overseas. Look, I’ve been in business for 25 years. I have no idea what youre talking about. I maybe need to get a new accountant.”

Mr. Romney appeared to be exaggerating his confusion to make a point: The tax break that Mr. Obama is talking about is both obscure and relatively tiny.

Currently, moving costs generally are deductible like any other ordinary business expense. The presidents budget contains a proposal to take away the deduction when a company ships a plant overseas. But it’s basically a symbolic issue. A legislative version of Mr. Obamas budget proposal would raise only about $168 million over the next 10 years. The corporate tax is expected to raise $237 billion in 2012 alone.

In fairness, Mr. Obama has other, much more substantial proposals that are aimed at the same general goal of reducing the attractiveness of operating offshore for U.S. businesses. Those include tightening up on tax rules that allow companies to defer U.S. tax on their foreign income, and reducing the ability of companies to siphon profits they earn in the U.S. to overseas subsidiaries.

Some of those changes could raise tens of billions of dollars and alter corporate incentives. But many U.S. multinationals view them with concern, saying they would simply make the U.S. tax system and U.S. firms even less competitive with other countries. Already, other developed countries have lower corporate tax rates than the U.S., and also no longer seek to tax their multinationals on foreign earnings - a system known as “territorial” taxation.

Mr. Romneys tax plan would move the U.S. in line with the rest of the world. At the same time, his plan also calls for curbing incentives for shipping jobs and profits overseas:

“Amendments to the tax code need to be crafted in a way that does not encourage corporations to game the system and export jobs or to move their U.S. headquarters abroad,” his plan says. “A territorial system must be designed to encourage the creation of jobs in the United States, not to outsource them.”

So, basically, despite talking past each other, the candidates actually agree on a lot when it comes to corporate and international tax policy.

That won’t stop them from continuing to clash. Democrats in particular believe blaming job losses on U.S. tax rules is an effective political contrast with Republicans. Mr. Obama already has brought up Wednesdays debate exchange at least a couple of times, as he argues that Mr. Romney is denying his previous positions, not to mention reality.

“Ending tax breaks for corporations that move jobs and profits overseas?  Hed never heard of such a thing,” Mr. Obama said at a Friday rally in Virginia. “Who knew? Who knew?”

SOURCE

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The federal tax code has “loopholes that are giving incentives for companies that are shipping jobs overseas.”
Obama says tax code rewards firms for shifting jobs overseas

Polititfact
October 8, 2012

President Barack Obama and Mitt Romney have sparred over tax policy for many months. They have argued over the treatment of the middle class, small businesses and whether the Bush-era tax cuts should be extended for the wealthiest 2 percent. The first presidential debate sparked debate on a different point—the taxes paid by companies doing business overseas.

So far, this topic has not played a prominent role in the campaign, although American-based multinational firms have a huge stake in the outcome. By one conservative estimate, this part of the tax code is worth $30 billion a year.

During the debate, Obama tried to score points on Romney by highlighting the tax breaks companies get when they move jobs overseas.

“When it comes to our tax code, Gov. Romney and I both agree that our corporate tax rate is too high, so I want to lower it, particularly for manufacturing, taking it down to 25 percent. But I also want to close those loopholes that are giving incentives for companies that are shipping jobs overseas. I want to provide tax breaks for companies that are investing here in the United States.”

Romney responded, “The idea that you get a break for shipping jobs overseas is simply not the case.”

In this fact-check, we’ll examine the presidents statement and ask if there are tax incentives for companies that set up foreign operations.

In the narrowest sense possible, Romney’s rebuttal is accurate. There is no clause in the tax code that rewards a company when it relocates production beyond U.S. borders. But if a plant moves at all, whether its from Ohio to Tennessee or Ohio to Malaysia, it is eligible for deductions.

“There is certainly a tax break for U.S. companies that move operations or people abroad,” said Gary McGill, director of the Fisher School of Accounting at the University of Florida. “It is simply a business expense like any other legitimate expense.”

Richard Harvey, a former partner at the accounting firm Pricewaterhouse Coopers and now at Villanova School of Law, went even further.

“A company would be arguably negligent if they did not claim the deductions,” Harvey said. “In addition, the current tax law would allow a tax deduction for the costs of shutting down a U.S. operation.”

But both tax experts said the moving expenses were trivial compared to the hefty tax savings that companies can realize after they move their operations. There are two provisions in the code that allow them to shelter income from the IRS.

