Introduction

Finsec represents twenty one staff that work for ANZ in the voucher processing centres in Auckland and Wellington. This submission is made on behalf of those members that will be directly affected by the proposal to outsource the work to EDS and the over 2700 members in ANZ National Bank.  

Opposition to the proposal

Finsec members oppose the proposal to outsource voucher processing to EDS. There are a number of justifications for this position.

Economic implications

There are significant economic risks associated with the increasingly widespread practice of outsourcing.

A research report released by Deloittes last year showed that many companies, including large global multinationals are overestimating the savings from outsourcing and underestimating the task of managing outsourced contracts.

For instance Westpac Australia was forced in 2006 to admit that its IT security had been compromised after a $4.3 billion IT outsourcing deal with IBM in 2000 went awry. The bank struggled to get security, and especially staffing levels working effectively following the outsourcing arrangement. Westpac's chief information security officer, David Backley told ComputerWorld Magazine:

"The guys we initially had in our security team had been difficult to deal with; but when we outsourced they were moved to an organization they did not want to work for so they went from an internal group that was difficult to work with to an external contract, which was impossible."

"We have always lived with financial losses and fraud in banking as it is a risk you take, but what worries us is reputation damage, not just to Westpac as a bank or the NAB but damage to the entire financial services industry."

Meanwhile research firm, Gartner, announced in 2005 that outsourced customer service operations can cost almost a third more than those retained in-house. Its research found that outsourced operations are 30 percent more expensive than the top quartile of in-house customer service operations.

Alexa Bona, research director at Gartner, told ZDNet that firms often fail to take hidden costs such as in-house back-up support to the outsourced function into account.

"The outsourced service is often more efficient but then outsourcers need to make a profit too," she said.

"Gartner also claims that 80 percent of organisations who outsource their customer management operations purely to cut costs will fail, while 60 percent of those who outsource parts of the customer-facing process will have to deal with customer defections and hidden costs that outweigh any potential savings offered by outsourcing."

"If all you are trying to do is save money you are not going to be successful," said Bona.

The next problem with outsourcing is that it puts all a business's eggs in another company's one basket. The outsourcer loses its ability to respond to the market and innovate for itself, except by putting pressure on its contracted outsource partner. The potential cost savings come at the expense of granting another company the exclusive right to understand and control the efficacy of your business.

The greatest economic pitfall of outsourcing is that companies inevitably end up swapping experienced loyal internal staff for a working culture that they have no control over. Staff at ANZ Voucher Processing value working for ANZ and are part of the culture that makes ANZ a strong bank in New Zealand communities. They want to keep their current jobs, and many of them would want to continue to work for the bank in a different role even if their current job were to be outsourced.

Loss of staff loyalty

Staff at EDS work with many of your competitors too. Why should they have the same commitment and loyalty that your current staff have to your business over other banks? How do you know how many of your direct competitors the same staff might be working for, right at this moment? Even if EDS could construct an effective Chinese wall between its staff working for various competing companies, its reputedly low wages, poor working conditions and reluctance to offer workers full time work, means that staff there are unlikely to exhibit loyalty towards their employer, EDS, let alone any individual client of EDS; which is all that ANZ National will become to those workers.

Credibility of EDS - quality issues

As well as introducing the standard broader concerns about outsourcing, EDS brings with it its own particular threats to your business reputation. EDS has faced criticism from a range of quarters in other countries as its outsourced services fail to meet the standards of the previous original workers.

For instance ZDNet reported in a 2005 article titled 'EDS - the single point of failure' that the British Office of Government Commerce had investigated EDS four times over the past three years. This followed a series of public catastrophes including a debacle with the government's Child Support Agency when it emerged that the EDS built £450m computer system wasn't working properly a year and a half after its supposed completion, and a crash at the Department of Work and Pensions when somewhere between 80,000 and 100,000 desktops crashed during a small trial upgrade of around 40 machines which somehow went awry and spread to the entire network.

These examples of EDS's failure to deliver a quality product and thus cause damage to their clients brand are unsurprising given EDS's business strategy of offering a service for cheaper than a company can do it itself. If companies chose to buy budget services rather than retain their own experienced and quality staff they are making a deliberate choice for cost cutting over quality. This is not a choice that we believe fits with ANZ National's broader philosophy and commitment to its workers and communities. We also believe it is not a choice that ANZ National customers would welcome. Cost cutting by outsourcing loyal workers' jobs seems particularly Dickensian when ANZ National made $1 billion in profit in New Zealand last year.

We are also aware that Westpac has faced a number of problems with its recent outsourcing to EDS which has included Westpac staff having to train EDS staff to process Westpac work and Westpac staff having to regularly fix problems.

Ethical obligations regarding closing VPC's

It appears that the primary rational for decision making in this process is cost reduction. We have already pointed out the potential false economies involved in this analysis. Further to that argument we believe that ANZ National should take all practicable to retain its own workforce. Aside from savings on wages, as a result of EDS paying its staff at or close to the minimum wage, there does not appear to be any good reason to outsource the work. As a very profitable trans-national corporation operating in New Zealand,   we believe that ANZ National has an ethical obligation to directly employ its own workforce on fair and reasonable wages.

