Entrepreneurship experts say that an entrepreneur must have a higher than average risk tolerance to be successful, nay, even to BE an entrepreneur. This is true, of course, but entrepreneurs also have a high tolerance for one of my favorite German words: schmutzig.
Those of you with a little knowledge of Yiddish will recognize the word. It means messy in Yiddish, but in German it’s just the regular word for “dirty.” Entrepreneurs must also love mess, because the creative process is messy.
Creating a company is a large exercise in orchestration, something like “do this, move this piece into place there.. .oh wait, a little to the left. Ok good, now that’s done, this piece can happen over there. No wait, it should go over there instead. Ok, that looks like it works. Do we have good flow? Yes!”
The creative process is messy. Oftentimes, things go wrong, or more accurately, not as right as you think. But if you move them a little over to the left or right — boom! It works, and all of a sudden, you’re achieving your goals.
The creation of Fair Trade Outsourcing, and our path to poverty alleviation, has definitely been like that. When people ask me the story of how we got started, I explain for the first two years of our existence, I was just trying to learn the BPO business.
Understand How a BPO Could Fight Poverty
The fact is that I didn’t even understand how a BPO could alleviate poverty until about 18 months into the journey. Since that time, now 2 1/2 years ago, we understand much more how to fight poverty with this BPO job, and we’re getting better at defining what that means.
Throughout that time, our definition of what an “non-poverty” or “Anti-poverty” BPO company is has also become more clear. It’s been a creative process though, with various orchestrations and changes in measurements, as we move from “Schmutzig” to “Sauber” — clean.
I’m not sure we’re 100% at clean yet, and it’s possible that we may never stop improving our definitions, because I doubt we’ll ever stop improving how we fight poverty. At this juncture in our development, as we have a robust 2020 ahead of us, my mind turned to some overarching rules of how a BPO company can fight poverty. Broadly, they are:
1. Don’t let market conditions dictate income; instead, fit anti-poverty income into market conditions.
2. Invest in building Agents’ capacity, in order to get them higher paying work that sustainably pays a middle-income wage.
3. Combating indebtedness and working to lower the indebtedness percentage among agents.
4. Continually measuring financial conditions and offering financial education to help agents understand and build sustainable households.
5. Promote smart increases in consumption when economic conditions warrant it.
Income, in the Right Way
Yes, getting and keeping people out of poverty starts with income. By definition, regardless of where you live in the world, when you earn less than a certain amount of income, you’re poor.
The reality of what it means to be poor is much more complex than that. To argue otherwise is to greenwash the problem. Let’s not do that.
In general, BPO income that gets and keeps people out of poverty looks like the following:
1. Every agent, upon entering a BPO, must earn a living wage in their home economy.
2. That living wage income must be designed to insulate the person from inefficiencies in their local economy that cause high prices (like how expensive transportation is in Africa).
3. A person’s income shall not erode due to inflation — the company shall give cost of living adjustments as inflation rises.
4. The company must strive to raise incomes for its agents: while this can mean general raises when appropriate and business conditions warrant, the company shall have a constant focus on creating pathways for earning more through higher value work.
5. The company shall operate its business to make incomes sustainable. While loss of business is inevitable in our industry, wherever possible the company should promote sustainable income for its agents.
6. None of the aforementioned rules except poor performance in Agents.
Implicit in these 6 rules is another — that the BPO provider shall not contract with customers where they cannot financially operate while adhering to these rules. This is probably the hardest rule to follow — market conditions are challenging and competition is rife — but the life-destabilizing conditions that exist in our industry were not borne from malice — instead they were borne, like most things in this world, from necessity.
Until a majority of BPO companies adopt an income plan like this, the market will still have competitive pressures that create negative outcomes for Agents. But we have to start somewhere.
Investing in Agents
In the middle of 2017, as I found inspiration in the 10 Principles of the FairTrade Movement, one principle above all really stood out to me. Principle number 8 of the FairTrade movement is Capacity Building.
What is Capacity Building? The WFTO describes it as “Seeking to develop the skills of producers and workers so they can continue to grow and prosper.”
Tactically, we’ve translated this to a series of 3 Skills Pentagons that help define what skills goals we have for our Agents that, when all achieved, will make them much more valuable than when they entered. But the basic rules of how this is measured and promoted in the call center look like this:
0. Ignore scholarly credentials (the meaning of these is hard to equate across economies); focus on direct skills assessment.
1. Define a basic set of skills, and provide numeric assessment of those skills, so that you understand where an Agent starts.
2. Establish what skills are needed based on the work your BPO has or desires; wherever possible, reduce the measurement of those skills to a number.
3. Tie compensation directly to skills — give increases only when skills are increased; the more skilled a person, the more they are worth.
4. Tie jobs directly to skills — give promotions or increases in responsibility only when Agents prove (through numeric assessment) that they have the skills to do the job they seek.
In practice, we have a set of two Skills Pentagons that can create one heck of a BPO professional: Basic Skills & Management/Communication Skills. Once an Agent scores high on these, we know that they are ready for either a very high level position on an account, or to be in management.
The Scourge of Indebtedness
At last measure, 41% of all agents at FTO were indebted in some form. This may not seem like a lot. In the US for example, almost all home owners are indebted — because we have mortgages.
