2010 bpo monograph (usc)

FOREWORD

The BPO in Cebu:
Challenges and
Opportunities

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FOREWORD

The BPO Industry in Cebu: Challenges and Opportunities

FOREWORD

The BPO in Cebu:
Challenges and
Opportunities

Contributors:
Fiscalina Amadora-Nolasco Leah C. Auman
Francisco M. Largo Elmira Judy T. Aguilar
Jiah L. Sayson Reuel C. Yap
Brenette L. Abrenica Tyler C. Ong
Rey Uzhmar C. Padit Charity A. Tecson
Cholen T. Osorio

UNIVERSITY OF SAN CARLOS PRESS
CEBU CITY, PHILIPPINES
2010

FOREWORD

The BPO in Cebu:
Challenges and Opportunities

Copyright @ 2010 University of San Carlos Press

All rights reserved.
No part of this publication may be reproduced or used in any form or by any means whether
graphic, electronic, or mechanical-including photocopying, recording, taping or through other
digitized information storage and retrieval systems-without written permission of the publisher.

Co-Published by CHED Zonal Research Center and University of San Carlos Press
Arthur Dingman Bldg., USC Main Campus
P. del Rosario Street, Cebu City, Philippines
Telefax: +63 32 2531000 loc. 175
www.usc.edu.ph

The National Library of the Philippines CIP Data

Recommended entry:

The BPO in Cebu : challenges and opportunities /
contributors, Fiscalina Amadora-Nolasco... [et. al.].
-- Cebu City : University of San Carlos Press, 2010.
p. ; cm.

ISBN 978-971-539-027-9

1. Contracting out--Philippines--Cebu. I. Nolasco,
Fiscalina Amadora.

HD2365 658.4058 2010 P102010107

Cover design: Julianito Joseph L. Masna


FOREWORD

he Higher Education Act of 1994 or Republic Act No. 7722 mandating the
Commission of Higher Education (CHED) to perform functions related to
research has come a long way since its inception. The Commission is
mandated to promote, direct and support higher education institutions (HEIs) in carrying
out their research and instruction functions. It is within this milieu that the National
Higher Education Research Agenda (NHERA 1999-2008; 2009-2018) was developed
and the Zonal Research Centers (ZRCs) throughout the country were established. Both
initiatives are aimed at enabling higher education institutions in the country to produce
high quality research that will advance knowledge leading to economic development and
better quality of life.

Among the various CHED schemes to support research is the Grant-in-Aid or GIA, for
which this present study on “The BPO in Cebu: Challenges and Opportunities,” is a case
in point. This grant is provided to research proposals approved from private and public
HEIs developed along the two-pronged Batch III USC-CHED Zonal Research Program
thrusts: Business and Industry Development Studies and Socioeconomic Development
Studies.

Contemporary business and industry is not spared of the effects of globalization. The
phenomenon of business process outsourcing is an impact of globalization. As it is,
globalization has made it possible for historically distinct and disconnected national
markets to merge as one huge global marketplace. For those in the know, declining trade
and investment barriers, the development of microprocessors and telecommunications,
the use of the internet and the World Wide Web, and major innovations in transportation
technology have been identified as the main drivers of globalization.

This study in regard the Cebu BPO industry (2008 and 2009) is timely as Cebu is ranked
as the number one in the Top 50 Emerging Global Outsourcing Cities. This is according
to Tholons (2009), a leading full-service strategic advisory firm for global outsourcing
and investments. According to Professor Fajardo (Sun Star Cebu Yearbook 2010), of the
University of San Carlos, Cebu met the most critical input in business process
outsourcing: An English-savvy and computer-literate work force with state-of-the-art
communication facilities.

This CHED Grant-in-Aid research output likewise comes with meaningful relevance as it
addresses the principles guiding research prioritization: Multidisciplinarity, policy
orientation, participation, balanced attention given to basic and applied research,
dovetailing, and complementation with other R & D initiatives. Moreover, the work is an
expression of the effort towards operationalizing the development of a research culture
through networking and collaboration, as partner HEIs in the USC-CHED ZRC research
capability building process.

Elizabeth M. Remedio, PhD
Director
USC-CHED Zonal Research Center


ACKNOWLEDGMENT

his Monograph was produced under the University of San Carlos-Commission
on Higher Education Zonal Research Center Grant-in-Aid Research Project,
both for Phase 1 (GIA 2008: Research) and Phase 2 (GIA 2009: Publication).
In particular, we thank the USC-CHED-ZRC Director, Dr. Elizabeth M. Remedio, for the
encouragement and remarkable support to this timely undertaking; the Director of the
USC Office of Research, Dr. Danilo B. Largo; and the Dean of the College of Arts and
Sciences, Dr. Ramon S. Del Fierro, for the research opportunity and release time from
teaching.

We sincerely acknowledge the involvement of our collaborating partners from other
Higher Education Institutions (HEI) in Cebu, namely, Cebu Doctors University,
University of Cebu, Cebu Institute of Technology, and the University of San Jose
Recoletos.

Additionally, we are grateful to those who have in one way or the other participated in
the capability-building activities, including the conduct of actual fieldwork: Adrian
Boyett D. Agbon, Reymar Zarsoza (CDU), Baby Ting (UC), Jofe Marie M. Garvez
(CIT), Agnes Sequino (USJR), Aldwin Joseph Empaces, Enriquito Satuita, Deborah Liz
Campos, Anna Beatrice Quijano, Leo Gerard A. Caral, Carlo Espina, Jiggs Adiong,
Donna Bacalso, Katrina Chiong, Lauren V. Ligaton, Reino D. Pasay, Anselmo Otero,
Ronnie Mandawe, Ma. Cecilia Caballes, Ana Flouressa Cabanilla, Shazeen B. Cruz,
Cielo Maris S. Badilles, Kaye Hazel Lequigan, Lizette Tomabang, Noel Lentija, Mae
Claire Jabines, Rowanne Marie Maxilom, and Sunleigh C. Gador.

To the technical experts who provided valuable and insightful suggestions, we thank
Gerard Go (Market Structure), Rene’ E. Alburo (Academe and BPO Linkage), Fernando
Fajardo (Benefits Package), Aloysius M. L. Cañete (Gender and Reproductive Health),
and Barbara Christina J. Pineda (Psychological Correlates of Stress).

For her unflagging assistance and for working extremely hard in preparing the financial
reports, we thank Chalemae O. Miñoza. We are also grateful to Celeste S. Villaluz-
Sanchez for the painstaking efforts and untiring assistance in preparing the documents
needed for submission to CHED; Julie Ann C. Belaniso and Geillecar C. Bucog for the
administrative and technical assistance; and Julianito Joseph L. Masna for the design and
layout of this monograph.

Finally, our profound gratitude goes to Rene’ E. Alburo and Aloysius M. L. Cañete for
the copyediting assistance, and to Father Dionisio M. Miranda, SVD, President of the
University of San Carlos, for the helpful inputs to improve this work.

ABOUT THE CONTRIBUTORS

Brenette L. Abrenica is a full-time faculty at the Department of Political Science,
University of San Carlos. She specializes in public management and local governance.
She finished her Master of Arts in Public Administration from the Cebu Normal
University, and Master in Political Science degree from the USC. Ms. Abrenica served as
field specialist and data processor of the CHED-ZRC BPO Study. Currently, she is
engaged in expanding her grasp of development issues, Cebuano politics, and voter
transition studies through new teaching responsibilities and training opportunities.
Among others, her extension activities are with the World Bank-Knowledge
Development Center (WB-KDC).

Elmira Judy T. Aguilar is Professor of Anthropology in the Department of Sociology
and Anthropology, University of San Carlos. She obtained her Masters in Health Social
Science degree at the De La Salle University. Dr. Aguilar served as Component Leader of
the CHED-ZRC BPO Study. For several years now, she headed several gender, sexuality,
and reproductive health projects.

Leah C. Auman is a full-time faculty at the Department of Psychology, University of San
Carlos. She obtained her Master of Arts in Psychology from the University of the
Philippines Diliman, with concentration in developmental psychology. Ms. Auman has
taught courses in research methods, statistics, psychological testing, training and
development, and developmental psychology. Her research interest includes
commitment, psychology of religion, and developmental concerns.

