Monday 10 June 2013

The ethics of RBC's outsourcing decision

RBC, Canada’s largest bank, has been under fire recently for planning to outsource 45 IT jobs through a vendor, thereby eliminating full-time Canadian positions.  India-based iGate is part of RBC’s supply chain and responsible for hiring the foreign workers.  All of this was accomplished through the proper legal and governmental channels – although Human Resources and Skills Development Canada is reviewing the matter.  As an ethics practitioner, it is the ethical territory outside the legal boundary that is the subject of scrutiny, analysis and interest.  RBC’s decision in this matter is legal, but is it ethical? 

First, let’s examine the components of an ethical decision.  According to Crane and Matten, the following three elements shed light on whether a decision is ethical in nature (as opposed to the numerous decisions made each day that are not necessarily ethically-charged: buying lunch out or brown-bagging it, black or brown shoes, jazz or salsa, mild or spicy):

1.   The decision has a significant impact on others.  Since a number of workers would lose their positions, we can conclude this decision affects others substantially.  RBC stated that the employees would be re-assigned within the organization, but it’s still a major change either way.
2.   The decision has viable options available.  In other words, did RBC have a choice in the matter?  On this point, we can agree RBC had a variety of different options concerning their IT staff – outsource (where and to what extent) or keep jobs in-house.  It wasn’t a financial deal breaker – RBC wouldn’t be forced into bankruptcy for not outsourcing.
3.   The decision is viewed as ethical by one or more parties.  Even if RBC did not initially believe the situation to be ethical, it does not automatically mean it’s not.  Certainly, the IT staff, unions, and the Canadian public perceived RBC’s decision as containing an ethical component.

The last point, of course is what makes this story media-worthy.  This case is generating publicity for a number of reasons: RBC’s profits are enormous, RBC’s employees were slated to train their replacements (an unsavoury proposition) and RBC, to put it bluntly, is a bank.  It’s important to cut through some of the emotionally-charged banter to achieve a balanced discussion.  RBC is not alone in outsourcing.  It’s a growing trend and will continue despite public uproar.  The major banks outsource as do major retailers and service-providers.  Classical economists argue that countries with a comparative advantage in a particular industry should produce those goods and trade with other nations.  If India and China produce goods or services of acceptable quality at a cheaper cost, Canada should produce other goods and trade with India and China.  If manufacturing or call centre jobs are lost in Canada, re-training in growth industries will provide new opportunities (a worthy goal, but does it work?).


I hope it’s apparent that ethical outcomes are complex and rarely a straight-forward proposition.  Is it ethical to outsource jobs when company survival or competitiveness is not at stake?  RBC answered the question on whether the original outsourcing decision in this particular case was ethical by introducing a new supplier code of conduct (http://www.rbc.com/sourcing/supplier_code_of_conduct.html).   “RBC will not offshore work where salary savings is the primary reason and will make every effort to source in Canada,” the financial institution states.  This flies in the face of the original mandate and is a complete change of direction.  RBC’s PR machine says they value Canadian jobs above cost-cutting, but only time will tell if the new policy is ethical.  If RBC respects Canadian jobs, why did this revelation emerge only after major media coverage?  Unravelling motives is another subject altogether: Would RBC have introduced this Code without the public outcry or government prodding?  RBC claims the Code is the first of its kind in Canada.  The Canadian public helped produce this outcome and it’s a step in the right direction regardless of motive.

No comments:

Post a Comment