Staff opposition

On 26 January Finsec sent a communication to ANZ National staff advising them of the proposal to outsource the voucher processing work to EDS. We received a significant number of responses to this communication.

The responses indicate a universal opposition amongst ANZ National staff to the banks proposal to outsource. Given that the proposal does not directly impact workers outside of the VPC's the volume and tenor of the responses should be seriously contemplated by the bank. The responses send a message that the proposal does not have the support of ANZ National staff, and that staff view this exercise as the bank trying to cut costs at the expense of staff jobs.

Key issues covered in the responses were:

• Opposition to proposal on the basis of cutting costs.
• Opposition to the proposal on the basis of quality reduction.
• Opposition to the proposal of the basis of job losses.
• Opposition to the proposal on the basis of collective support for affected workers.

Samplings of some of the written responses are included for your consideration below:

"I'm not one to usually respond to such requests but please do all you can to retain the VPC staff in ANZ's employ. We need them to continue their roles as they do now - superbly!"

"I think this is another way ANZ is trying to cut back on wages for staff".

"We do not think Our Bank should outsource jobs to cut costs and reduce staff".

"I am concerned that this change will adversely affect our customer service, as delays and missing items may result".

"Keep the processing people employed. Don't contract out this work. That is when problems arise".

"Voucher processing now - then what".

"We are keen for all voucher processing work to be completed in house by ANZ National staff".

"How can you be a top employer if you can't protect your existing employees by cutting their jobs to cut costs, especially when the turnover was $1 billion last year".

"I know our customers do not want jobs to be outsourced. People can not afford to buy houses as it is, not having a job will not help out New Zealanders".

"Outsourcing is a bad business decision".

"Outsource - no way".

Contractual implications

While is our view the proposal should not go ahead we wish to also set out our views in relation to the application of the redundancy and redeployment provisions of the Collective Employment Agreement.

Section 6.5.2 (c) provides the definition of a directly comparable role. It states;

'A directly comparable position' shall mean a position which has the same or higher grade and salary, is in the same location or at another location within reasonable commuting distance of the employee's place of residence, does not involve a change of duties significant enough as to be unreasonable with regard to that employee's skills and ability, and does not involve a change in working hours which would place an unreasonable imposition upon the employee's individual circumstances, particularly domestic or child care arrangements, or a reduction in working hours unless the salary is maintained. The position may be with another company within the ANZ Group of companies.

Our knowledge of EDS would suggest that the contracts there cannot meet the terms of this section. Our reasons for this are:

• EDS is not a company within the ANZ Group of companies, so the section does not apply.
• Even if the section does apply, the nature of work at EDS currently does not meet the terms of the clause in relation to salary, location and change in working hours.

On that basis ANZ has two options. The first is to redeploy and the second is to make the workers redundant.

Genuine redeployment opportunities

Finsec staff have received feedback from members that if this outsourcing proposal were to go ahead they wish to be considered for redeployment (Notwithstanding their primary preference that the outsourcing proposal not be adopted). We are aware that there is a limited range of directly comparable positions available for staff, particularly given the hours that VPC staff work. Therefore we believe the bank should consider training opportunities for staff to learn new skills in order to perform different roles which could be anywhere in the bank.

In order to do this we believe the following should happen;

• Affected staff meet one on one with a career consultant.
• This discussion should look at different roles in the bank and what training would be necessary to facilitate VPC staff moving into them. The bank will need to be pro active in this process to ensure the consultant has all available information.
• With the time available till the proposed closure of the VPC it is important that planning take place to make available work time for training for new roles. This needs to happen well in advance of the VPC closure.
• The bank is pro-active in identifying available roles, job swaps (voluntary redundancy in non affected areas and VPC staff moving into the vacated roles) and roles that could come up e.g. placement in already full areas that have turnover such as branches and call centres.
• The bank would need to also commit to early placement into roles when they become available. This will impact the VPC while it is still operating, but is important to staff as it means they won't miss out on jobs due to the timing not lining up with the closure of the VPC.
• Regular review of training and job search option with Finsec will need to occur.

Inadequacy of recommendation and lack of options

We believe that there has been a failure to seriously investigate other options in this process. In particular staff and Finsec (their appointed representative) have not been consulted on what it would take to keep voucher processing with ANZ.

We believe that ANZ needs to properly consult with staff about ways to keep voucher processing in house before advancing this proposal further.

Summary and proposal

1. The bank does not go ahead with the proposal to outsource voucher processing to EDS.
2. The bank meets with Finsec and VPC staff to develop a business plan for keeping voucher processing with ANZ.
3. Our position on redundancy and redeployment is fully implemented should 1 and 2 above not secure the ongoing provision of voucher processing in house.

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