Tax break #1: Keeping profits overseas

When an American firm opens a foreign division, it typically sets up a separate company that does not pay U.S. taxes.

“That foreign subsidiary is a new entity, organized and created in a foreign country, “said McGill. “And responsible for its own taxes.” Profits earned by the subsidiary need not show up on the parent company’s tax return.

The subsidiary pays taxes in the country where it’s located. Those rates are often lower than in the U.S., where the corporate rate is 35 percent. So long as profits remain overseas, U.S. taxes are deferred.

The company can declare that none of that money will return to the U.S.

McGill, along with colleagues Edmund Outslay and Michael Donohoe, picked apart the public financial statements of Apple and other high-tech companies such as Google and IBM. With Apple, they found the company had built up $23.4 billion in earnings the company said would stay overseas permanently. And for good reason: Apple was paying an effective tax rate overseas of 1.2 percent on those profits.

Tax break #2: Selling to yourself

An American firm with a global network of subsidiaries has another way to trim its tax bill. All of those companies can buy and sell among themselves. Its perfectly legal and very lucrative. Take the example of Google.

In just one quarter, the owner of the world’s most popular search engine had nearly $2.8 billion in net income and over half of that came from outside the U.S. That would put Google in good shape regardless, but the foreign earnings would be especially valuable. In 2009, the company’s foreign tax rate was 2.4 percent, reported Bloomberg News.

Google helped keep its taxes low by licensing its algorithms and other digital wizardry to an Irish subsidiary which then sold advertising around the world. The Irish tax rate on that income was 4 percent. But Google was able to drive its tax bill even lower by creating Google Ireland Holdings based in Bermuda where the tax rate is 0.6 percent. The Irish subsidiary sheltered its income by paying royalties to the subsidiary based in Bermuda.

These transactions are supposed to cost the same as if they were conducted at ar’s length. Harvey, the former Pricewaterhouse Coopers partner, said they are anything but.

“It is relatively clear most U.S. multinational corporations are aggressively shifting taxable income to low-tax jurisdictions,” Harvey said. “I believe that anyone who believes the IRS can effectively enforce the arms-length standard is an eternal optimist - or delusional.”

Tallying the cost

Harvey said the tax tools that multinationals can use give them a competitive advantage over domestic firms. He points to the work of Martin Sullivan, chief economist at Tax Analysts, a nonprofit news service. Sullivan told the House Ways and Means Committee that the tax revenues lost through deferral and transfer pricing were worth between $30 billion to $60 billion a year.

Sullivan also noted that American firms with international operations had shed American jobs while increasing their overseas employment.

“Between 1999 and 2008, U.S. multinational corporations cut their domestic employment by 1.9 million. Over the same period U.S. multinationals increased their employment overseas by 2.4 million,” Sullivan said.

But the picture is more complicated than that might seem. There is strong debate over the role that tax rates play in those job shifts. Some analysts, including Harvey, believe the real drivers could be lower wage rates and being closer to important markets around the globe.

However, regardless of the initial motivation, once companies make the move, in Sullivans words, “a toehold of real investment allows a truckload of profit to follow.”

Our ruling

President Obama said there are “loopholes that are giving incentives for companies that are shipping jobs overseas.”

Independent analysts agree that firms with international operations can take advantage of tax loopholes that domestic firms can not. The value of these is in the billions. Such tax laws might not be the deciding factor for companies to locate in foreign countries, but they make that choice more lucrative.

We rate the statement True.

SOURCE

Footnotes:

CNN, First presidential debate transcript, October 3, 2012

PolitiFact-Rhode Island, Whitehouse says companies get a tax break for moving jobs overseas, November 21, 2010

Interview with Curtis Dubay, senior policy analyst, Heritage Foundation, October 5, 2012

Interview with Will McBride, chief economist, Tax Foundation, October 5, 2012

Interview with Rebecca Wilkins, senior counsel for tax policy, Citizens for Tax Justice, October 5, 2012

Interview with Gary McGill, director, Fisher School of Accounting, University of Florida, October 5, 2012

Email interview with Richard Harvey, professor of practice, Villanova University School of Law and Graduate Tax Program, October 5, 2012

National Tax Journal, Through a glass darkly: What can we learn about a U.S. multinational corporationҒs International operations from its financial statement disclosures?, (forthcoming) December, 2012

