Outsourcing in the Scottish Highlands

This is an extract from Teleworking: Thirteen Journeys to the Future of Work by Andrew Bibby, published Calouste Gulbenkian Foundation, Nov 1995.

Park on a yellow line in the London Borough of Newham, in nearby Tower Hamlets, or across the city in the boroughs of Ealing or Brent and when you ring up to complain about the parking ticket on your windscreen the person answering the phone will almost certainly have a Scottish accent.

More precisely, the local rate 0345- number you will have been given as a contact line will have transferred you to a new purpose-built industrial unit on the edge of Forres in north-east Scotland, 26 miles east of Inverness. Inside, staff working for the IT consultancy and software company Hoskyns will already have access to your details. Each parking attendant (not 'traffic warden' any longer, please note) tramping the streets of these London boroughs has been provided with a hand-held computer which issues the tickets. Each night the day's haul is downloaded electronically, available for processing at the Forres centre.

The geographical - and perhaps also cultural - distance between, say, the streets around Petticoat Lane and the edge of the Moray Firth might seem to constitute a considerable barrier to this operation. In fact, Hoskyns says that the arrangement should be completely unnoticeable to users. For example, staff in Forres answer the phone in the name of the relevant London Borough. They have also been trained on what to say to callers who are keen to discuss the exact place on the local High Street where the parking ticket was issued: "We say, sorry, we're not in the area. We don't say, actually we're 600 miles away," says Les Morgan, General Manager of Hoskyns' Forres operation.

Hoskyns opened their processing centre in Forres in April 1994, and expanded early in spring of 1995 to a neighbouring purpose-built unit. It is clearly a business which is growing fast. When I visited, the number of employees had reached about 45. But Les Morgan was preparing to recruit again, and his new building was built to accommodate up to 200. The target for 1998, he told me, was to have 1000 staff in post, spread across about five sites in the north of Scotland.

Hoskyns' business at Forres is based on taking subcontracted work from other companies. The fashionable term used to describe this process is 'business process outsourcing' or BPO. The theory is that companies should concentrate on their core business activity, passing out their back-office administrative and information processing work to other firms - firms like Hoskyns for whom this is their core activity.

For example, Hoskyns suggests that whilst companies need to retain control over their decision-making and 'judgemental' processes (such things as management strategy, sales and marketing and corporate image), they can outsource much of the rest of their activity: everything from dealing with correspondence and telephone calls to letter production and company mailings.

In the case of parking tickets for the four London boroughs, Hoskyns handles enquiries from motorists (both post and telephone), processes payments of fines made by post or by credit card and initiates the legal processes for anyone who fails to pay up in the set time. The boroughs themselves are responsible for establishing parking policy and handling the court cases. (A third company, Sterling Granada, employs the parking attendants).

Hoskyns' opportunity for this business follows the passing of the Road Traffic Act of 1991, which gave the London boroughs responsibility for most of the parking enforcement work in their areas (the Act came into effect in July 1994). Whilst the police continue to deal with parking offences on main trunk roads, other roads are no longer their responsibility and instead 1200 parking attendants patrol in their place. 'Under the new system, it is anticipated that the number of tickets issued will double,' Hoskyns says cheerfully.

Hoskyns' unit at Forres also has contracts from two Scottish local authorities to administer aspects of council tax benefit and housing benefit claims. Grampian, for example, has arranged for new claims for council tax benefit in Aberdeen to be outsourced to the company. Applications from claimants and evidence such as wages slips and bank statements sent by them to support their claims are scanned in to a computer database, accessible both by the authority and by Hoskyns staff.

There are clearly other potentially fruitful opportunities ahead for Hoskyns and its competitors in the outsourcing business. Les Morgan talks of the prospects of undertaking the billing work for privatised gas and electricity utility companies: "Does an organisation whose business is the delivery of gas or electricity really want to do all the billing?" he asks.

There is no secret why this work is gravitating geographically to places like Forres. Les Morgan says that in general his building costs are a fifth of those in London while staff costs, he adds, are half those of London. What this means translated into figures is that Hoskyns' employees in Forres earn about ð8,500 a year. About 70 per cent of the current staff are women.

There is also public money available to create employment. Despite its image as a comfortably respectable town, Forres' registered unemployment levels have been high. Helpfully, the town happens to fall both within the area covered by Highlands and Islands Enterprise (formerly the Highlands and Islands Development Board) and Grampian Regional Council, both keen to support economic development in their areas. Hoskyns has become a key plank in the strategy of creating jobs in rural Scotland.

In some ways, Hoskyns' arrival in the north of Scotland can be taken as evidence that the Highlands and Islands Development Board was correct in its thinking in the late 1980s, when it put considerable stress on the importance of developing the telecommunications infrastructure of the area. The Highlands and Islands, stretching from Shetland to the Mull of Kintyre, comprises one sixth of the UK landmass but has only about 370,000 people, giving it one of the lowest population densities in the European Union.

