David Prichard – Operational insights in outsourcing

David Prichard

We are joined by David Prichard of thenile.com.au, he is the country manager of the Nile. I consider David to be an operational guru, especially in the context of the Philippines or outsourcing operations. I certainly learned a lot in this episode, and I’m sure you will too.

The Nile 

The Nile is a family-and-friends-led enterprise that started in a living room with two guys and a computer. It has now grown to become an employer of over 80 people in the fields of customer service, logistics, marketing, and creative design. The Nile has a successful outsourced operations center in the Philippines.

Founders Jethro Marks and Mark Taylor witnessed the dawn of online retail and withstood its tests of time. They are now beyond 15 years of online retail experience and that is not their collective experience. 15 years is how long together Jethro and Mark have been contending with the challenges of the online marketplace, while flourishing, to guide The Nile to the place it is today.

References

The Nile

outsourceaccelerator.com/259

Operational insights in outsourcing

David Prichard – The Nile

Outsourcing insights

Derek Gallimore: We are joined by David Prichard of thenile.com.au. David now has the prestigious title of being the most frequent guest here. This is his fourth episode. Congratulations, David. I sort of see David as an operational guru, and just want to tap into his wealth of knowledge now of managing people and managing Filipino teams within an outsourcing context. Hi. And thank you so much for joining us.

David Prichard: Thank you, Derek. It’s great to be here for my fourth episode. I don’t regard myself as a guru at all, but that is very flattering for you to suggest that.

Derek Gallimore: Absolutely. And I have to pinch myself to think that it’s the fourth episode. What I want to start with if people haven’t heard prior, if you can just maybe introduce yourself and a little bit about the team that you manage here and the functions that they do.

David Prichard: Certainly. So as I mentioned in previous episodes, the parent company is The Nile, which is an online retailer in Australia specializing in books, toys, and baby accessories. Here in the Philippines, we operate most of our internal processes, which include customer support, back-end order management, product catalog management, marketing, and also human resources and bookkeeping and accounts.

We cover all of those functions plus a few more with the headcount of – it varies depending on the time of year – but a team between 30 and 50 employees. My job as a country manager is to oversee all of that and to ensure that we fulfill our deliverable for the offshoot for the onshore company.

Derek Gallimore: Great. So, now we have spoken at length about your specific environment, your learning over the last five years. And if you want to go back and listen to those episodes, please do. But the summary is that five years in, we’re still evolving. Five years in, we’re still all learning how to perfect these things. But you’ve definitely made incredible strides with that, certainly in the last 12 months. I’m going to start by asking a very broad question. 

In my formative years, when I was about 20, I believe I was lucky enough to read two really formative books. One of them was Maverick by Ricardo Semler, and the other one was E-Myth by Michael Gerber. Not sure if you read both or either of those, but they are fundamentally pole opposites.

Maverick, being the management philosophy of letting people be adults, doing whatever they want, and organizing themselves for the best outcome for the business, versus E-Myth as very much writing everything down, being incredibly process-oriented. Almost like the McDonalds method, where everything is a protocol or a process, it’s written down, and there are to-do lists for everything. 

What are your thoughts on the sort of polar extremes of both of those cases? And where do you see the Philippines fitting in?

David Prichard: Well, it’s really interesting, because, first of all, I haven’t read either book but that sounds like I should. Maybe I should have read them when I was 20 as well, but they both sound really interesting.

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I see merits to both, and based on what you’ve explained to me, I don’t necessarily see them as polar opposites in the Philippines context. The first thing to point out is that it is, when things work well in the Philippines outsourcing context, when you have strong standard operating procedures and everything is documented and people have clear parameters and guidelines to work with.

Just casually telling somebody ‘please go and do this for me’ or ‘please take care of this area of responsibility’ generally doesn’t work that well. In my experience in an outsourcing operation, people need to have really clear guidelines to follow and metrics to adhere to. 

Just to jump aside for a second and give you a little anecdote with our bookkeeping, our Accounts Payable team, we have several people that handle that across the whole business based in Manila. Our financial controller in Sydney often has new things that they need to do or clarifications that he wants changes made to the processes they’re following.

We were finding previously where he was just basically calling up our senior accountant and telling her to change something or sending an email or going through it. Often weeks later, he would come back in complain and say, wait for a second, this isn’t being followed or didn’t understand what I was saying this isn’t working. And I said well, okay, when you take a different approach here, we have an internal team here in Manila, who, which is in charge of what we call process execution.

