I have now run a few companies. Over time, I have experienced a repeated epiphany; which is that you never realize which employees are useless until they go on a vacation and nothing bad happens. Now, this isn’t a dig at good employees; good ones find ways to delegate their responsibilities and still check their emails—great ones work harder while on vacation. However, the bad ones often vacation themselves out of a job—oddly, those are usually the ones who keep reminding me about how valuable they are. Ironic right?
I bring this up because most employees just went on a 3-month forced vacation. As I speak with my friends, they’re all saying the same things;
-For 80% of employees, work from home went better than expected and my friends are now wondering why they need an office building and the associated expenses.
-For 20% of employees, it has been chaos and it seems silly to retain office space just to micro-manage these weaker employees.
-If they are going to run the business through Zoom meetings, why do they need expensive Americans when there’s some guy in Poland who will work harder for 10% of the price?
Me: Wait…, what???
Him: Yeah. We can save a fortune by outsourcing. We have considered it in the past, but we thought we needed the communication and team-building of all being in the same place. Now, we’re re-thinking this.
Me: Have you ever managed people overseas?
Him: Yeah, we outsource a few projects today. Some work better than others, but we’re getting the hang of it. We intend to dramatically increase the percentage that is outsourced because we basically outsourced everything during COVID-19. Sure, it isn’t going to be perfect, but the savings more than justify it. We can then retain a few Americans who fix the mistakes. All we really need is for senior management to be American with a few guys in Admin to support management. More than half of our staff can be offshored.
I have had this conversation a dozen times now in the past month. Rewinding a few decades; America outsourced its blue-collar manufacturing workforce and hobbled the middle class. The white-collar guys have sort of ignored this as everything at Costco got cheaper. However, there were big consequences along the way. Now I wonder if we are about to outsource a lot of the white-collar jobs too. That would be crippling for the economy.
Thinking of my expenses, I have always wondered why I spend a few hundred dollars an hour for a lawyer to review a document or regurgitate the securities laws. I have to think there’s someone overseas who can do this for a fraction of the cost. You don’t need a fancy degree to proofread a contract for me. I just need to know that you have all the facts and won’t make expensive mistakes. Fear of the unknown is all that held me back from finding a cheaper alternative. Many of my friends have said something similar. “How will we know if our bookkeeping is done right if it is done in India?” “Well, what’s the difference between India and having it done 20 miles from your office with a weekly Zoom meeting?”
Now, many of these offshoring experiments will fail. It takes a unique skill to manage people remotely and after a period of chaos, many of these jobs will stay in America, but many won’t. Much like the multi-decade process of outsourcing manufacturing, we’re about to have a similar process when it comes to office work and COVID-19 just dramatically accelerated it by removing the fear of remote work. Except, whereas manufacturing took decades to offshore, I wonder if office work is pushed offshore over only a few quarters.
COVID-19 was a bad cold that global governments overreacted to. The ramifications of this error will be ricocheting around for long after we all take our masks off and go on with life. As I sit on the beach during my vacation and piece it all together, I realize that many people are focused on the first-order effects like restaurant seating capacity, while ignoring the much larger impacts. The world will never be the same after COVID-19. History says that a crisis accelerates changes that are already in motion. Look around you and think through the permutations. Our world will change dramatically as things open up. Is your portfolio prepared?
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