Offshoring: The Other Side Of The Double-Edged Sword

The practice of offshoring is not a new phenomenon. It has been utilized and hotly debated for many years and has only seemed to pick up momentum from both sides as the concept of globalization spreads. As Mary K. Coulter describes on page 41 in her 2005 textbook, Strategic Management in Action, “Potential markets are found all the way from small villages in China to Johannesburg to Moscow to Mexico City, and all points in between.” Globalization knows no borders. Businesses large and small are now able to compete with one another in the world market. Coulter goes on to point out that globalization not only means that businesses are able to expand their product reach, but they are also able to access vast “financial, material, human and knowledge resources” and that they “should be acquired wherever it strategically makes sense to do so.”

There are various reasons domestic firms consider and ultimately choose to offshore part or all of their business functions. The most obvious reason is money. Firms may be motivated by the pressure of stockholders and management to generate a return on their investment, or they may be looking for ways to cut expenditures because of the increasing cost of compliance to governmental regulations in the United States. Still, others may choose to offshore certain operations in order to stay competitive in their industry.

In the race to make more money or stay competitive in the world of globalization, firms need to take a step back and examine the full extent of their decisions. The choices they are making not only have an effect on the bottom line, but they also dramatically affect the lives of their loyal employees and their families, the community in which the business is located, as well as foreign workers and their nation. Firms must realize that product safety standards in developing nations are different from those standards in the United States. They risk consumer injury and illness because of produce safety issues such as hazardous levels of toxins in such things as children’s toys.

Businesses should consider the ramifications of their decisions. Is it ethical or socially responsible for firms to eliminate American jobs in order to achieve the goals of certain stakeholders? What about the effect they have on the livelihood of other stakeholders such as their employees and their families as well as the community in which the business exists? Are there other alternative operational and management changes they can make in order to reduce costs, yet maintain their domestic workforce? What impact will their decisions have on the foreign workers used to replace the domestic workers? Will these workers experience an improved quality of life, or will they be forced to accept low wages that will not bring them out of poverty and have to endure injuries, abuse and exploitation? How will their choices impact the environment in the country they offshore to? Are safety standards in place and enforced so the products that are manufactured in foreign countries are safe for consumer use? Will they be perceived as anti-American for their choices? These are very important questions firms must ask themselves before making the risky decision to offshore part of all of their business operations.

Firms that have chosen to move domestic jobs overseas to developing and underdeveloped countries have had devastating impacts on individual workers, their families and surrounding communities. Common side effects include increased levels of stress and anxiety, depression, as well as low self-esteem and low levels of self-worth. In May and June of 2003 North Texas Technology Council, in collaboration with the University of Texas at Arlington’s Center for Research on Organizational and Managerial Excellence, conducted a survey in North Texas to assess the economical and psychological impact on individuals who were laid-off, as well the impact on their families. In the July 2003 report released by Principle Researcher, Dr. Meg Virick entitled, Research Report: The Effect of Layoffs in the North Texas Region, Dr. Virick reported that of the group being surveyed, “depression was the most significant stress reaction, followed by mood swings and tenseness” of being laid-off. Nearly 58% of those who responded to the survey reported an increase in health problems after being laid-off. “Frequent health problems reported by individuals included sleep disorders, depression, eating disorders, and general aches and pains.”

The loss of a job oftentimes means the loss of familiarity and stability. Laid-off workers and their families struggle to make ends meet while enduring the emotional and physical turmoil of the actual loss of the job. Stephanie Armour in her February 15, 2005 article, Three Laid-off Americans Struggle to Find Work, follows three individuals who have lost their jobs due to lay-offs. Two of the three persons faced financial difficulties. One 41-year old single mother of three struggled to make ends meet by relying on inconsistent child support, food stamps, her limited unemployment payments and credit cards in order to get buy. Her boyfriend who wasn’t living with her was also helping out where he could. Her two oldest daughters, ages 10 and 6 years even began saving their change in empty jars they labeled "saving for college" and "saving for helping Mommy with food". She eventually had to ask her credit union for an extended overdraft in order to get by.

After three months of not finding a job the single mother went to a local copying store and made 120 copies of her resume and began going from business to business offering to work one day free. She ended up getting work for three days at a temp agency. Shortly thereafter, she received a call from a friend at Cisco, where she had worked 8 years prior. They were considering her for a temporary job she had applied for and were talking about making her an offer. By the end of the article, she did receive the temp job at Cisco and they would pay her $56,000 for the project she would be working on. The hours were longer than she wanted, but it was a pay check.

The second laid-off individual who struggled financially was a 58-year old male who was eventually forced to sell his dream home and downsize to a smaller house. When he lost his job that also meant that he lost his health insurance. He and his wife both had health problems. He had diabetes and his wife suffered from multiple sclerosis. During the agonizing months he tried to find work he ultimately had to borrow thousands of dollars from friends and family just to get buy. He applied to many places, but was oftentimes denied because he was told that he was over qualified. He felt