We have a process expert. Instead of talking directly to the senior accountant, you should talk to him and explain the process to him, give him your guidelines. And then, his responsibility is to make sure that is cascaded adequately and thoroughly to the team. 

Now, cascading is a common word you hear in the Philippines, probably not so common. In this context, outside of basically what it means, is properly delivering a change. Don’t just give basic instructions. Make sure it’s documented correctly. Make sure there’s been a proper session with all the involved employees, where it’s been delivered to them, all their questions have been addressed. And then, when they’re all happy, get sign off from all of them that they understand it. Then, you can finally close it off and say, right, we have implemented this change, however big or small it may be. 

We took that approach, which is a little bit more labor-intensive. We started to find that these misunderstandings, these misalignments of expectations disappeared, and it was much more effective. So that’s an illustration of, I guess the latter that you mentioned, the strong process-oriented, detail-oriented approach. And so that does work more effectively in the Philippines. 

Getting back to the other side of it, the autonomy side if I recall correctly, that’s important, too. And the major challenge that I have had over five years, and we’ve started to make some big strides over the last year, is getting individual employees here in the Philippines. Regardless of the level of seniority, whether they’re at a management level, a team lead level, or just one rank-and-file agent level, I want them to be the drivers of change and innovation and the drivers of productivity. I don’t want them to be purely passive, and only what I say or only take any initiative, I’m the one that sets them off on that course.

And that is a problem that I think is, not unique, but quite acute in the Philippines. There is a culture that, unfortunately, an organizational culture that does not generally, in my experience, encourage or reward people taking initiative. They generally wait for instructions and only do things been attracted to do so. 

Just an illustration in terms of mindset and how you can observe it, I used to find that I would pull meetings at a certain time. And I’d say right, we’re all going to meet discuss something, there are several different people involved, and we’re all going to be sitting down at 10 am. Then, I would be late for some reason, I’d be busy doing something and then I’d find that I’m the supposedly the big boss in the office, I don’t think of myself that way. But they think of me as the most senior person there, I would find that maybe I’m busy distracted with something and then it’s five or 10 past 10. And I’m sitting at my desk and I realize, wait, I forgot about that meeting. And then I’d go and look, and I’d see that everyone else was still sitting in their desks.

No one actually convened for that meeting because they were waiting for the boss to be the one that comes out and says right, we’re meeting now. And if I go and sit there, they assume, oh, the meeting’s not happening, because he’s the person that takes all the initiative. And I said, “I want that to change where I want you guys knocking on my door and saying, ‘hey, what’s going on? We have a 10 am meeting. And we should all be meeting here, but why aren’t you here?’” That’s the kind of approach I want. 

If you took it into more of an operational context, you know, if a task or a process we’ve given somebody or a bit of work with given that is not working, if they’re struggling to meet their outcomes and they need our help, if they need us to come and say wait for a second, this needs to change, there are wrong expectations, we need to change your operating procedure, I want them to be the ones coming to me and saying, “Hey, David, this is what we need. I need you to drive this change with Sydney. I need your help on this.”

But I want it to come from them. And that has been something that’s been quite a struggle to inculcate, and it does come down to a degree of autonomy. And it also comes down to finding the kind of people that are able to thrive with those expectations. And the success I’ve had is that some of the people that have been with us since the first year, – and obviously, they’re very good employees because they’ve stuck with us this long – over the last year, have started to come into their own and started to become those drivers of change.

I think it’s just been a matter of, I guess, identifying that kernel in them, that they’re that kind of personality, and encouraging it and making them realize that it’s something that we value and reward, and setting their expectations and of course, also aligning their goals by setting the right KPIs. 

I’ve started to build a team around me. When they come and say that, and I’m not the one who has to give them those instructions, that’s a great success for me. So that’s how I think I would marry two different approaches.

Derek Gallimore: Nice. So, you mentioned earlier process execution, and … starts, and the industry is really known for its process, and the people being producers. Where do you see the value at? And is it a reality that people can move up the value chain? And as I see it, people moving from being producers to management to strategy, and then to leadership? Do you think that Western businesses can harness resources in the Philippines, not just for the production stage, but right through the value chain of a business?

David Prichard:  Yes, yes. In short, I think absolutely. And I think it’s about identifying that talent, wherever it occurs, you know, that it could be in somebody that has a very junior role, someone that is working in quite a silo-ed area where they don’t necessarily get involved in other aspects of the business just purely because they’ve been told to operate a certain way. Over time, you can identify that in certain employees, and they can suddenly become extremely valuable to the organization. 