Francisco M. Largo is Assistant Professor at the Department of Economics, University
of San Carlos. He obtained his Master of Arts degree in Economics from the University
of the Philippines School of Economics. His current research interests revolve around the
role of institutions in public policy formulation and implementation especially in the field
of water resources management and the economics of intra-household resource
allocations. Mr. Largo served as Component Leader of the CHED-ZRC BPO Study.

Fiscalina Amadora-Nolasco is Professor of Anthropology and Graduate Program
Coordinator in the Department of Sociology and Anthropology, and currently
Coordinator of the USC Social Science Research Center. She obtained her Ph.D. in
Anthropology under the Bureau of Cultural and Educational Affairs’ Anthropology
Program Affiliation between USC and the New Mexico State University. She served as
Project Leader of the CHED-ZRC BPO Study. Her research interest includes among
other concerns, women and health, HIV/AIDS, child labor, water in urban poor
communities, and other development-related issues.

Tyler C. Ong is a full-time faculty at the Department of Psychology, University of San
Carlos. He is a psychotherapist in private practice. Dr. Ong earned his Master of Science
degree in Psychology specializing in Marriage and Family Therapy from the California
State Polytechnic University at Pomona, and his Doctor of Psychology in Clinical
Psychology from the California Southern University. He teaches courses in clinical and
counseling psychology. His doctoral project was a proposed psychology of religion for

gay men. His research interest involves gay men’s issues, psychology of religion, and
religio-magical practices.

Cholen T. Osorio is a full-time faculty at the Department of Psychology, University of
San Carlos. She earned her Master’s degree in Industrial/Organizational Psychology from
the USC. Her thesis focused on stress and teaching performance. She teaches human
behavior in organization, human resource management, techniques in counseling, and she
handles internship supervision. Her research interest involves issues related to work
performance and occupational stress. Ms. Osorio’s professional experience includes
working as a training and development officer for two organizations: one in Cebu and
another in the Laguna area. Her eight years of experience as a guidance counselor has
given her a wider view of the developmental concerns among the adolescent age group.

Rey Uzhmar C. Padit is a full-time faculty at the Department of Economics, University
of San Carlos. He teaches microeconomics, macroeconomics, and health economics. His
areas of interest include political economics, institutional economics, economics
education, and public policy. Mr. Padit served as field interviewer and data processor of
the CHED-ZRC BPO Study, and is currently active in development-related undertakings.

Jiah L. Sayson earned her Master of Arts in Development Studies major in Politics of
Alternative Development at the Institute of Social Studies, Den Haag, The Netherlands in
2004. Her training includes urban and regional planning and development (UP-Cebu
College), geographic information systems (USC and Larenstein University), and
American political thought/political development (University of Massachusetts). Ms.
Sayson is the former Chair of the USC Political Science Department, and she served as
Component Leader of the CHED-ZRC BPO Study.

Charity A. Tecson is Professor of English, Speech, and Linguistics in the Department of
Languages and Literature at the University of San Carlos. She earned her Master of Arts
in English Language Teaching and Doctor of Philosophy in Education at the USC. She
has also pursued short-term courses in Linguistics at the Linguistics Summer Institute of
the Philippines. Her researches are language and linguistics-related.

Reuel C. Yap is a full-time faculty at the Department of Psychology, University of San
Carlos. He obtained his Master of Arts degree in Psychology from the USC. His latest
research endeavor was as a collaborator for a cross-cultural research on happiness and
quality of friendship. He served as one of the technical experts of the CHED-ZRC BPO
study. Mr. Yap’s research specialization includes attachment styles, forgiveness, positive
psychology, and other topics under social psychology.

TABLE OF CONTENTS

FOREWORD
ACKNOWLEDGMENT

CHAPTER 1 Introduction ......... 11
Fiscalina Amadora-Nolasco

The Story
The Method
Plan for the Monograph

CHAPTER 2 Market Structure and Labor Market ......... 15
Adjustment Mechanism
Francisco M. Largo and Rey Uzhmar C. Padit

Introduction
Conceptual Framework
Methodology
Findings
Implications
Policy Recommendation

CHAPTER 3 Academe and BPO Linkage: ......... 27
Matching Workforce Competencies

Introduction
Competency Needs of BPO Management
The Metro Cebu Sample BPO Workforce
Conclusion and Recommendations

CHAPTER 4 Benefits Package and Worker Satisfaction ......... 43
Jiah L. Sayson and Brenette L. Abrenica

Introduction
Decent Work Agenda
Investigating BPO Benefits Packages in Metro Cebu
Decent Work Status in the BPO Industry
Decent Work Status in the BPO Industry: Per Subsector
Perspectives

TABLE OF CONTENTS

CHAPTER 5 Identifying and Addressing Gender and Reproductive ......... 62
Health Issues in the Business Process Outsourcing
Companies
Elmira Judy T. Aguilar

Introduction
Health Concerns and Experiences of Men and Women
Addressing Gender and Reproductive Health Concerns in the Workplace
Conclusion and Recommendations

CHAPTER 6 Psychological Correlates of Stress Among BPO Industry ......... 70
Workers
Leah C. Auman, Cholen T. Osorio, Reuel C. Yap and Tyler C. Ong

Introduction
Method
Results
Implications
Recommendations

Special Paper USC English and ICT Curricula ......... 88
Charity A. Tecson

Introduction
USC English Curriculum
USC ICT Curriculum
Recommendations

CHAPTER 1

Introduction
Department of Sociology and Anthropology

The Story

he study of the BPO is not restricted to any single discipline. It is an area of
concern which is of special interest to many people in contemporary Cebu and
can be analyzed in a variety of ways. This monograph is a five-component
study that makes use of the social science approach, and interprets findings obtained from
both quantitative and qualitative interviews. This project is a product of a CHED-ZRC-
funded research conducted by social science departments of the University of San Carlos
and their collaborating partners from other HEIs, namely: University of Cebu, Cebu
Doctors University, Cebu Institute of Technology, and the University of San Jose
Recoletos.

The overarching goal of this undertaking is to foster collaboration between the academe
and business sector as well as to support the priority thrusts of the CHED-ZRC,
particularly Business Industry studies. It aims to build a body of knowledge of the BPO
industry based on verified observations.

The research was first conceptualized by the USC Social Science Research Center in
2008 to encourage collaboration in research, demonstrate the importance of working
together, and enhance the research competencies of faculty and students. Given the
holistic intent of the study, the project had to be a collaborative effort among four social
science departments (Sociology and Anthropology, Economics, Political Science, and
Psychology), the Department of Languages and Literature, and the Social Science
Research Center, each with specific objectives and interpretation for a given concern. A
series of consultative meetings initially funded by the USC Office of Research were then
carried out to plan the research process and mobilize resources for action. Consultations
were also regularly done with the USC-CHED-ZRC to shed light on the relevance of the
research in contemporary society and the strategies that will need to be employed to
fulfill the objectives of the study.

In a forum held with the Cebu Educational Development Foundation for Information
Technology, the agency which has been instrumental in positioning Cebu as a location
for the development of IT and IT-enabled services, the matter of strengthening the BPO
workforce competencies was raised. The same concern was emphasized in a separate
forum initiated by the USC-CHED ZRC. A clear gap was seen between what the industry
needed and what the academe was producing, leading to efforts to fill in the perceived
mismatch including an assessment of the region’s demand and supply of human resources
in the IT sector. CEDF-IT also collaborated with academic institutions for faculty
training and curricula development. Despite those attempts, however, it was suggested


Introduction Amadora-Nolasco l 12

that the BPO industry in Cebu still has to face the challenge of improving its workforce to
move up in the value chain.

Following these fora and upon the suggestion of the industry’s stakeholders, the study
team reexamined its original proposal and thereafter incorporated the concerns raised by
the BPOs in the forum. The first proposal (Phase 1: Research) was then submitted in
response to ZRC’s call for proposals under CHED’s Grants in Aid Research Projects for
2008. Upon completion of the research phase, a second proposal (Phase 2: Publication)
was submitted for GIA 2009.

The objectives of the study include (i) to examine the reported mismatch between the
workforce produced by the academe and BPO’s demand in Metro Cebu in the context of
predicted market structures for business process outsourcing industries, (ii) to determine
the mental, emotional and psychological well-being of the sample workforce, (iii) to
explore the dynamics of gender, sexuality and reproductive health in the workplace, (iv)
to look into the status of decent work in the BPO industry and examine the benefit
packages and workers’ level of satisfaction, and (v) to determine the needs of
BPO management insofar as competencies of workforce are concerned, and assess how
the academe can best address these concerns.