Tax Notes, U.S. MNCs offshore operations: an unbiased view, January 2, 2012

Tax Notes, The revenue effects of multinational firm income shifting, March 30, 2011

Tax Notes, Economic analysis: Transfer pricing costs U.S. at least $28 billion, March 22, 2010

Email interview with Daniel Shaviro, professor of taxation, New York University School of Law, October 5, 2012

Department of the Treasury, General explanations of the administrationҒs fiscal year 2013 revenue proposals, February 2012

Heritage Foundation, Obamas “Insourcing” Agenda: Punishing Job Creators for Competing Overseas, January 18, 2012

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union-workers.jpg

Bring Jobs Back Home Act

From SPOKESMANM 10/13/2012:

Surveys of the business community state that regulations are not the No. 1 issue that is causing businesses to not hire, but the uncertain economy. Republican McMorris Rodgers, along with fellow Washington Reps. Jaime Herrera Beutler, Dave Reichert and Doc Hastings, voted down the effort to bring to the floor a measure called the BRING JOBS HOME ACT (H.R. 5542) that would have removed the tax incentives for companies to ship jobs overseas, and would have given tax breaks for those companies who brought jobs back to America.

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US election: How can politicians bring back jobs from China?

By Jason Margolis
BBC
September 27, 2012

Voters in the swing state of New Hampshire have an extra interest in hearing more details about Mr Romney and Mr Obama’s jobs plans.

New Hampshire earned the dubious distinction of losing more jobs to China, per capita, than any other state from 2001-11, according to a new study from the Economic Policy Institute.

Companies like Watts Water Technology helped the state secure that spot.

The company had been making water control valves at a factory in the town of Franklin since 1959, but the company began shifting jobs to China a dozen years ago.

The company didn’t entirely shut things down in New Hampshire, and today, the Franklin factory is once again bustling.

That’s because it has begun to make sense to bring some jobs back home, says operations manager Ken Sargent.

“The cost of labour in China is constantly going up, the fuel to get [the product] here is constantly going up,” he says. “A lot of the benefits of doing business in China have deteriorated.”

And operations are becoming more streamlined in New Hampshire, he says, “which makes it a lot more cost effective to bring the work back to the states”.

Markets and customers

And Mr Sargent is just happy to be back home.

“In China, I really didn’t know what to expect,” he says. I had translators for many of my meetings.

“The cultural barrier is significant. It’s much harder for a manager to come from the US and not offend the Chinese people.”

Mr Sargent says Watts Water has brought back more than 125 jobs, about two-thirds of what they originally moved to China.

Tyler Stone, the company’s director of operations, says government incentives can influence the decision to relocate jobs, “but it’s usually never the driver”.

“The driver is really around how we serve our markets and our customers,” Mr Stone says.

Though politicians may be quick to take credit for bringing manufacturing jobs back from China, “it’s all baloney”, says Richard D’Aveni, professor of strategy at Dartmouth College’s Tuck School of Business.

US ‘disadvantage’

That’s not to say that government shouldn’t try to help businesses compete with China.

Most of Hypertherm’s employees work in New Hampshire

The US is fighting and losing a new economic Cold War with China, he says, in part because the country has failed to adapt.

“Our form of capitalism is at a disadvantage compared to state capitalism,” says Mr D’Aveni.

“And so far, what we’ve tried to do is to level the playing field by getting the Chinese to act like us,” by invoking World Trade Organization free trade rules and pressuring Beijing to curtail currency manipulation.

That might stop China’s economic juggernaut in the short-term, but Mr D’Aveni says it is a losing strategy for the long term.

And what voters often hear are promises to restore what we’ve lost, says Dennis Delay, an economist with the New Hampshire Center for Public Policy Studies. That does voters little good.

“If you look at the manufacturing jobs that have been lost, in a very real sense those jobs have gone and probably will never come back,” he says.

“They’ve gone to China or to Mexico, or to other countries with lower labour costs or lower natural resource costs.

“But in part, they’ve been replaced by automation, by technological change.”

Tax breaks and subsidy programmes can create a short-term boost, he says. But to promote long-term economic growth, policymakers need to focus on educating the workforce.

“Where New Hampshire competes is in producing high value-added products that require a significantly trained workforce,” he says.

“And that’s a very difficult combination for other countries to be able to match.”

Deep tradition

To see that formula in action, I ride up the road to the town of Hanover, where Hypertherm Inc makes equipment used around the world to cut steel and aluminium.