But the type of indebtedness that exists among the poor is more dangerous. It’s a larger part of monthly income, has shorter timelines, and at least in the Philippines, 61% of all borrowing is done through informal sources — borrowing where the borrower has no legal protections.
It may seem counterintuitive that an employer should think about their employee’s indebtedness — aren’t employees adults who in society are responsible for their own actions? Maybe, but only when they have good access to information, aren’t borrowing to deal with some calamity (which could lead them to make an irrational borrowing decision), and understand how to manage debt.
Because, as Nobel Laureates Banerjee and Duflo argue in their book Poor Economics, poverty is not just financial poverty, it’s a poverty of information. Thus, the rules are:
1. Measure indebtedness among your agents; separate the measurement between formal and informal borrowing.
2. Provide a fund where you insulate Agents from calamity by giving cash grants when calamity strikes (i.e. health costs not covered by your insurance; health of a family member who is uninsured; loss of property).
3. Train on how to handle debt — including basic financial measurements of the impact of debt on income, budgets, and spending, as well as basic education about how to calculate interest.
4. Access to health care reduces indebtedness. Provide free healthcare to the Agent; cover as many dependents as possible within your revenue model.
5. Partner with ethical lenders, where possible, to offer debt at ethical (instead of usurious) rates as allowed in many developing economies or as charged by unethical lenders.
As you can see from these rules, this is a comprehensive plan for reducing indebtedness in your Agents. It’s worth it to you — a debt-free Agent who feels in control of their financial life is an Agent that’s able to concentrate at work.
The Gift of Financial Education
“Give a man a fish, he eats today. Teach a man to fish, he eats for a lifetime.” The rich have become rich because somewhere along the way, they or their ancestors learned how. One of the greatest things the rich can give to the poor is to teach them how to be rich.
Some know intuitively, and when the right opportunity comes along for getting them out of poverty, they seize it (Read Alemar’s Story). But, most poverty alleviation has occured because someone learned how to do it.
Lots of NGOs, government programs, software programs, etc., propose to teach you that they’re all doing good work. But how much more effective can the employer be when the employer does the teaching, and more importantly, fosters a culture of sound financial education?
1. Offer basic financial education in the workplace.
2. Make the completion of financial education training something that reflects favorably on the Agent.
3. Create (or adopt ours) a methodology for measuring Agent economics (like what we measure in our impact reports).
4. Feed the economic results back to the Agent; allow them to see their results over time.
There are two additional things that we do that may be of interest, but aren’t programs that I would consider required for a non-poverty BPO. However, they do go far toward promoting a sense of culture within your BPO that values financial education and financial progress.
First, we provide a zero-interest microloan to Agents for starting a business or buying private transportation (motorcycle). We have stringent qualification requirements, which include cash flow planning, so the Agent knows exactly how they’re going to make their payments. But this is inline with our mission of “Grow Capital Owners from Wage Earners.”
Second, we’ve started to gamify the measuring of household cash flow with our own version of a cash flow game. This is still in development, but we expect to also start cash flow clubs, similar to Robert Kiyosaki’s Cashflow.
This may seem like a lot, but as a BPO manager, operator, or owner, if you adopt these rules, you will be surprised at how good you feel knowing you’ve directly taught some of the poor how to be rich.
Promoting Smart Consumption
The last part of creating a non-poverty BPO company rests with thinking about what Agent’s consume. This may seem like a ridiculous thing for any employer to think about — but remember, you’re not just any employer, you’re an employer of the poor, working poor, or lower income, and thus the bar is higher.
This is not the nanny-state theory at work. There are real things that you can do as an employer to positively impact the way that your Agents consume, apolitically, with the potential for vast benefits.
The poor, when paid irregularly and without regard to consumption habits, have a habit of over-consuming after payday, then borrowing to get through to the next; this reduces cash flow on all sides.
1. Pay your Agents weekly — this more intuitively promotes responsible consumption and budgeting
2. Set a target weekly transportation cost for Agents, and ensure that they can consume reasonably on top of those transportation costs — i.e. don’t let transportation costs eat into consumption.
3. Financial education — show the difference between strong housing materials vs. mobile phones; help agents understand how one improves cash flow & the other reduces it.
4. Set up financial counseling — when Agents are considering a larger purchase, and help them model it so they know they can afford it.
5. Measure & Educate on the dependency ratio — help agents look for ways to increase household income to reduce the dependency ratio
While an extensive list, most of these rules will positively promote the right type of consumption and demand management behavior in your agents.
In conclusion — it may not be easy, but it creates value for everybody.
A Non-poverty BPO takes a lot more work than a regular BPO. There’s no doubt about it — you will have to worry about a lot more things in your operations and your Agent’s lives than you thought possible.
The results will tantalize you. Even when you start implementing just some of these, you will see immediate benefit as the implementation will create wonderful positive feelings in your Agent toward you and your company.
As this is an important, but complex topic, please feel free to reach out directly to me at email@example.com. I’m happy to give you some free advice on how we did this, and how you can do some of all of this yourself.
AUTHOR’S NOTE: As of this writing, FTO is still implementing weekly pay in both its Philippines and Ghana service delivery centers. It’s currently on-schedule for the 2Q of 2020.