These concerns are only a few areas that warrant immediate attention as BPOs continue
to expand their operations in Cebu. We hope that other equally significant issues not dealt
with thoroughly in this monograph can be examined by other researchers who may wish
to continue the journey of writing about the BPO industry in Cebu, the changes it is
undergoing and future directions.

The industry has placed Cebu on the global map thereby promoting the Cebuano
capability and culture. It has encouraged Cebuanos to expand their skills in marketing
and communication, among others, to ensure that the industry will remain and continue to
provide economic incentives to families and communities particularly in the context of
difficult economic realities.

Recognizing that the industry is not just about opportunity and innovation, there is
therefore a need to better understand the challenges faced by both workers and
management. The study explores the links between labor market efficiency and the
various social and psychological factors that impact on work effectiveness and day-to-
day living. It intends to demonstrate how the BPO industry has reshaped the lives of
people, not just insofar as economic incentives are concerned but also with regard to
changes and adjustments they need to make to accommodate the pace of rapid change.

While it is imperative to understand the risks, threats and challenges faced by the BPO
industry in identifying concerns that can be addressed by the academe and training
institutions, it is equally important to understand situations faced by its workforce. It is
believed that while they enjoy better-paying jobs and perhaps better living conditions,
they also need to have a supportive environment that promotes their health and well-
being, and prevents other factors from affecting work competencies and competitiveness.



The complexity of the phenomenon highlights the relevance of a multidisciplinary
approach, which the academic sector is uniquely equipped to contribute to addressing
problems in the real world. This monograph is our way of addressing our corporate social
responsibility, our academic contribution to the business world, and to the Cebuano
community in general, albeit limited. Because this monograph provides exploratory
analyses, its results would have to be taken as guides for a more thorough investigation.

The Method

The companies involved in the project were pre-identified and determined on the basis of
the BPO category to which they belong to ensure representation of categories. The study
population comprised men and women of varying ages in Metro Cebu who work in
technology-empowered companies that provide outsourcing services to other companies
whether local, national or international.

The BPO/IT sub-sector categories which have been identified for inclusion include call
center, back office, medical transcription, legal transcription, animation, software
development, engineering design, digital content, and companies that offer multiple
services.

For triangulation and validation of results, the process of gathering information
proceeded along certain quantitative (survey) and qualitative (key informant interview)
methods. The survey instrument was crafted with close-ended and open-ended questions
designed to draw out participant socio-demographic characteristics, entry qualifications
and skills training, gender and reproductive health, benefits package and enabling
policies, psychological well-being, occupational stress and coping styles. Interviews were
carried out with a sample of 118 purposively-chosen workers from 15 purposively-
selected BPO companies, between May and July 2009. Apart from the involvement of
our partner institutions, our field researchers comprised of graduate and undergraduate
students and faculty of the departments of Political Science, Psychology, Sociology and
Anthropology, and Economics.

There are portions in the instrument, particularly on the psychological well-being and
benefits package sections, which are self-administered or filled-up by participants
themselves owing to the length of multiple-choice items. In this study the PWB scale of
C. Ryff was adopted to measure the psychological well-being of the sample workforce,
while the J. Greenberg scale was used for occupational stress.

A set of open-ended questions was prepared for the key informant interviews. BPO
management and human resources heads in five companies were interviewed to obtain a
broader understanding of the BPO industry in Cebu and draw out information about
needed competencies and concerns which they think can be addressed by learning
institutions. Prior to actual fieldwork, courtesy calls were made to various BPOs that fall
within the inclusion criteria, letters were distributed, and appointments for interviews
were made to those who agreed to participate.



Company names are not mentioned in this monograph to protect their privacy and
maintain confidentiality of information, and only participants who were willing to
participate in the study were interviewed. To ensure that the survey instrument and key
informant interview guides contain relevant concerns that address specific objectives, a
series of long and serious deliberation among key project staff and technical experts were
carried out prior to considering these as final and ready for field implementation.

Plan for the Monograph

This monograph is organized into six chapters. The present chapter provides a short
background to the monograph including a discussion of the methodology used by the
different components in the study. Chapter 2 describes the prevailing characteristics of
the market structure of the BPO industry in Cebu and analyzes the possible adjustment
mechanisms resulting from these structures. This analysis is extended to possible
implications for public and business policy. Chapter 3 presents the kinds of competencies
required or preferred by the BPO companies. It discusses the current profile of the sample
workforce, their entry qualifications and skills training. Chapter 4 discusses the status of
decent work in the BPO industry and analyzes the benefit packages offered by companies
and workers’ level of satisfaction. Chapter 5 identifies the gender and reproductive health
concerns and corresponding health services and other related benefits in the BPO
workplace. Chapter 6 examines the mental, emotional and psychological well-being of
the sample workforce. It discusses their level of stress and identifies their coping style as
well as social support networks. A special paper on the USC English and IT curricula is
included in this monograph to show the extent the University of San Carlos has addressed
some of the competency needs identified by BPO companies.


CHAPTER 2

Market Structure and Labor Market
Adjustment Mechanisms
Francisco M. Largo and Rey Uzhmar C. Padit
Department of Economics

Introduction

he markets for Business Process Outsourcing (BPO) have enjoyed considerable
growth in the past decade. Galvanized by substantial reductions in the cost of
information technology infrastructure, professional services such as payments
processing, customer contact, records encoding, and others that were
previously done inside the firm were now contracted out to external parties either
proximate in terms of geographical location (“nearshoring) or not (“offshoring”). The
outsourcing of these information technology enabled services (ITES) is estimated to
reach USD 110 to 180 billion globally by the current year. The Philippines is poised to
capture a substantial portion of this market. If government reports are to be taken at face
value, the Philippines is now a very close second to India, with the total value of BPO
transactions estimated at USD 7 billion as opposed to the latter’s USD 9 billion. Despite
the advent of the global financial crisis of 2008, the sector has continued to show
resiliency and is preparing for even further growth (Rodolfo, 2009; Tolentino, 2010).

The exuberance surrounding the BPO phenomenon in the Philippines has been dampened
somewhat by problems identified by the industry especially with respect to the
availability of human resources. As industry insiders point to the availability of human
resources as critical to sustaining its growth 1, these issues present considerable causes for
concern for the industry. Belen (2008) identifies two issues that are relevant to this
study: 1.) the lack of people with the required skill sets, and 2.) the high rate of turnover
among employees. Applicants to the workforce are assumed to be ready for their
assignments in the workplace but only a small fraction is claimed to be so. The first
problem is of particular concern to the academic sector especially higher education
institutions (HEI) as industry insiders are wont to attribute this deficiency to the nature of
training received at the tertiary level. Proposals for solutions have come thick and fast
from industry to address these deficiencies but to our knowledge, these have come
without an analysis of their economic context. Such an analysis is especially pertinent in
ensuring the efficacy of these solutions at the very least. For example, asking for
“education supply to meet industry demand” shows a basic misunderstanding of the
nature of the markets involved. It is the household that demands education for its
members from HEIs that supply it. These work force participants then supply labor to
firms that demand them. For industry to ensure that its needs are met, firms must ensure
that they recognize these channels and work through them. No mention, for example, has
been made of the crucial role that alumni have on the feedback process for curriculum

1
See Nolasco, Chp 3, this volume.


Market Structure Largo and Padit l 16

development. It is also our hypothesis that economic forces largely account for the nature
and magnitude of the problem of employee turnover. Accounting for these forces will
similarly fruitful in determining the appropriate actions to take to mitigate the effects of
this problem as well.

This paper aims to contribute to an emerging literature on BPOs and ITES by developing
a rudimentary framework of the economic forces at play especially in the Philippine
context. The literature on BPOs, as opposed to that concerning manufacturing
outsourcing, is still in its infancy. This is largely due to the recentness of the phenomenon
and its very dynamic nature in the short time it has been in place. We develop such a
framework by starting at the most basic level possible, the decision on the boundaries of
the firm. We then proceed to showing that the forces that determine whether or not the
firm outsources operations also determine the nature of the service being outsourced.
The nature of these services, the ease of entry and exit of firms selling them, and the
ability of prices to move in reaction to changes in market conditions determine the
behavior of service sellers. This behavior in turn affects the behavior of BPO firms as
buyers of human resources as inputs to the production processes and the nature of
production processes themselves. The following section shows this framework.

