Behind the Asian outsourcing phenomenon

Behind the Asian outsourcing phenomenon

From the McKinsey Quarterly Special to CNET News.com
February 21, 2004, 6:00 AM PST


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In the United States, high wages are a major reason for the understandable tendency of high-performing companies to strip out layers of middle management and to increase the operating span of the remaining managers, forcing them into administrative and supervisory roles. In Asia, by contrast, the ratio of managers to staff is much higher, so they can spend more time building the skills of employees.

To give an example, eTelecare maintains a ratio of one "team lead" (frontline manager) to eight customer service agents, compared with a ratio of 1:20 or more for similar U.S. operations. The company invests heavily in formal training programs, which are reinforced by apprenticeship, coaching and mentorship. Agents who handle complex mutual-fund advisory calls, for instance, take a 16-week training course leading to the NASD Series 7 examination for broker certification.

By organizing employees into smaller teams that have more exposure to managers, the company can follow up with ad hoc coaching and detailed reviews of every agent’s performance--at least an hour a week for seasoned reps and more for newer ones. Agents at eTelecare enjoy an average pass rate of 81 percent on the NASD tests--recently, in fact, the pass rate has been 100 percent--compared with an average U.S. pass rate of 59 percent.
The higher ratio of managers to workers also allows companies to pay greater attention to identifying and implementing process improvements that enhance their operational performance; at eTelecare, no less than 10 percent of a team lead’s time is spent in this way. The benefits are evident as soon as the company takes over a client’s call center. One client, in its own operations, was used to an average handling time of about eight minutes. Within six months, eTelecare had reduced this to four and a half minutes by refining call-handling procedures; revising the order in which information was gathered and entered, with a view to minimizing the impact on performance; and altering computer screens to reduce the number of page changes required in most transactions.

The benefits of a high ratio of managers to staff are visible in offshore manufacturing operations too. Assembly line managers at one Chinese factory, for instance, worked closely with the staff to identify a novel way of reducing the time and cost of setting up surface-mount-technology placement equipment. By identifying and grouping products with similar attributes, the factory reduced throughput times and manufacturing costs significantly.