Is Outsourcing a Moral Practice?

by | Apr 9, 2013

RBC and any other company should be free to outsource as much as they want—because it is moral.

When I told my husband that I had to write this post defending outsourcing, he suggested the title “I love foreign workers.” Admittedly, that would be more attention-grabbing, but I stuck with the more descriptive heading. Why do I want to defend outsourcing as moral? The Royal Bank of Canada (RBC) has been under attack in the social media because its supplier, an IT outsourcing firm iGATE Corp. has brought in temporary foreign workers for training, to replace 45 workers in RBC’s Investor Services division in Canada. Eventually the jobs will be transferred abroad. RBC is defending itself by stating that its suppliers, not the bank itself, is hiring foreign workers, and that not all 45 jobs will be lost as RBC is working diligently to “assist workers through the transition.” But this defense is not good enough.

The critics in the social media are shaming RBC for moving Canadian jobs overseas, thus allegedly jeopardizing the employees’ livelihoods, and they are threatening to take their business elsewhere (presumably to more nationalistic banks, if they can find some). RBC’s meek defense will not placate these critics or the government. Federal minister of human resources and skills development, Diane Finley, has reportedly stated that RBC contracting with iGATE to replace Canadian workers is unacceptable, and the government is investigating and determining the next steps.

RBC and outsourcing in general need a moral defense, one that explains why outsourcing is right and why the bank—or any company—has the right to do it. Banks offer us valuable financial services: they safeguard our savings and pay us interest on our deposits; they give us mortgages so we can buy homes, and other loans and lines of credits so that we can finance other purchases such as cars, home renovations, tuition fees; they finance companies that employ us, or a business of our own. Without banks, we would have to resort to storing our cash under the mattress, which does not earn any interest, and depend on friends and family for loans; which would be too cumbersome, too risky, or not sufficient, at least for mortgages or business loans.

In order for banks to exist and offer all the financial services they do, they must be competitive. This means that they must control their costs and operate as efficiently as possible—or they will go out of business, replaced by more efficient competitors. The role of banks is not to provide (guaranteed) jobs for home-country employees but financial services to their clients, and to do so profitably. Therefore, banks should hire those who are willing to do a job competently at the lowest salary, wherever in the world they may be. This is the moral thing to do—because it is good by the standard of human well-being.

Hiring employees who are willing to do the work at the lowest salaries—such as workers in developing countries where the cost of living is much lower—naturally benefits the bank (its shareholders) because it remains competitive and profitable. But it also benefits all the employees of the bank, whether in the home country or elsewhere, as the bank is thriving and continues to employ them. Clients of the bank, both individuals and businesses, also benefit from the competitively priced financial services that make achievement of their goals possible.

But what about those home-country workers, such as the 45 employees in RBC’s Investor Services division who will lose their jobs? They will also benefit, despite the temporary hardship that the job loss will cause. The fact that RBC will remain competitive means that the bank can afford to help them to find jobs elsewhere. It also means that the bank will be able to finance other businesses (and their cheaper, better products), which means more job opportunities for the laid-off bank workers elsewhere. It also means that everyone in Canada, including these former employees, can enjoy competitive financial services—as opposed to fewer, less innovative, more costly services that less competition in the banking sector would mean.

This is why I love competition and foreign workers—they are good for all of us. RBC and any other company should be free to outsource as much as they want—because it is moral.

Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. How to Be Profitable and Moral” is her first solo-authored book. Visit her website at profitableandmoral.com.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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