The subsequent section shows how the predictions developed in this framework perform
when checked against anecdotal evidence from key informant interviews with six firms in
the Cebuano BPO/ITES industry. These interviews were conducted with senior and
human resources management. The paucity of willing participants is in itself a result
consistent with our framework as we will show below. We next discuss the implications
of this framework for the issues previously identified. Finally, we provide some
recommendations for stakeholder action and further research.

Conceptual Framework

The Nature of Outsourced Services

At the most fundamental level, the decision whether to outsource a service or not is
typical of a make-or-buy decision that faces the firm in organizing its production
processes. The classic reference on this is Coase (1937). Coase revolutionized the view of
the firm and markets by introducing the concept of transactions costs as the primary
determinant for this decision. A firm decides to produce something with its boundaries
within direct administrative control if this control is less costly compared to enforcing
contracts with external market players for the same level of production costs.

These costs are independent of the costs of production, i.e., the costs of attracting inputs
from alternative employments so that while lower production costs might make market
provision attractive, the costs of finding these low cost participants, engaging them in a
contractual arrangement, and monitoring their contractual obligations might be so high as
to make in-house provision less costly.



Coase, however, failed to describe precisely how these costs of transacting were
determined both within and outside the firm. Subsequent work in transaction cost
economics and organization theory extended his analysis to provide testable
propositions. 2

Williamson (1971, 1979, and 1981) develops Coase’s arguments further by pointing out
that transactions costs of market contracting hinge on two important factors: the
complexity of transactions and the specific nature of human and physical assets. 3 The
more complex the transactions involved, the more detailed the contracts need to be. This
is a patently falsifiable proposition as complexity and detail may be measured or scaled.
Complex transactions are then done within the firm or done in environments amenable to
detailed contracting and enforcement. 4

The converse proposition is that outsourced activities tend to be simple and easily
verifiable in nature. Williamson also argues that when assets utilized in the production of
activities are specific to a relationship, there is a danger of being held-up by the owner of
specific assets, that is, firms find themselves being subject to opportunism by partners.

This opportunism may take the form of sub-standard provision of the activity or
extraction of surpluses through higher fees on renegotiation or hidden fees during
operations. The high cost of ensuring that rent is not extracted leads to activities of this
nature being provided in house. The converse proposition is that when activities are
outsourced, the assets involved tend to be of a homogenous and transferable nature that
are widely applicable to several partners or even industries.

The nature of markets that result in professional service outsourcing is then predicted as
follows:

Proposition 1. The markets for outsourced professional services will be those involving
relatively simple services which require standardized inputs and production processes.
Outsourced professional services that are more complex will involve more detailed
control procedures.

The Nature of Sellers of Services

Looking further at transactions costs further gives us other predictions related to market
structures. The relatively homogenous nature of products and processes will mean that
substantial economies of scale will be available for both in house production and market
2
Alchian and Demsetz (1972), for example, pointed to the need for understanding the implications of
monitoring work effort inside the firm and the role played by proprietors and employee status in the
latter.
3
The scientific primer on Oliver Williamson at the Nobel Foundation website (www.nobelprize.org)
provides very accessible information on his work.
4
Jester and Pedersen (2000) argue that increasingly complex transactions being done in both
manufacturing and services outsourcing require the arrangement of “total solutions,” a veritable package
of material and services that ensure the satisfaction of client standards. This is based on the premise that
both client preferences and provider technologies are well defined.



transactions. However, when external providers enjoy lower production costs then this
will incentivize the firm for market provision or outsourcing, when the requisite
transactions costs are lowered.

This lower production cost, especially for human resources, is identified as a primary
driver for outsourcing to developing countries. NeoIT (2006) mentions that savings from
activities involving Indian and Filipino professionals could be 80-85% of wages of
comparable staff in Western countries. Nicholson et al. (2006) report a lower differential
of 70% for India, the premier outsourcing destination. Combined with the large volume
of transactions, the potential cost savings can be substantial. However, it has only been in
recent years when the cost of transmitting and verifying data has fallen, has the
outsourcing of professional services been actually done.

While the homogeneity of output and input would normally be conducive to competitive
markets, the presence of substantial transactions costs would cause the opposite. When
activities are transferred to locations with differing practices, choosing the correct firm to
contract poses information costs on the searching firm. These may include ensuring
familiarity with standards, awareness of cultural sensitivities, and other similar costs.
When these costs are especially acute, a firm may give up altogether and just offshore
operations and keep them within management control of the firm if only to take
advantage of lower production costs. At the next level, firms may choose to employ a
near-shore provider or a firm incorporated in the same jurisdiction that is known to
operate in offshore locations. Both offshoring and near-shore outsourcing will be
prevalent in the early stages of industry development as they are in the Philippines when
home-grown provider track records are still unproven. This is our second hypothesis:

Proposition 2. Firms engaged in professional service provision will either be offshore
units of mother firms located in developed country jurisdictions or branch plant locations
of third party near-shore outsourcing firms.

If this proposition is borne out, the firms that provide services will have some degree of
market power. However, with non-asset specificity, entry into the markets for services
whether off-shored or outsourced, will be relatively easy. One can then point to seller
markets that more or less border on monopolistically competitive markets with the
attendant implications on their behavior as sellers. The most relevant of these is that firms
will earn normal or near-normal rates of profit.

Proposition 3. Professional service firms will earn market rates of return as easy entry
drives profits down to normal levels.

As employers of resources, the requirement that assets be non-specific to client needs
means that skill sets are well-defined for labor resources and that fixed capital costs are
not significant barriers to entry. The fact that off-shoring is an option means that an added
dimension of location choice is added to the firm’s decision if several low production
cost locations are available. As pointed out in NeoIT (2006), one can model this decision
as akin to choosing a portfolio of plant locations that minimize costs subject to some
quantity constraint. Operations will be spread across locations possibly as a response both



to client demand for redundancy and the above motive. Whatever the case, net returns are
maximized across locations and profits are driven down to normal levels as ease of entry
extends to location choice as well.

This ease of entry in both service markets and location has implications for labor
markets. As already alluded to, labor supply will have to be devoid of firm specificity.
This precludes any learning by doing on the job of any skills or the acquisition of
proprietary information that would render the firm and its client dependent on any one
resource. When a supply of labor can be had at a prevailing price, firm demanders will
have no difficulty finding required amounts of this resource. However, as entry
continues and labor demand expands in a market with a finite resource pool, firms
quickly find themselves fighting over a fixed but highly mobile resource base in the short
run. Wage competition will be out of the question if firms only earn normal profits. The
enticement of labor will then take the form of non-wage benefits.

Proposition 4. When normal profits prevent firms from paying wages at levels to ensure
participation (i.e., reservation wages), turnover rates will be high.

Findings

This research is exploratory in nature. In this light, any results gained would have to be
taken as guides for a more rigorous investigation. This does not, however, discount the
value of this effort in providing preliminary insights to the problem at hand. In particular,
this research may be regarded as an exercise in deduction. The general assumptions are
laid out from which relevant predictions are made. These predictions are then subject to
falsification through the search for contrary results. The presence of corroborative results
lends itself to the possibility of the assumptions being correct but not conclusively so.
Contrary results, however, offer stronger indications that the assumptions are not correct.

The propositions were verified using key informant interviews with the senior
management and human resource officers of six BPO firms based in Metro Cebu. These
firms were the only ones willing to participate in the exercise out of the ten initially
targeted from a list of identified BPO firms from private and government sources.
Additional information about these firms were gleaned from other sources such as
company websites and third-party online resources. The findings for any exploratory
study must be considered preliminary and serve to direct future research. These findings
are discussed below.

The findings for propositions 1 and 2 are best discussed in relation to one another. The
firms in the sample provided a variety of services. Table 1 enumerates these firms and
their broad category of services provided and whether they are Philippine firms or
multinationals / wholly owned subsidiaries of multinationals.



Table 1
Services Provided and Type of Participant Firms

Firm Service Type
A Call Center Multinational Subsidiary
B Digital Content Multinational Subsidiary
C Graphics Multinational Subsidiary
D Medical Records Review Local
E Online Marketing Multinational Subsidiary
F Software Local

Four of the six firms are subsidiaries of firms based outside the Philippines. Firm A is the
subsidiary of a BPO service provider based in the United States. Its presence in Cebu is
for the provision of customer contact for a key client. It undertakes both sales creation
and customer service activities for its client which has a substantial market share. Firm B
is a long-standing player in the market based in the United States engaged in a wide range
of services from software development, business process services, and content creation.
Its Cebu operations deal mainly with textual content processing. Firm C is the local
subsidiary of a major player based in the US in the graphics-related services including
advertising, animation, and digital graphic content. Firm E is another multiple-service
firm based in the US with its Cebu operations concentrating on on-line marketing.

