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Echoes of recent weeks - key thoughts of top managers of Hungarian service centers on the effects of COVID 19

As promised, we have summarized the key conclusions of the SSC / BSC / BPO Senior Leaders' Chatroom, which Knowledge Pyramid Kft. had the opportunity to organize and moderate.
The seven attendees, each of them a highly esteemed senior leader in the sector, were the following:

Szilvia Olle – Director, Varian Medical Systems Finance SSC 
István Lenk – BSC Operations Manager, Eaton
Pieter Van der Velden – Director, FrieslandCampina EMEA Service Centre
Simone Olivo - Country Director, Covalen
Ahmed Ismail – Vice President, EMEA Operational Controller, Genpact
Attila Hernold – Director, Albemarle SSC
Emese Pataki – Senior Business Consultant, Service Centers Expert, Knowledge Pyramid Kft.

Monika Slomska, Managing Director of Knowledge Pyramid Kft. hosted the event. During this exciting occasion, a multitude of topics related to the SSC / BSC / BPO sector’s current status as a result of the recently imposed COVID-19 lockdown in Hungary were addressed.

Could you please describe your experience relating to the last 6 weeks? What was the first thought that came to your mind once the announcement regarding the mandatory home office environment was released?

After the exchange of brief introductions, Monika encouraged the participants to tell about their initial reaction to the government-imposed restrictions and the resulting first-hand experience related to managing such a sudden and monumental change to day-to-day operations. Every attendee highlighted the importance of anticipatory planning, an open attitude towards change management and a developed IT infrastructure. It was commonly agreed among guests that the prevention of panic arising from uncertainty and the preservation of employees’ trust within the firm has become paramount, as well as possessing a reliable and functioning Business Continuity Plan. All in all, our participants seemed to have managed change, uncertainty and the resulting anxiety quite well, despite the numerous challenges posed by COVID-19.
It was also concluded that companies’ actions in advance of the lockdown announcement were greatly influenced by their global presence and their level of IT preparedness. Highlighting the importance of global presence, firms possessing service centers within China enabled them to better understand COVID-related operational and day-to-day business risks, which resulted in a higher state of readiness. In another example, sudden governmental decisions taken within India were deeply felt by some Hungary-based service centers due to the prevalence of process outsourcing towards the region, essentially impacting the coverage of certain business processes.

As for the significance of IT preparedness, firms possessing substantially more digitalized processes had an easier time making the change compared to companies still relying on paper-based tasks. As an example, such companies were needed to order and deliver printers to employees’ homes to preserve timely process delivery. However, all participants agreed that running all-encompassing stress tests on key IT infrastructure and identifying potential issues was a critical component of their preparedness.

What do you think of your teams’ effectiveness and productivity showcased over the last 6 weeks? What are your expectations for the coming period? In relation to virtual leadership, how do you manage your team remotely? Do you think of it as a positive or negative experience?

Our attendees’ own experience in relation to the notion of compulsory Home Office (HO) varied greatly. Although many of them admitted that they were absolutely exhausted during the beginning of its tenure, they soon started to adjust to their new routine, telling of an overall positive HO experience. Funnily enough, some of them even started to prefer this way of working. However, everybody agreed that an individual’s experience relating to HO may differ based on said individual’s personal background. For this reason, it was concluded that engaging with employees about HO and its impact on employees’ personal lives has become a valid and needed task for the future. When it came to virtual leadership, our attendees emphasized patience: During such an unconventional period, a multitude of people management issues can surface relating to peoples’ diverse needs of leadership support, employees’ maturity and family background. In order to preserve an “in-the-office” feeling, the scheduling of multiple virtual meetings a day have become a common occurrence. Our guests, even though they have successfully adjusted, miss the workplace and the daily interactions of the office environment.

Before the pandemic, HO was regarded as an important employer branding tool due to its popularity and flexibility. Opinions regarding HO before the outbreak differed from company to company mainly due to firm and leadership culture. However, the HO resulting from the COVID-19, although forced and mandatory, has proven to be a strangely easy change for the firms in question, at least in terms of productivity. Numerous guests stressed that today’s compulsory HO unexpectedly resulted in increased performance, and that the general integrity of business processes was well-preserved after the “switch”. Certain attendees noted that this result is simply a short-term phenomenon attributable to companies being able to preserve staff trust in the middle of a crisis. This however is merely a short-term effect, since after 6-7 weeks it becomes increasingly difficult to preserve staff motivation. For this reason, participants emphasized that face-to-face human interaction is essential due to its capability to boost creativity, and that long-term „isolation” from the office environment could put a strain on employees’ mental health and long-term productivity.

What is your opinion: How will internal and external expectations change in the coming period?