And Obama visited a Wisconsin factory last year

Most of Hypertherm’s 1,300 employees work in New Hampshire, and the company exports 20% of its product to China.

The company has decided not to move the factory to China, even though “there’s nothing that technically requires it to be here in the US”, says president Evan Smith.

He compares his firm to successful German manufacturers who have invested locally and for the long term rather than chase short-term profits.

Hypertherm has spent a couple of million dollars on a training institute to ensure a steady stream of skilled machinists. The states of Vermont and New Hampshire and the federal government in Washington helped.

That is the type of government support many in the state call for. The presidential candidates do address workforce training in their platforms, but most of their economic arguments focus on taxes.

Mr Romney promises lower business taxes, while Mr Obama says he’ll end tax breaks for companies that outsource American jobs.

I asked Evan Smith at Hypertherm how much he considers taxes when deciding where to manufacture.

“I can’t think of a single strategy meeting that we’ve had where that’s come up,” he says.

SOURCE

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Intel’s Otellini: U.S. Can Bring Jobs Back From Overseas

By Joseph F. Kovar
CRN
October 02, 2012

Paul Otellini used his keynote presentation at the Intel (NSDQ:INTC) Capital Global Summit to focus on his view of worldwide economic trends instead of focusing on Intel’s vision or its investment plans.

Otellini, Intel’s president and CEO, engaged in a question-and-answer presentation with Tom Campbell, Dean of the Law School at Chapman University in Orange, Calif., and former U.S. Congressman, on how U.S. and world economics are impacting the business environment while touching on issues that are at the center of the economic debate in the upcoming U.S. presidential elections without mentioning the elections themselves.

The Intel Capital Global Summit is an annual event that brings companies in which Intel Capital has invested together with potential investors, customers and partners.

[Related: Intel To Invest $300 Million In Ultrabook Partners Fund]

Otellini said that, of all the economic indicators that are regularly discussed, the scariest one is the unemployment rate.

“You need 350,000 jobs [to be created] per month to get back to normalcy, and we’re not getting that,” he said.

Otellini also said he is closely watching the drop in consumer sentiment and in CIO sentiment, noting that the rise in productivity that had been seen until recently seems to have run its course, which is part of the normal cycle. However, he said, CIOs are worried about the future.

When asked about the Federal Reserve Bank’s easing of the money supply as part of the current third round of quantitative easing, Otellini said he is concerned about what that will do to the business environment. “None of us would run our own companies or our personal lives based on the Fed,” he said.

He explained that the expanding money supply is keeping borrowing costs low, but that money markets, now flush with cash, are remaining on the sideline and are getting little or no rate of return on their holdings. The result, he said, is a lot of money coming to the U.S. but not being put to work. “It’s a shame,” he said.

In addition to all that capital sitting in the U.S., the country also has a well-trained and highly educated workforce as well as a stable political environment, giving it a unique opportunity to turn the economic discussion away from the problems of outsourcing and instead focus on bringing jobs back home, Otellini said.

“It’s important for leaders to speak out. ... We need to reduce the uncertainty and bring the money back,” Otellini said.

That includes uncertainty related to over-regulation in such areas as environmental concerns, banking concerns and healthcare, Intel (NSDQ:INTC)’s Otellini said.

For instance, Chapman University’s Campbell asked Otellini about such issues as the Environmental Protection Agency now having regulatory authority over carbon dioxide output and the DoddFrank Wall Street Reform and Consumer Protection Act providing for a new Consumer Protection Bureau, which can act against businesses without Congressional authority.

Otellini said that such uncertainties mean that industry has cheap money, but not easy money. He explained that customers and distributors can’t get loans to carry inventory and that investment in the U.S. is restricted by regulations. Healthcare is also a big regulatory overhang. “Business people don’t like uncertainty,” he said. “The more variables are uncertain, the harder it is to make decisions.”

Otellini also said that corporate tax rates in the U.S. are among the highest in the world, a fact that retards the ability of companies to bring cash from overseas to the U.S. He called for a lower, more competitive tax rate combined with the elimination of tax loopholes.

Otellini did say there are new opportunities to bring high-end jobs back to the U.S. from places like China and India thanks to the rising cost of doing business in those countries.

For instance, the cost of working with mid-level engineers in those two countries is similar to that of the U.S., whereas the cost of working with senior-level management is becoming higher than in the U.S., because of the fact that such personnel with strong English-language ability and management experience are rare.