Firm D is engaged in the review and summarizing of medical records. While it had earlier
been involved in the transcription of medical notes, it exited from this market due to the
increasing competition. Firm F is a local firm engaged in software development using
industry standard software and the packaging of software solutions.

While almost all of the participant firms are subsidiaries of multinational service
providers, a result in support of proposition 2, the converse proposition also has some
support from the sample in firms D and F. In terms of physical asset specificity only
Firm C provides a clear-cut case consistent with proposition 1. Firm C is engaged in very
sophisticated graphics content provision. Its design facility in Cebu is touted as at par
with any design facility in its market. The fixed investment for such a facility would be
understandably important. Such asset specificity predicts that this firm would just be an
offshore facility still within the control of a vertical firm hierarchy headquartered in the
primary market being served. This indeed is the case for this firm.

The firms interviewed hired labor of varying qualities (i.e. participated in several labor
markets as a demander). Customer contact services such as those provided by Firm A
would be the most standard in form and requiring the least amount of in-house training.
When firms require more specialized (specific) labor it would be typical for hiring to be
conditional, based on a specific base criteria with subsequent specialization provided in-
house. For Firm D, a medical background was key. For Firm B’s highly specialized
projects in legal, medical, and chemical data and content processing, the relevant
specialist degree was required. Firm F professed a preference for exemplary students
without work experience indicating that most training would be done in-house. Despite
these, the actual work would be subject to clear definitions of output quality and form and



hence a high level of standardization is expected for outsourced services as is consistent
with the first proposition.

The exercise of market power is clearest for Firm C as it professes to have a substantial
portion of its market (~20 percent market share). This leads to its above-normal rates of
return as highly specific assets and high fixed costs play their role as barriers to entry and
the increase of profit rates above normal levels. For the rest of the firms, the model of
monopolistic completion appears to be corroborated. Firm D reviews medical records for
one of the largest sub-national political jurisdictions in the United States. Given its
current capacity, it is unlikely that it accounts for a substantial share of the transactions
for this entity. Firm F recently expanded operations to Manila and the US. In this market
it faces numerous other competitors. All other firms compete in markets that are subject
to easy entry from competitors. It would be reasonable to say that the third proposition is
corroborated. Firms in the sample, with the exception of Firm C, enjoy normal rates of
return.

The inability to offer at least reservation wage levels appears to plague Firm D the most
as it competes for labor with very high alternative wage levels (nurses working abroad).
As predicted, this firm is the most vocal about its turnover rates. On the other hand, Firm
F with its willingness to pay even new entrants high wages said that turnover was not a
problem. This will, in general, be true for work that is valued at such levels as to enable
market participants to apportion a greater share of the gains from market participation to
labor. These will typically be true for the more specialized forms of labor.

Implications

The Lack of Qualified Labor Resources

What accounts then for the lamented lack of qualified human resources from HEIs? An
understanding of the nature of the education and labor markets makes this clearer. As
previously mentioned in the introduction, firms are not usually direct participants in
education markets. The usual participants are households building up human capital and
HEIs facilitating the process. Graduates who finish their programs then supply their
labor to firm buyers of labor. It is the workers and their employers who bear the brunt of
any deficiencies in training: workers, in terms of delayed advancement or even lay-off,
firms, through additional expenditures on training. If the philosophy of higher education
is to emphasize enduring principles, this gap in training in immediately applicable skills
and knowledge will be glaring if the industry concerned is experiencing significant
changes as the BPO/ITES industry is. This is a coordination problem that has no inherent
immediate mechanisms for correction in the markets concerned if this strict dichotomy is
maintained.

Are stop gap measures possible? In terms of the analysis presented above, the answer is
yes.



The general need for inputs that are not specific to any client requirements means that
demands placed on skill sets for labor resources will be for generally available and
clearly defined ones at least at the early stages of BPO/ITES industry development. This
points to the feasibility of measures that specifically aim at the deficiencies that are easily
verified and addressed through directed interventions. This ease of definition should also
take into account the appropriate level of educational careers where this training or the
appropriate intervention would be most effective. Firm specific skills might be provided
in house, general professional skills at the tertiary level while competencies in analytical
thinking, reading comprehension or language proficiency are built up over the years of
basic education. Remedial measures aimed at producing immediate results may be
possible given the concreteness of the desired results. The next question is who bears the
cost of these measures. Some firms who are earning above normal profits may choose to
bear this expense. Workers may opt to defray this expense on their own through
enrollment in specialized training providers (e.g. English for Call Center training
centers). Government may also provide bridge training in a similar vein as it is currently
doing for other industries’ requirements. HEIs may offer non-traditional or vocation
instruction as well in addition to the menu of traditional programs. The point is that
remedial measures are feasible and from several providers.

The long-term answer to this coordination problem lies in mitigating the dichotomy of
the education and labor markets. Firms who want to ensure the availability of qualified
personnel must undertake measures to ensure this availability as a participant in the
education market. How is this done? Several avenues are possible. Firms may choose to
endow HEIs with funds to operative specific initiatives which would otherwise not be
financially or technically feasible. Firms may also choose to participate in the demand
side of the education market by funding scholarships specific to the profile of desired
potential recruits with concomitant employment agreements. Firms may also seek
participation in the certification processes of professional programs as government
regulation for professional programs are well in place. Another avenue that is not often
mentioned in the discourse in this area is the role of alumni feedback on curriculum
development. The alumni of HEIs may be in a better position to dialog with their alma
maters on the matter of workplace competencies especially if they occupy leadership
positions in the concerned industries. Concerned alumni would also have an incentive to
ensure that their degrees remain valuable and untarnished by subsequent entrants to the
labor market. Whatever the case, there must be a mechanism whereby the costs of these
adjustments are shared in proportions amenable to all parties with recognition of the
various constraints that impinge on the ability of all parties to act.

An even longer term structural problem that needs to be addressed is the quality of
training received in the basic education levels where basic skills such as language
proficiency and analysis are developed over the longer term of the 10-12 years of basic
education. Skills training at the tertiary level will still not produce the volume of
competent graduates required with growing industries if this is not answered.



High Rates of Labor Turnover

The non-specialized nature of outsource services and the labor that serve as inputs in their
production provide for significant labor mobility between employments and across
industries. High rates of labor turnover are expected for an industry with ongoing entry
of firms and fixed resource pools. Wages may not be able to rise due to the presence of
competitive pressures on service firm profits. This is particularly true for the current
level of development of the industry, dominated as it is by multinationals. Given that
multinationals engage in location choice in the manner of choosing a portfolio of
locations to minimize costs, wage increases will make one location more unfavorable.
This inability of wages to rise is crucial as it means that incentives for the transfer of
labor resources from other industries will not be present.

The appropriate long term measure to address any lack in the availability of labor with
the appropriate skill sets is the expansion of labor supply at the same or lower wages.
This expansion is again subject to the conduct of short-term and long term measures
mentioned in the above section predominantly on ensuring that the quality of labor meets
industry standards.

Firms subject to downward pressures on their profit levels will also be reluctant to
provide in-house training as the ensuing labor mobility means that the returns to this
investment are lost. Firms will then find ways to offload the cost of training to other
sectors of society (to the laborers through paid internships, to the educational sector
through curriculum changes that closely mirror firm requirements). This will determine
in part the avenues that firms take when seeking to breakdown the dichotomy mentioned
above.

High levels of turnover also result from the inability of firms to pay reservation wages
given that normal profits are just earned. The wages that can be earned in alternative
employments may be sufficiently high such that long-term employability with BPO/ITES
firms is undesired (e.g. nurses working as medical transcriptionists).

Firms may also resort to process innovation and substitute away from relatively costly
inputs (i.e., work at home schemes). If this innovation is not possible, then labor costs
will rise to a point where new entry is discouraged. The fact that expansion is still
occurring at a rapid pace means that these limits have still not been reached.