"It became apparent from early discussions with British Telecom that the existing telecommunications network was wholly inadequate for modern purposes, without fibre optics, digital exchanges, even kilostream. Furthermore BT had no plans to upgrade the network in the area. The prospective commercial return on the large investment from such a sparsely populated area was too low to justify the expenditure. Left to commercial forces, the new services were unlikely to come to the Highlands and Islands for another twenty years, last as usual in the UK queue!," says David Henderson, HIE's head of projects and research.

Instead the Highlands and Islands Development Board and BT jointly agreed to collaborate on the Highlands and Islands Initiative (now more frequently referred to as the Highlands and Islands Telecommunications Initiative), a project designed to install a sophisticated new telecoms network across much of northern Scotland, providing digital exchange services and access to dedicated lines for data transmission. For example, about 80 per cent of businesses in the area now have access to ISDN lines.

The Initiative involved an expenditure of approaching ð20 million, of which about ð5 million was public money, routed via the HIDB. It was seen at the time of its launch in 1989 as an attempt to overcome the geographical disadvantages of the area. "Information technology will unlock a huge field of commercial opportunities for the north of Scotland and render distance from markets irrelevant," said HIDB's then Chairman Sir Robert Cowan at the launch. "Without doubt, this is the most important single investment the HIDB has made in the economic future of the Highlands and Islands."

From the start of the Initiative, the HIDB stressed the new opportunities provided for teleworking and remote working in the north of Scotland. There was also an emphasis on encouraging community-based use of the technology. HIDB, and then HIE, has supported the development of a number of Community Teleservice Centres, following the model which has more generally become known elsewhere in Britain as telecottages, and four pilot CTCs were established in Unst, Hoy, Islay and Lochgilphead. There has also been use made of the opportunities of the technology by schools and other educational bodies in the area.

However, six years on, there is perhaps a feeling that not all the initial hopes of the Highlands and Islands Initiative have been met. There is also the practical reality that the Highlands and Islands' lead has slipped: most of the rest of Britain now has had its telecoms infrastructure upgraded, and the time when parts of northern Scotland were ahead of central London for ISDN facilities has long gone.

The use made by business of the Initiative's telecoms infrastructure was the subject of a 1994 report by Andrew Gillespie and Ranald Richardson. They painted a mixed picture, concluding that existing businesses in the region have made little use of the technology: "It is clear from research interviews that it has proved extremely difficult to translate the provision of advanced infrastructure into the use of advanced services by regional enterprises. The uptake by the private sector in the region, particularly by SMEs [small and medium-sized enterprises], appears to have been low. The issue is an extremely sensitive one to the Initiative sponsors, and no usage figures have been made public; nevertheless, one interviewee admitted that 'the existing infrastructure is massively under-utilised'."

However they stressed the Initiative's role as a catalyst in encouraging companies like Hoskyns to base back-office units in the area: "For the future, call centres and back offices in particular appear to show marked growth potential. 'Teleworking' in the Highlands and Islands will, therefore, primarily be undertaken from conventional offices (ie work-places), usually located in the main regional population centres. The image of the self-employed professional teleworker operating from his (usually his) home-office in a remote glen may be a seductive marketing image, but it is unlikely to represent the reality for the majority of Highland teleworkers."

HIE claimed in 1994 that over 350 jobs had been created over the previous three years as a result, directly or indirectly, of the advanced telecoms network installed. The subsequent opening of Hoskyns in Forres has added to the total. Les Morgan says that the access to good telecommunications facilities is essential for his company's operations.

In fact, Hoskyns could have been in David Henderson's mind when he summed up the benefits of the telecoms Initiative:

"Telecommunications are a liberating force, freeing businesses from previous constraints, and allowing them to access the attractive and lower cost resources available in the Highlands and Islands. Principal amongst these is the quality of the workforce which can be obtained... Amongst the female population in particular there are large reserves of under-utilised education and ability, eager for employment. The commitment which these people have to living in their own community means that employers benefit from a high degree of loyalty and very low turnover of staff."

Taking a more general perspective than simply that of northern Scotland, clearly distance working using information and communications technologies - my definition of teleworking - provides new opportunities for employment for rural and remote areas. But it is obviously important to ensure, as the Highlands and Islands Initiative largely did, that the telecoms facilities are adequate. There is also an ongoing requirement to ensure that the infrastructure continues to be upgraded.

That this is more of a political than a technological issue is reflected in the debate within the European Union over arrangements for continuing with the provision of universal telecoms service once the existing public telecoms monopolies in EU member states have been 'liberalised'. In a market-led telecoms market, why should a small number of users in, say, a remote mountain area have access to the same telecoms facilities as users in a large city?

