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A series of blog posts highlighting an important topic or trend in the development through enterprise community. In the most recent Big Idea series, NextBillion partnered with Ashoka to showcase affordable housing innovations.

Monday, February 18, 2013

Special Series (Part 6): BPO for the BoP : Thoughts on moving impact sourcing forward

By Sateen Sheth

Photos courtesy of Digital Divide Data

Editor’s note: This is the final post in a six-part series examining the emerging Impact Sourcing space through work performed by the William Davidson Institute (WDI) and funded by the Rockefeller Foundation.

This series on Impact Sourcing is an attempt to bring attention to a new and emerging space within the business process outsourcing (BPO) sector.  Impact Sourcing (IS) has the potential to alleviate poverty for millions of people in a sustainable manner through job creation in the formal economy. Each piece was intended to shed light on a different facet of Impact Sourcing.  The insights were derived from a project funded by the Rockefeller Foundation and performed by the William Davidson Institute (WDI).  

In parts one & two, we defined Impact Sourcing, discussed the potential of and current challenges within the space, and described the factors accelerating its growth. In parts three, four & five we profiled three Impact Sourcing Service Providers (ISSPs) at various stages of operation in Kenya. These ISSP profiles were intended to move the discussion beyond the mere conceptual for Impact Sourcing.  We hope they provide a more robust view of the motivations, challenges, and successes that the social entrepreneurs and IS workers are experiencing.

This final post summarizes our key insights and offers several suggestions on how to most effectively move the space forward.  There are three key factors we hope that you remember about Impact Sourcing:

  • The BPO industry is large, growing, and spreading across the world; many services can be done from anywhere and are not tied to specific geography or location.  Due to macro factors such as continued technological innovation, the digitization of the workplace, and the growing capabilities of workers worldwide, growth in BPO is likely to continue.
  • The big idea driving Impact Sourcing is that it has the potential to create both economic and social value for multiple stakeholders. This includes those from disadvantaged communities looking for employment, Impact Sourcing Service Providers (ISSPs) who hire employees from disadvantaged communities, BPO firms that could benefit from a lower cost structure when partnering with ISSPs, and BPO customers looking to outsource services and have CSR impact.
  • Existing ISSPs have demonstrated positive change on employee well-being through increased income, formal work experience, the development of skills, and other educational opportunities. But ISSPs still face significant challenges regarding training employees, securing new client work, and finding employment for the ever-growing number of unemployed workers.

Our research and field visits revealed that there is potential for creating large social impact.  But there are also significant challenges holding the sector back.  Below we outline three key challenges facing the sector, and associated interventions to address these challenges.  These are:

Challenge: There is a lack of information about the long-term social impacts of ISSP employment on poor and vulnerable individuals and their households.

Opportunity: Conduct impact assessment studies focused on individual workers to better understand the impacts of employment for these workers.

While much work has been done to quantify the prospective market size and employment potential of the Impact Sourcing space, there still remains a lack of information outlining the true social impacts of ISSP employment on poor and vulnerable individuals and their households.  Clients working with ISSPs have requested more specific, quantifiable information regarding the positive and negative social impacts on ISSP employees and their families.

More work also needs to be done to better understand worker satisfaction, quality of work output, and worker retention. Clearly documenting employment impacts will help potential clients and supporting organizations (e.g. foundations and governments) decide whether to pursue Impact Sourcing. Performing individual-worker focused impact assessments would allow ISSPs to better understand how to improve their business models and support services so as to maximize impact.

While better impact assessment is a high priority for most participants in the sector, few ISSPs have the capabilities or resources to do this themselves.  A sector-wide effort would improve quality, standardize results, and document best practices across ventures and geographies.

Challenge: ISSPs incur significant costs identifying, recruiting, and training BoP workers that may make the ISSPs less cost competitive. 

Opportunity: Support ISSPs by establishing regional training centers targeting those from disadvantaged communities

Because ISSPs hire from poor and vulnerable communities, the workers they hire tend to have fewer academic qualifications and less formal work experience than mainstream BPO employees. This means that initial training requirements are high.  Our research revealed that most ISSPs run their own training programs, which are both costly and idiosyncratic to each firm. While training programs offer high benefits for ISSP workers, they raise costs and can be a significant distraction for ISSP managers.

A second way to support the industry would be to fund the development of regional training centers in identified hubs where several ISSPs are present or activity is likely to grow.  Creating a pool of qualified, well-trained, and certified Impact Sourcing workers is a public good that has the potential to support an entire cluster of ISSPs.  The costs of identifying, training, and certifying workers for ISSPs might best be moved off the ISSP income statements and born by either government programs or foundations.

This strategy would create a standardized curriculum that covered skills training (i.e., computer literacy, business English, typing), work environment training (i.e., workplace etiquette, managing expectations), and management training (i.e., communication as a manager). Training hubs would not only offset costs but could also serve as a recruiting ground for ISSPs searching for local talent and trying to scale.

Challenge: ISSPs find it difficult to connect with new partners and secure new client work 

Opportunity: Facilitate a series of knowledge dissemination events like summits/seminars for both clients and ISSPs.

One of the biggest challenges that ISSPs face is client acquisition. Many clients express interest in outsourcing work to service providers that are creating impact. But, while the sentiment is there, most potential clients lack reliable information about Impact Sourcing providers or information on how to consummate partnerships.

One way to address this challenge would be to provide both an offline-online platform for such knowledge exchange to take place. Summits could be developed that provide comprehensive information on Impact Sourcing – from policies and programs that work from a government/industry level to successful business models for ISSPs, types of work that ISSPs can accomplish, and roles of other players (i.e., foundations, NGOs, and mainstream BPO providers). Such events can provide networking opportunities between clients and ISSPs and help in business development for ISSPs. The Rockefeller Foundation and others have started to bring together diverse stakeholders with the hope of further developing such opportunities.

In addition, there would be considerable value in developing a companion online platform dedicated specifically to promoting Impact Sourcing. Such a portal could enable the distribution and promotion of Impact Sourcing content and discussion. Developing an online presence would go hand-in-hand with offline summits and seminars and connect relevant ISSPs, BPO providers, and other stakeholders involved with Impact Sourcing.

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The emergence of the Impact Sourcing space is an exciting development with the potential to transform the lives of millions while creating real economic value. But there are significant obstacles preventing the space from reaching its ambitious goals.  Modest interventions by foundations, governments, and development organizations can help transform the industry, impacting millions of workers and their families.

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  • Managing Partners

    William Davidson Institute
  • Sponsoring Partner

    Citi Foundation
  • Content Partners

    Ashoka
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