Summary and Recommendations

This paper aimed to develop a rudimentary framework for analyzing the market structure
of BPO/ITES services with which the problems of lack of qualified labor resources and
high labor turnover may be analyzed with greater focus and aid in suggesting solutions to
these problems. This framework builds on the assumption that the costs of searching and
maintaining market contracts engenders a market for outsourced services that are easily
verified and utilize inputs that are non-specific to the client firm to guard against the
problem of over dependency on outsourcing firms. These costs also imply that BPO/ITES
firms will tend to be multinationals offshoring their service operations or subsidiaries of
near-shore outsourcing firms at least in the early stages of industry development as is
currently the case for the Philippines. This non-specialized nature of the production
processes imply that entry is easy and that competition will drive profits to normal levels.
Rapid industrial growth and the need to keep wages low will mean that firms will be
fighting over fixed labor resource pools, hence, the high turnover rate. We find support
for the predictions of this framework in a very limited sample of six firms that
participated in key informant interviews.

This framework also implies that stop gap measures to address the bewailed lack of
qualified labor resources are possible given that the competencies required are clearly
defined and non-specialized. Longer term measures to address this gap however will
entail closer partnerships between industry, academe, and government. As there are no
automatic incentives for such partnerships, this presents a collective action problem.

High labor turnover in this framework is the result of short-term deficiencies of labor
resources that may not be addressed with wage increases due to the competitive nature of
the industry. High rates of turnover will persist pending long-term adjustments in labor
supply. Making this happen at the soonest possible time should be the locus of solutions
for this problem.

Even with such a rudimentary framework, we are able to provide insights to what often
puzzles industry insiders. While formalizing this framework and ensuring the testability
of predictions for rigorous empirical tests should be the next order of business for
research in this area, substantial data gaps, including a census of all firms in the
BPO/ITES industry in Cebu province, would have to be filled even before such an effort
is possible. The latter is an effort of the highest priority in our opinion and should be the
next worthwhile undertaking in this field.



References

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The American Journal of Sociology 87, No. 3: 548-577


CHAPTER 3

Academe and BPO Linkage:
Matching Workforce Competencies
Department of Sociology & Anthropology

Abstract

he biggest challenge of BPOs in their workforce is the inadequacy of skills in
oral and written communication. Other challenges include inadequacy of skills
in computer/ICT, comprehension and analytical thinking, and management.
Lessons learned can be used as benchmark for future reference in order to arrive at a
situation that will translate to the level of skill and competence needed to promote a
sustainable BPO industry. Although this paper reports exploratory analyses and is by no
means complete, readers will find a window through which the role of the academe in
filling-in the competency needs vacuum of BPO management may be assessed.
Suggestions have emerged from this exploration and are presented in the discussion.

Keywords: business process outsourcing, academe, competencies, Cebu, Philippines

Introduction

The purpose of this study is to explore the kind of competencies required or preferred by
BPO companies, assess the gaps between workforce skills and BPO competency needs,
and determine the role of the academe in addressing these concerns. By providing useful
data for both the academic and business sectors, the findings are expected to contribute
not only to the enhancement of knowledge of the BPO industry but also to efforts toward
developing a framework that integrates concerns of the academe and BPO. It is
envisioned that further studies will validate results obtained from previous works and
eventually enable learning institutions and program planners to effectively address the
problems in workforce competencies.

The BPO industry involves the contracting of a task to a third-party provider. As the
Reynolds and Magno study (2006) puts it, “BPO is hiring someone else to do all of your
chores while you concentrate on core business, like manufacturing” (p. 2). The industry
has been proven to be a viable business strategy in the Philippines particularly in Cebu
where the BPO boom was triggered by a demand for call centers sometime in 2004.

TESDA (2007, p. 8) reports that the factors that make Cebu an ideal location for contact
center firms outside Metro Manila include (i) a pool of customer-oriented and service
driven call center agents who are proficient in English, (ii) adaptability and familiarity
with the western culture, (iii) delivery of quality services at cost-effective rates, (iv) low
operating costs, and (v) presence of adequate infrastructure and service support.


Academe and BPO Linkage Amadora-Nolasco l 28

Information and Communications Technology (ICT) is also one of the four priority
sectors being promoted for development in Region VII, to include Cebu. The many
employment opportunities therefore that it provides stimulate more BPO activities. Other
outsourcing services include back office, medical transcription, legal transcription, other
data transcription, data encoding and processing, web design, software development,
animation, engineering design and other services, digital content, financial management,
accounting and payroll services.

A total of 30 major companies in Cebu that provide IT and IT-Enabled Services
(ITS/ITES) was reported by JETRO Philippine IT Industry Update (2007, p. 1), many of
which are engaged in call center and software development services. In 2006, there were
11 call centers which employed more than 6,000 call center agents. The number
increased to 20 in 2007 employing 18,000 people. During the Cebu ICT 2007, a two-day
event hosted by the Cebu Chamber of Commerce, the most pressing issue raised for the
sustainability of Philippines' ITS/ITES industry was human resource development, that
is, expanding the supply of human resources that the industry needed. Another common
challenge for many companies in the young and rapidly growing industry was the critical
shortage of middle-management talents. In this two-day event, a CEO pointed out that the
lack of managers was an even more pressing issue for the Philippine BPO industry than
the lack of agents, and needed immediate attention and action.

Using survey and focus group discussions as main elicitation techniques, Sequino (2008),
in collaboration with the Cebu Educational Development Foundation for Information
Technology (CEDF-IT), conducted a study that looked into the factors affecting BPO
suppliers’ sustainability, the sales performance levels of BPO companies in Cebu City,
and the support provided by government and other institutions to the industry. In this
study, Sequino identified inadequacy of skills and competencies of the workforce as one
of the challenges faced by BPO firms. She recommended that apart from curriculum
development and skills enhancement activities to improve the competencies of potential
applicants, tertiary level faculty needed to undertake BPO immersion programs to better
understand the dynamics and intricacies of the industry (p. 26).

“Human resources is what the business is all about,” say Reynolds and Magno (2006, p.
3). What is therefore needed for the success of the industry include, first and foremost,
qualified and competent people. Similarly Saxena and Bharadwaj (2007) note that
“human resource is the most crucial resource in the high growth BPO industry.” They
imply that BPO companies are faced with numerous human resource challenges,
particularly the problem of attrition and finding the right people who can keep pace with
the unique patterns of the industry. To combat these challenges, Saxena and Bharadwaj
put forward the need to develop competency in building innovative process (p. 99).

In view of these observations, the need to highlight the role of learning institutions and
assess how a partnership between the academe and the BPO industry can be most
beneficial is imperative, both to the workforce and the industry. Schools and training
establishments play a significant task in creating jobs for students and graduates, and in
providing the industry with appropriate human resources.



Since the competencies of the BPO workforce in Cebu are inadequate this study assumes
that the academe can help address some of the challenges faced by the industry through
curriculum enhancement and other capacity-building initiatives for faculty, students and
graduates. It is a fact that the BPO industry plays a significant role in Cebu’s local
economy but its sustainability depends largely on the competencies and competitiveness
of its workforce. The quality of the workforce in turn depends on the quality and
effectiveness of education and training obtained from institutions and the relevance of
curricular program offerings to BPO needs.

Recognizing the economic incentives brought about by the industry to families and
communities in Cebu and the concerns that need to be addressed to ensure a sustainable
business, a partnership between the academe and BPO industry is critical. Such a
collaborative effort can help ensure the promotion of a sustainable and fertile business
atmosphere and a stable quality of life for a skilled and competitive workforce.

Basic information and insights collected from this study are intended to be used as a
preliminary basis for learning institutions to rethink course offerings which could lead to
decisions toward improving course contents, quality of instruction and teaching
strategies, and perhaps, developing elective courses primarily designed for students and
graduates who are looking at a future with BPO. Intensifying research endeavors on BPO
life will generate more public awareness and guide learning institutions, BPO companies,
and policy makers to arrive at decisions that will lead to achieving a sustainable industry.

Competency Needs of BPO Management

This section presents what the surveyed BPO management and human resource heads and
directors have to say about needed workforce competencies, problems faced with their
workforce, and how the academe can help address some of these competency-related
problems. Results can be used by the academe to develop a mechanism to address weak
areas.

The two sets of key-informant interview participants indicate strong preference for
applicants who are, first and foremost, proficient in English (which includes skills in oral
and written communication) and computer/ICT literate. In all interviews with
management, they emphasized that workers must have a strong command of the English
language and must be familiar with technology-based and ICT-related activities in order
for them to meet the demands of the highly competitive and dynamic BPO industry.
While English proficiency is a general education competency, computer literacy on the
other hand is a basic technical competency. This may therefore lead one to say that the
BPO companies prefer applicants who are competent in both categories.