The EU's current thinking on this sensitive issue emerged early in 1995 with the publication of the second part of a Green Paper on telecoms liberalisation in member states. The Green Paper proposes that telecoms companies' requirements to provide universal service should, at least initially, be limited to conventional voice telephony services. The Green Paper's preference was for the creation of a fund, paid for by levies from telecoms operators, to meet the costs of universal service.

However this issue is eventually resolved, it is clear that the technological possibilities for remote working for rural areas may be offset by the higher costs of accessing the technology. In other words, the development of this sort of teleworking depends on political decisions related to telecoms provision, rather than on the technology itself.

There is one aspect of Hoskyns' operation at Forres which we have not yet considered. Technologically, there is no reason why the company could not make use of home-based teleworkers - or perhaps teams of teleworkers located in the Highlands and Islands' Community Teleservice Centres - to undertake its work. Whilst there would be extra costs, there would also be considerable savings in the overheads.

Les Morgan is adamant, however, that he would not consider home-based staff, and he adds that he has turned down suggestions from telecottages that he might want to sub-contract work on to them. His reason is interesting: "The whole benefit of working from here is the team work we can develop, the office atmosphere, and the culture created". Particularly important is the culture of customer care which he is trying to inculcate among his employees.

This is not a conventionally managed office. There is an emphasis on informality, which includes informal dress. "All members of staff are on first name terms and have direct access to all levels of the hierarchy. Regular 'open access' sessions are held in which views may be aired and opinions voiced openly," says the company.

In fact, the management structure is extremely flat with only two intermediate levels (team leaders and 'customer care assistants') between Les Morgan and the bulk of his workforce. There are rituals which he has developed, as bonding mechanisms: all staff have sprigs of white heather, for example, to wear on days when potential new customers are visiting the building. And Les Morgan has asked the whole workforce to collectively devise the office's statement of values, prominently displayed throughout the building (these include "being part of a team", "attention being paid to quality" and "people willing to try new ideas without being put down"; there is a converse list of 'do not' values which include "messages not being passed on", "good work being ignored" and "colleagues who think the public are a nuisance".)

There are other unusual aspects to being a Hoskyns' employee at Forres. Just before my visit, Les Morgan had presented all his staff individually with a paperback copy of Ricardo Semler's book Maverick, a provocative account of Semler's radical management strategy at his Brazilian company Semco. Semler's practice has become well-known in current debates on management and he is now a regular speaker on the lecture-circuit. An extract from Maverick gives a taste of his ideas:

"Today, our factory workers sometimes set their own production quotas and even come in on their own time to meet them, without prodding from management or overtime pay. They help redesign the products they make and formulate the marketing plans.."

Clearly, Les Morgan feels that Semler has something to say to his own staff at Forres as they cope with abusive telephone calls from motorists objecting to their parking tickets.

The management ideas at Forres are interesting not just in themselves, however. New forms of working clearly raise new issues of management, as the existing literature on telework makes clear.

Technology permits today much greater insight by management into employees' exact work performance than in the past. As we have already seen, Margaret Birkett had access to comprehensive statistics on the work being carried out in Southampton by her BT staff, both at home and in the call-centre. Keyboard use is particularly easy to measure: a writer reporting on the word processing unit developed in the North-East of England by one of the big clearing banks quoted a bank official as saying: "We could actually measure productivity from London on the computer system. We actually know who are the most productive secretaries: we know the number of key strokes they do per hour or per minute."

But much of the literature written for companies planning telework programmes has stressed the need to move from management by supervision (checking exact hours worked by employees, for example) to management by results.

Old management styles, it is suggested, have no place in the more flexible working arrangements which are developing, of which teleworking is a particular example. Charles Handy in the Age of Unreason, for example, speaks of a need to reward good performance rather than punish the bad. "Intelligent people prefer to agree rather than to obey," he says, though he also warns: "Do not look to the new intelligent organisations with their intelligent machines and their cultures of consent for days of gossipy coffee breaks or for boring but untaxing jobs."

I suspect that participative management styles and more democratic forms of work organisation are generally welcomed by most people - almost everyone, given the opportunity, wants to be able to do the best they can at work. (Whether collective value statements, group discussions and team building exercises change the fundamental relationship of an employee selling their labour to an employer is perhaps a different matter.)

But this is not just a matter of being nicer to employees. There is a business imperative involved too. It is clearly profitable to add as much value as possible to work undertaken, particularly in the case of outsourced information processing, where much of the work is relatively simple and easily automated. Hoskyns' quest for a high level of customer care is clearly a search to add extra value to its operations.

And without this, the work might not have ended up in Forres. After all, if work from London clients can be undertaken in Forres where overheads are much cheaper, why not send the work somewhere else where costs, especially labour costs, are even cheaper? Somewhere like India or the Philippines, perhaps.

"Basic date processing can be done much more cheaply in Delhi. The bottom end of the market will go to wherever in the world is the cheapest. It is the top end of the market, the value-added end, which we have to keep in Britain," says Les Morgan.

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