When asked whether he was bullish on the State of California, Otellini answered in the negative.

“Oh God,” he said. “I was born in California and raised here. But, we’ve messed it up so much. ... I’m afraid the abyss will be like Greece.”

Otellini said that Intel has not increased headcount in California in the last 10 to 12 years and has closed its last factory in the state. Employees cannot afford to buy a house in California, and they complain about their local schools. “If it wasn’t for the magic of Silicon Valley, there would probably be a net [population] exodus,” he said.

SOURCE

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Don’t Blame China (Or Corporations), Politicians Pushed Jobs Out of the U.S.

By J.D, Tuccille
Reason
October 17, 2012

While listening to the major-party presidential candidates come within an inch of declaring war on China during last night’s debate, my first thought was that Beijing displayed admirable restraint by not sinking a U.S. aircraft carrier about two-thirds of the way through the posture-fest. My second thought, though, was of the inflation-fueled sticker shock my father displayed a year ago over the price of desert boots. Yeah, that sounds weird. But those two political candidates, and power-grubbers just like them, have helped create conditions in which it’s very attractive for manufacturers to do everything they can to keep costs down, including moving factories to such terrible destinations as China.

First, to be clear, I’m not arguing that all of the incentive to move manufacturing overseas comes from inflation. There are good reasons to move manufacturing that have nothing to do with the eroding purchasing power of the dollar (although many of those reasons can also be blamed on politicians). But my father is a guy who spent much of my youth stomping around in Clark’s desert boots. He’s also an economically savvy guy who writes financial newsletters. And he balked at the price I’d paid for my own pair of desert boots even though that price was comparable to what he paid back in the day, adjusted for inflation.

My father, like many people, was blind-sided by inflation. The purchasing power of the dollar erodes, and even if manufacturers do nothing more than adjust for inflation, people complain about price-creep and insist they’re being gouged. Clark’s desert boots cost $12.95 in 1959. By standard measures, according to the American Institute for Economic Research’s handy cost of living calculator, they should cost $100.87 today. They list for just about exactly that now, though you can usually find them on sale. But labor costs in in Britain have dramatically risen in that time, so the shoes are no longer made there they’re made in Vietnam.

Likewise, Levis 501 blue jeans have been a staple clothing item over the decades. They listed in the 1986 Sears catalog for $30.99 each. Sears currently lists them for $64.00 (which would exactly compensate for inflation), but has them on semipermanent sale for $47.99 ח J.C. Penney just lists them at $45.00. That means 501s are actually cheaper than they were in 1986, once you adjust for inflation. U.S. labor costs have also risen in that time, so it’s no surprise that Levis has moved production to Asia.

Incidentally, the AIER warns, “Most Americans in 2011 experienced a day-to-day inflation rate of 7.2 percentmore than two times the official estimate released by the Bureau of Labor Statistics ... If the inflation rate of big-ticket items such as cars matched that of everyday items, consumers would be appalled.” The organization explicitly links price rises to “monetary expansion policies” ח policies implemented by our fearless leaders in Washington, D.C.

Historically, such a large expansion of the money supply has always resulted in higher inflation. For now, most of the additional money created by the Fed is accumulating in the excess reserves held by banks. But recently banks have started lending again. Reserves have started flowing out of the banks and into the wider economy through a somewhat increased volume of consumer loans and a more dramatic increase in the volume of commercial and industrial loans. There are also some early signs of life in the housing market and therefore in mortgage-loan origination.

All forms of lending convert bank reserves into money, available to be spent by consumers on goods and services. If the money enters the economy without a corresponding increase in output, higher inflation will follow. With money supply increases in the 14 percent range and output increases forecast in the 2 to 2.5 percent range, it seems likely that the money supply will outpace output.

So, when Mitt Romney and Barack Obama rail against China’s nefarious practice of offering Americans good they want at prices they like, and attack corporations for shipping “American jobs” overseas, they’re mugging shock and horror over a situation they and their buddies created. They screwed with the value of the dollar, consumers were horrified by resulting price rises, and manufacturers raced to lower production costs to avoid alienating customers. And it’s everybody’s fault but the that of the government officials who started it all.

SOURCE

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Call-Center Jobs That Pay $100K a Year

By Vivek Wadhwa
Business Week
August 25, 2009

In a column a few weeks ago, I wrote about “smallsourcing” and how U.S. workers are competing for jobs that small companies haven’t chosen to outsource. Some of these jobs are in the very areas where the doomsayers said the U.S. had no chance of competing, such as information technology, Web development, and graphic design.