A similar finding was found by TESDA in its study of call centers in 2007. All of the call
center companies they had surveyed specified that applicants must be proficient in
English, and nine out of 10 of them indicated computer literacy as equally important.
Other qualifications mentioned in the TESDA study include higher educational



attainment, training in call center jobs, positive comprehension and right attitude, and
web-hosting skills (p. 21).

Then comes other preferred competencies such as skills in comprehension and analytical
thinking, and interpersonal and management skills. While the former is a general
education competency, the latter falls under the social skills category. The BPOs
commented that the workforce must possess these skills to ensure that they become
productive and are able to sustain their level of energy and enthusiasm in the BPO work.
In the absence of these skills, BPO companies in Metro Cebu are most likely to face the
problem of dearth of qualified people.

Their responses suggest that the primary objective of these companies is to provide
clients with the most efficient customer-oriented services. Hence the hiring process must
also be efficient so that management will be able to get the right people with the right
skills and attitude. It may be well worth to note at this point that these are almost the
same skills which the study sample in the survey component claims to be needed at the
time they were hired.

The most critical competency problem that emerged from this study is the inadequacy of
the workforce’s skills in English proficiency, both oral and written. For both management
and human resources heads, this is the biggest stumbling block faced by their companies.
This observation appears to be consistent with what TESDA reported about the
attractiveness of jobs brought about by the call center business boom being
overshadowed by the observed decline in English proficiency among graduates.
Likewise, inadequacy of skills in computer/ICT, comprehension and analytical thinking,
and management are essential competency problems faced by BPOs. These revelations
can serve as guide for learning and training institutions to devise more effective strategies
to ensure that potential applicants are qualified to work in whatever position they may
choose to apply.

Another concern cited by the sample BPOs is weak work ethics, referring in particular to
not having a positive attitude towards work, tardiness and inability to work well with
others. Reportedly, workers tend to slow down on their job or delay work assignments
when no supervision is provided, hence the need to constantly remind them about their
work attitude. In another interview, a human resource head commented that some of their
workers have the tendency to come late for work, a practice which is detrimental to work
efficiency. They pointed out that workers need to demonstrate not only a high degree of
knowledge and skills but a positive attitude and good work ethics.

This study may not be able to show whether the sample workforce is looking at a future
with BPO but the reality is that they are, at the time of the study, working in a BPO
company. Such could be attributed to the incentives it offers or because of a lack of other
options. The assumption is that these workers may not have been cut out for and/or
trained for BPO work hence their personality may not fit into the industry’s type of work
environment. This is presumed to be the reason why mentions were made by
management regarding the workforce “not having the right attitude” or “problems in



attitude.” To cite an example, many of the learning institutions in Metro Cebu offer
courses in management and marketing, but these are general courses that go into every
type of industry. Thus if an applicant possesses the necessarily skills but is not familiar
with the nature, scope and environment of the BPO industry, he/she is likely to
experience various difficulties which in effect might lead to inefficiency at the
workplace.

Suggestions on how best the academe can help address some of the challenges faced by
BPO companies were obtained from management and human resource heads of the
surveyed BPOs. These include (i) strengthening students’ skills in English (oral and
written, to include correct grammar, spelling, sentence construction and punctuation),
reading comprehension, analytical thinking, computer skills and other technology-based
and ICT-related competencies; (ii) educating students on the nature, scope and
environment of BPO work, giving special emphasis on topics that relate to work ethic;
(iii) assisting in the training and integration of students and graduates into the industry;
and (iv) facilitating in the work placement of interested and qualified individuals coming
from different disciplines.

The Metro Cebu Sample BPO Workforce

This section presents the data collected through interviews with 118 workers to show
whether they possess qualities and skills preferred by the selected BPO companies. It
discusses the workforce profile, perceived entry qualifications, and the in-house skills
enhancement activities they had to go through at the time of employment. Specifically, it
describes the characteristics of the sample by age, gender, marital status, highest level of
education, last school attended, course taken, nature of BPO work and employment
status. Subsequent sections focus on examining the responses of participants in terms of
skills training which they think should have been given stronger focus in schools.
Recommendations that have emerged from this exploration are presented in the
discussion.

Profile

Table 1 provides a profile of the sample by age, gender and marital status. Evident here is
that the BPO workers are mostly in their 20’s. Their ages range from 19 to 43 years old,
the mean and median ages of which are 27 and 25, respectively. The proportion of
females is slightly greater than the males, although this study could not say whether the
BPO companies surveyed have a strong preference for females. In this study, the
difference can be attributed to the fact that there were more females than males who
agreed to participate and be interviewed.

In the TESDA study (2007) of call centers, however, close to 60 percent of their finishing
course graduates were females, and more than 40 percent of them were eventually
employed in call centers. Among the male graduates, only a third of them were
employed. TESDA implied that “females have more chances of landing a call center job
than the males” (p. 29). Whether such observation holds true in other BPO categories is



something which requires further study. Management’s gender preference is therefore a
potential area for future research.

On the aspect of marital status, those who are single account for over 70 percent of the
sample while a little over a fifth of them are married. Workers who claim to have live-in
partners or have been separated from their partners account for only a slight percentage.
Table 1
Study Sample by Age, Gender and Marital Status (N=118)

Background N Percentage
Information
Gender
Male 56 47.5
Female 62 52.5
Marital Status
Single 87 73.7
Married 25 21.2
Living-in 4 3.4
Separated 2 1.7
Age
Age Range 19-43
Mean Age 27 years old
Median Age 25 years old

The sample workforce is composed mostly of college graduates (Table 2). This illustrates
that the BPO industry in Cebu has become an appreciable employment alternative for
many college graduates. But whether the reason for the choice of work is a consequence
of a lack of other employment opportunities or the lure of a higher income is something
which this study has not looked into. This is perhaps one possible area which other
researchers can explore. While close to a fifth have had some form of college education,
a little over 10 percent of them have post-graduate degrees. Only three workers are high
school graduates while one has finished a vocational course.

The majority has studied or is studying in the major universities located in Cebu, with
USC accounting for a fifth of these (23 out of 118). Other schools registered only less
than 10 percent of the sample. These data should not be interpreted as an indicator of
BPO preference for graduates of specific universities. It is also worth noting that a
significant number of BPO workers obtained their education from schools located outside
Cebu, an indication that the industry provides employment opportunities not only for the
Metro Cebu workforce but to those in neighboring places as well.



Table 2
Study Sample by Highest Level of Education and School Last Attended (N=118)

Highest Level of Education N Percentage
Post Graduate 12 10.2
College Graduate 79 66.9
College Level 22 18.6
High School Graduate 3 2.5
Vocational 2 1.7
School Last Attended
University of San Carlos 23 19.5
Cebu Institute of Technology 10 8.5
Southwestern University 10 8.5
University of San Jose Recoletos 10 8.5
University of Cebu 8 6.8
UP-Cebu/Visayas 7 5.9
Cebu Normal College 4 3.4
University of the Visayas 4 3.4
Velez College 4 3.4
Other Schools in Cebu (merged) 17 14.4
Other Schools outside Cebu (merged) 21 17.8

We now turn to the distribution of participants according to courses taken at the tertiary
level (Table 3). A preponderance of workers who have taken or are currently taking
courses in Computer Science and/or Information Technology is evident in the study.
Applicants who are in the field of CS and/or IT appear to be at an edge when compared to
those in other courses insofar as finding work at the BPO is concerned. If such becomes a
trend, it is likely that enrolment in the CS or IT curriculum will double in the next few
years particularly if the industry continues to expand operations in Cebu. This will give
all the more reason for learning institutions that offer CS and IT to strengthen their
curricula and ensure that their students and graduates possess the required and preferred
skills.

Other courses which registered an appreciable percentage of workers include Commerce,
Nursing, Engineering and Education. One can also see in Table 3 that students and
graduates who are in the Medical and Allied Programs, Law, Social Science, and
Architecture and Fine Arts are among those who have been given opportunities to work
in the BPO under the assumption that they possess the competency requirements of the
company at the time they were hired. Even those coming from the natural sciences and
individuals who have not had a College education have found work in the industry.



