Outsourced services: reputation renewal?

Increased public and regulatory scrutiny of large outsourced services providers in the UK is perhaps unsurprising given the result of the recent SFO investigations into the UK government’s electronic tagging contracts. However, the issue has rekindled debate on the costs borne by the public as a result of the privatisation of public services and sentiment towards the outsourced services sector has declined dramatically, with alva’s Reputation Index ranking table for the industry shedding -0.18 in Q4 2013.

The Conservative party’s Big Society policy , aiming to transfer control of public services into the free market and initially positioned as aiming to “empower communities” took a marked increase in mainstream media reference as “The Shadow State” a report by Social Enterprise UK was published in December on the current state of the outsourcing sector. The report found that the sector lacked both transparency and accountability, now being dominated by a select few firms, following the privatisation of services such as waste management, children’s homes, adult social care and social security.

The report criticised firms with large stakes in multiple public service markets for being too big and complex to fail and determined that a lack of publically available information as a result of commercial confidentiality has resulted in it now being “impossible to hold many providers properly to account”. The cost reductions for the government as a result of competition for contracts is often cited as a benefit to society that these firms offer, however the report determined that “bidding on price usually creates a race to the bottom on wages, fuelling low pay and inequalities”. Low pay in the sector necessitates in-work benefits which the taxpayer must pay for, and can also make it difficult for large sections of the workforce to prepare financially for retirement, which can create significant future social and economic problems.

The issue for companies providing these services is very much a reputational one,  given a long list of high-profile reported misdemeanours, companies are faced with a set of staunch and vocal antagonists as well as a tried and tested media narrative when issues are reported. Legacy issues are conflated with present day events and a confirmation bias operates both in the reporting and often the reception of new information relating to these firms. This is a very good example of the pervasive and tenacious quality of a bad reputation.

Regulatory and government pressure for outsourcing firms to renew their reputations is likely to increase in coming years as the perceived actions of companies in other sectors such as utilities and financial services create public, media and political demand for tougher action from regulators. In the long term, the sector’s winners will likely be those that are seen to be providing good value for the services they offer and who are able to avoid accusations of unnecessary profiteering. In building or maintaining a strong relationship with government and regulatory bodies, firms will need to demonstrate that they enhance the public good, rather than simply profiting from it. Over time, this will help reshape the existing narrative towards them and the benefits provided by the sector may be given due prominence.