In both cases, firms are expected to face difficult decisions. In relation to external expectations, the preservation of a mutually understanding, partner relationship was identified as an essential business practice. This is because COVID-19 does not impact every industry in the same way: There are bound to be differences between clients, which is why patience must be exercised by both sides. From an internal perspective, attendees highlighted that even though the current goal of their respective centers is staff preservation, they are still required to seek out and implement cost-cutting measures. It was universally agreed that the reduction of capital expenditures, T&E and other expense items that have an obvious impact on the bottom-line are expected to be on hold. However, service centers’ determination towards staff preservation could entail dilemmas: In some cases, directives requiring the dismissal of staff, whose work is not impacted by the pandemic in any way or form, could be viewed negatively by other parts of the business, deeming such acts as “unethical” business decisions. This can lead to additional friction in an already uncertain economic outlook. Should the crisis deepen further in the future, which would most likely entail the decrease of business transaction volumes, some firms may find the dismissal of staff necessary.

Our attendees identified two major elements of the current business outlook relating to the service centers’ industry. Firstly, in the case of some businesses, non-core activities are expected to be put on hold, with the main goal of said businesses shifting towards staying afloat. Secondly, attendees are not expecting a reduction in current office rent expenses due to landlords’ primary goal of protecting investors’ interests. Our participants also highlighted that landlords’ disinterest in lowering rental fees is also strengthened by service centers’ preference of following cost-cutting strategies, which inhibits them from moving to a different location due to such a decision’s substantial CAPEX implications. In conclusion, even though there are various factors in play, our participants expect this recession to be one of shorter duration, which results in their centers’ aim being the retention of their staff and clients.

What is your opinion: how will service centers’ market conditions change in Hungary post COVID-19?

One of the principal characteristics of the current service center sector within Hungary is the tendency of outsourcing processes to the Far East (ex: India). As mentioned before, economic uncertainty tied to COVID-19 can easily impact the cohesion of business processes. Highlighting India’s example, a massive number of employees were forced to work from home, but due to said employees’ mixed socioeconomic backgrounds, some of them were unable to work effectively for a time. Such cases can logically shed some doubts on the viability of such an outsourcing model. However, attendees maintained their faith in the current model. They asserted that there is a fundamental need to consider the bottom-line when making business decisions, and since Hungary cannot be identified as a low-cost country anymore – the crucial task therefore becomes identifying the correct balance between quality, language knowledge, price and complexity by separating high-value job profiles from transactional work. Our participants labelled the harsh criticism of the current model an overreaction and misguided panic, however they did emphasize the importance of geographical diversification – essentially not “putting all eggs into one basket”.

Will service centers change from an employer branding and recruitment perspective?

In relation to our question about whether firms’ approach towards the rental of office space would change, our participants denied radical assumptions concerning the complete elimination of conventional offices in the name of cost-cutting. They first emphasized that offices serve as „symbolic” places – Many companies would like to preserve their footprint in cities such as Budapest. It was also said that even though various expansion plans may experience delays, office spaces in general boost creativity and interaction, which in turn compels people to perform better. Lastly, our attendees asserted that Budapest has been doing a great job when it comes to service delivery as well as sustaining the current BPO model, even when handling difficulties arising from the COVID-19 crisis in India. They mentioned that even though Hungary cannot be classified as a low-cost country anymore, Budapest should still expect a bright future when it comes to the service center industry.

It was also concluded that the general image of the service center sector will be, and already is impacted by COVID-19 from a hiring perspective. Firstly, the fact that the compulsory HO has so far resulted in elevated performance will encourage some centers to identify job roles worthy of conversion into „virtual jobs”, essentially making use of the COVID-19 crisis as a test period. These positions primarily include activities that essentially do not require a working-relationship with other colleagues within the office environment, but current CAPEX restrictions are likely to push such plans into the future. Secondly, others discovered that compulsory HO improved employees’ efficiency during financial closes, which will be considered going forward when it comes to staff attendance during monthly-and quarterly close periods, signifying an openness for additional flexibility. Thirdly, attendees explained that the current COVID-19 crisis by itself is an employer branding opportunity, the success of which will be influenced by companies’ way of handling the crisis.

We would like to thank our participants once again for having the interest and motivation to participate in our Chatroom. Knowledge Pyramid Kft. truly believes that by hosting exclusive chatrooms reserved for a small number of top leaders, it becomes easier to facilitate an honest and friendly conversation. Even though there were some differences between our attendees in terms of their backgrounds and experiences, the Chatroom proved capable of creating a platform to carry out an active, honest and friendly conversation.

We hope that you have enjoyed the summary. Take care and stay safe!