Table 3
Study Sample by Course Taken (N=118)

Course N Percentage
CS and IT 24 20.3
Commerce 16 13.6
Nursing 14 11.9
Engineering 14 11.9
Education 11 9.3
Medical & Applied Programs 9 7.6
Law 7 5.9
Social Sciences 6 5.1
Architecture and Fine Arts 5 4.2
Natural Sciences 3 2.5
Journalism/Mass Communication 4 3.4
High School Graduate 3 2.5
Others 2 1.7

BPO Work and Employment Status

As earlier pointed out, there are 30 major BPO companies in Cebu many of which are
engaged in call center services. This perhaps explains why the bulk of the sample
population, as shown in Table 4, works in a contact center, followed by more than a fifth
of them who work in companies that offer multiple services to clients, that is, a
combination of two or more of the identified services. It appears that the presence of
BPOs in Cebu that offer multiple services is increasing. If this is the case, this would
translate to wider employment opportunities, higher demand for competent human
resources and tighter competition. Those who are engaged in medical transcription
account for 17 percent of the sample, and there is an equal number of workers who are
engaged in back-office and software development. The others are into animation and
digital content-related work.

Interestingly, over 70 percent of the workers hold regular employment status (83 of 118),
a finding which can be considered a positive development in the BPO world. This fact
contradicts anecdotal reports that working in the BPO is temporary and workers are
generally contractual or do not have security of tenure. Given this finding, it would not
come as a surprise if more and more potential applicants would want to pursue a career in
this industry.



Table 4
Study Sample by BPO Work and Employment Status (N=118)

BPO Work N Percentage
Call Center 45 38.1
Multiple Services 29 24.6
Medical Transcription 20 16.9
Back Office 8 6.8
Software Development 8 6.8
Animation 6 5.1
Digital Content 2 1.7
Employment Status
Contractual 34 28.8
Regular 84 71.2

BPO Work and Course Taken

CS/IT students and graduates are mostly engaged in call center, software development
and multiple outsourcing services. Whether this is going to be the trend is something
which future research endeavors can confirm. At this point, we could not say, for
instance, that only CS/IT students and graduates have wider opportunities for work in the
three mentioned categories. On the other hand, Nursing students and graduates of other
Medical and Applied programs are involved in medical transcription although it may be
well worth noting that even the three high school-graduate participants have found
employment in the BPO as medical transcriptionists. This may be an indication that a
prerequisite for this line of work is computer literacy rather than knowledge in the
medical field. Most of those who are in the field of Commerce or Education also work in
call centers while among the Engineering and Law students and graduates, multiple
outsourcing services appear to be the common niche. Other courses which registered a
few participants are no longer included in the discussion herein.

BPO Work and Last School Attended

In reference to the distribution of participants by BPO work and last school attended, the
data show that the number of USC participants who work in call center and medical
transcription companies is higher compared to other institutions. Many of those who
come from CIT and UC also work in call centers while the SWU and USJR students and
graduates are mostly involved in multiple outsourcing services. Other participants are
spread over the various BPO categories. This sub-study, however, could not say whether
BPO companies in Cebu have school preferences in hiring. Perhaps a more thorough
study on this can be made to enable learning institutions to become aware of the quality
of their students and graduates, and provide them with directions on aspects that need to
be given special emphases in the teaching and learning process.



Perceived Entry Skills and Qualifications

One can see in Table 5 the perceived entry skills of the workforce at the time they were
recruited and hired. For clarity, these are divided into four types: (i) general education
competencies, (ii) basic technical competencies for BPO work in general, (iii) specific
competencies for the particular BPO, and (iv) social skills. Among the various types,
computer/ICT literacy, which falls under the second type, appears to be the most sought-
after skill that facilitates entry into the BPO world. A far-second skill requirement
mentioned was English proficiency, a general education competency, although this did
not elicit as many mentions as computer or ICT literacy. The data show that the entry
skills as perceived by the workforce match those identified by the BPO companies.

Other skills which registered relatively higher frequencies fall under two categories:
general education (comprehension, analytical skills, problem solving) and social skills
(attitudinal and interpersonal skills, management skills). The workers themselves are
aware that more skills-enhancement activities on these aspects need to be undertaken to
make them more effective for BPO work.

Table 5
Entry Skills and Qualifications Possessed by the Surveyed BPO Workforce (N=118)

Entry Skills and Qualifications N Percentage
General Education Competencies
English Proficiency 32 27.1
Comprehension and Analytical Skills 22 18.6
Problem Solving 13 11.0
Communication Skills 8 6.8
Reading Comprehension 2 1.7
Basic Technical Competencies
Computer/ICT Literacy 50 42.4
Specific Competencies
Web Hosting 6 5.1
Foreign Language 5 4.2
Knowledge in Medical Field 5 4.2
Knowledge in Legal Profession 3 2.5
Graphics Design 3 2.5
Technical Support 3 2.5
Production Skills 3 2.5
Filing 2 1.7
Social Skills
Right Attitude and Interpersonal Skills 18 15.3
Management Skills 13 11.0
Experience in Other BPO 2 1.7
multiple response



To determine whether the entry skills mentioned by the workforce match the nature of
their work, cross-tabulations were made. The results show that many of those who
mentioned computer and ICT literacy found employment in call centers and companies
that offer multiple services. Clearly, participants who possess proficiency in the English
language, have good comprehension and analytical skills, and those who claim to possess
the right attitude and interpersonal skills as well as management and problem solving
skills are more likely to be hired in call centers.

The BPO In-House Skills Enhancement Training

The workers were next asked to identify the skills training activities they had to undergo
at the time of their employment at the BPO (Table 6). For this part of the exploration,
more mentions were made for computer/ICT training, English proficiency, and
management skills. Despite the claim of many workers that they possess such
qualifications as computer/ICT literacy and English proficiency when they were hired by
their current BPO employer, it appears that the surveyed BPO still saw the need to further
enhance the skills of their workforce in these aspects. One can therefore say that the
workers’ perceived skills in both computer and English proficiency may not be sufficient
to warrant management’s trust and confidence.

The frequent mention of computer/ICT literacy, English proficiency, and management
skills as BPO in-house skills enhancement activities is an indication that honing the
workforce’ skills on these aspects is critical to the operations of the sample BPOs. Other
skills-enhancement activities which registered an appreciable number of mentions include
product-sales-marketing, right attitude and interpersonal skills, comprehension and
analytical skills, and problem solving.

Table 6
BPO In-House Skills Enhancement Training (N=118)

Entry Skills and Qualifications N Percentage
Product, Sales Training, Marketing 17 14.4
Web Hosting 4 3.4
Foreign Language 4 3.4
Others (1 mention each only) 21 17.8
Social Skills
multiple response



The survey participants (N=118) were then asked which of these skills should have been
given stronger focus in schools. The responses laid out in Table 7 show four types of
competencies. Under general education competencies, a considerable number of
mentions was made for English proficiency (76%). This is a clear indication that despite
the claim to English proficiency as one of their entry skills, the sample workforce
recognizes the need to improve on language and communication skills. They are also
aware that comprehension, analytical and problem-solving skills are equally significant to
prepare them for more challenging roles. Under the social skills category, the workers
identified right attitude, interpersonal and management skills as competencies which
learning institutions must give stronger focus in school. Other mentions which registered
high frequencies include computer and ICT literacy and web hosting.

In a study of call center communication, Forey and Lockwood (2007) explained the
importance of interpersonal language. They affirm that “the demands of interpersonal
language rely on more than just a proficient understanding of English grammar and
vocabulary” (p. 13). Interpersonal problems may arise when the caller and the agent
come from different cultural backgrounds, and the agent does not know the right
interpersonal response. This implies that an agent needs to learn how to interpret
language in the context of the call and the culture of the caller to avoid frustrations on the
part of the client.

Table 7
Skills Training Which Should Have Been Given Stronger Emphasis in School (N=118)

Skills Training N Percentage
Social Skills
Web Hosting 64 54.2
multiple response

When the participants were asked to rank the abovementioned skills-enhancement
activities in the order of importance, English proficiency (Rank 1) still appears to be the
most important skill to them, followed by computer/ICT (Rank 2) and comprehension
and analytical skills (Rank 3), interpersonal skills (Rank 4), skills in management (Rank
5) and problem solving (Rank 6). This is an indication that the sample workforce
recognize that they could be better prepared for BPO work as well as in other work
opportunities should these skills be given stronger emphasis in schools.


2010 bpo monograph (usc)

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