That U.S. workers have been competitive in these fields underscores my belief that the nation’s workforce can be more competitive in other fields than is broadly understood.

Yes, outsourcing will continue and globalization will change the world’s economic landscape. But the U.S. is hardly helpless. With smart processes and the proper incentives, U.S. companies can keep jobs here in America, and do so in a way that is actually better for the company and its employees.

Handles Big Names Consider iQor, a call center and business process outsourcing company based in Columbus, Ohio, that’s increased revenues at a 40% clip for the past four years. It’s done this primarily by expanding its U.S. operations. IQor also gives its U.S. employees universal health insurance, and pays salaries and bonuses that are nearly 50% above industry norms.

IQor’s services include customer management and other call-center work. The company also handles financial services and industry-specific tasks. IQor has big-name clients in finance, media, and telecom including Capital One (COF), the BBC, DirecTV (DTV), and MetroPCS Communications (PCS).

Handling the back-office functions for those kinds of companies is work that’s largely been relegated to the scrap heap in the U.S., considered a source of little more than low-wage, low-value, and low-self-esteem jobs. A significant number of such jobs has moved to India and other parts of the world. Sure, some companies, such as Dell (DELL), have moved call centers back home after customer protests. For the most part, though, call centers and back-office work in all but the most specialized areas have been rapidly moving off U.S. soil.

Pulling Down $100K a Year IQor, on the other hand, has 12 locations in the U.S. that house nearly half its 11,000 employees, including in such all-American cities as Columbus, Buffalo, and Greensboro, N.C. It also has operations in Canada, India, the Philippines, and Britain.

The best of iQor’s front-line call-center workers make more than $100,000 per year, and that’s not a typo. During the past four years, iQor added nearly 3,000 jobs in the U.S., making it the company’s fastest growing region. IQor CEO Vikas Kapoor took an industry that’s viewed as a lemon and has made lemonade.

There are a few lessons other CEOs might draw from Kapoor’s approach. For one, the company’s high salaries partly explain why it has a turnover rate of about 45%, less than half the industry average. To ensure that employees don’t feel like a job at iQor is a dead end, the company creates career path programs that clearly lay out a worker’s road to advancement. IQor regularly promotes employees who started out working the phones to management. And unlike many of its competitors, and an increasing number of other U.S. companies, iQor offers all its employees good health insurance and generous benefits packages.

Investing in Tech, Too In other words, iQor invests in its people, and doesn’t view them as expendable or replaceable. The company values tenure and seeks to promote from within its walls, a hallmark of companies with strong cultures. Yes, iQor expects high performance. But employees don’t seem to mind. If they did, they wouldn’t stick around. This is hardly revolutionary. Study after study has shown that overpaying your people is a key requirement for maintaining high sales growth.

That said, paying people more and setting them down career paths isn’t sufficient to make iQor competitive against companies in cheap labor spots. IQor also invests in technology designed to make its employees more efficient, for instance, by using “virtualization” technology that lets the company run any of its customers’ software applications.

Kapoor also hired a labor economist and a psychologist to build a screening and aptitude test to find the best prospects for working in a call center. Employees hired through this screening process were about 50% more effective on customer calls than their peers who weren’t screened.

Close to Accounting IQor also realized that it was paying far too much to headhunters to bring in employees who usually quit within a year. So it figured that paying its own employees much higher referral fees for leads on potential hires would be a better use of its money, and would build social cohesion among the ranks. In the past four years, iQor employees have referred more than 7,000 people to HR, and the company has paid out over $1 million in referral bonuses. Motivating a workforce to take referral bonuses seriously enough that management can replace headhunters is impressive.

IQor’s success is based on the realization that although call-center work has a bad reputation, it’s actually complex labor that can be improved through better processes and technology. It’s closer to accounting or law in its intricacy than it is to fast food. Complex jobs benefit markedly from better talent, and iQor hires skilled people that lead to better outcomes than if it had decided to ship jobs overseas.

For all the complaints about disappearing American jobs, companies do have a choice. Yes, Indian outsourcing firms could benefit from applying iQor’s management style. But their advantage shrinks dramatically when people become a company’s primary investment.

SOURCE

Posted by Elvis on 10/11/12 •
Section Dying America
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