I have one employee that pops to my mind, a relatively shy guy who’s spoken English, on first impressions, was somewhat limited. But nonetheless we certainly noticed that this guy, whenever we gave this guy, something that was a little bit different, he suddenly took initiative, and thought about it beyond just the confines of simple instructions.

He thought about the end goal, how we could do this better, and how it fits in with other aspects of the business. And we saw those little clues early on. And then we just started saying, Hey, this is somebody that’s got potential. We started building him up giving him more responsibility. And every step that we have set for him, he assumes that step and really flourished in it. So there is great talent out there, you just need to identify it.

In my expectation, there is no correlation between. And I’m talking about titles and other companies, there’s no correlation between salary expectation, job title, and actual ability. So, out of our challenge was how we’re going to fill roles that require more responsibility. And we hired you to know, we’ve had some successes and some failures. I had a lot of people into management roles, and overall, in general, we haven’t always had success with wanted.

Not necessarily because those managers weren’t capable and talented people, but they didn’t necessarily have the right skill set that fit our organization. And we’ve had far more success and identifying those people within our organisation that usually have ended up the relatively Junior level, and saying that they have the right mindset and then helping them however we can, allowing them to expand, letting them realize that they’re an environment where they can have trust that we’re going to support them. And they’re free and encouraged to speak their mind, and to offer suggestions and to try to innovate and building those people that you suddenly find people that are of extraordinary…

Culture in the Philippines

Derek Gallimore: Yeah, because it is a different culture in the Philippines, isn’t it in the people are taught really to do and not ask so many questions. Whereas, I think in the West, you know, the kids are encouraged to ask and inquire. And maybe, you know, as people move up through management and leadership, then they are magnifying those traits.

Whereas if you take people from when they are Junior, and the young and impressionable and excitable, and you can get them thinking strategically, leading, and being bold in terms of their, their decisions and movements, then you can, you know, propagate some fantastic senior-level skill there.

David Prichard: Absolutely. In some ways, the earlier you get somebody, the better because they can be a lot of it can be a lot of habits or mindset tendencies that a person can develop, which aren’t necessarily bad in general. They may work really well and other companies, but they’re not necessarily suitable for your organization. And then when you bring somebody in externally, you’ll find that it just doesn’t seem to fit. And those habits and trades are very difficult to change, you know. 

A typical manager you hire is going to, or any kind of senior leadership position is going to have a box of tricks that have worked for them and previous companies approaches and just ways of doing things. And it is always going to be a challenge taking somebody who was developed in another environment and trying to get them to work with your environment, which is obviously unique to your own business. And that’s certainly been our experience very recently with even and just to your point, I mean, we’ve even decided that we’re going to eliminate the requirement for a university or college degree without new hires.

Previously, we had that requirement, and we hired some really good people. But we’ve also experimented with hiring people that have come straight out of high school, or maybe have come out of high school and had some experience working in a few years experience working in a different company, snd we don’t see any correlation where the university degree suddenly gives them a major edge in terms of their ability and productive capacity. So I think that’s important. And to your point, I think it’s 100%. Right. 

I get a few different answers from different Filipinos I talked to, but it does seem that being inquisitive. And asking questions is generally frowned upon the, in the educational context that people had when they’re at school. And it also, I think, translates you see that a lot even in local corporate structures here. It’s very hierarchical and your job is to do what you’re told to do. And, you know, it’s not your place to suddenly question things sort of making suggestions about how things could work better at an organizational level. You know, it could be a major oversimplification.

I don’t mean this as a major criticism of Filipino culture, but it’s certainly in my context, something I’ve encountered. And that’s an attitude. When you find it very interesting, certain employees, it’s very hard to change. And so it is much easier if you can get somebody who hasn’t got years and years of these habits entrenched, and then you can sort of set expectations. And like I said, and in our case, it has taken a few years with some employees, employees that obviously had something there, they had a kernel of, of that ability to be the driver for a change in innovation, that natural inquisitiveness. But it has taken a while upon them and get them to a point where they realize they can flourish with that approach.

Derek Gallimore: Yeah, again, I think, you know, these are all just fundamental men, different business philosophies on there, some business owners, I know, they say, you know, we’re not a university, we don’t want to train people, we just want people to lead our company to the next stage that we need. Versus, you know, there’s also a lot of companies like yourself, saying, we can get the best out of people, if we get them when they’re young, and not yet stuck in their ruts, and then, you know, spend a few years building them up to be super strong leaders in their roles. So it’s, it is interesting, isn’t it? And, you know, certainly, it’s fascinating to see the real-life examples of these things. 

I want to dive into some future trends. Just a little bit of warning there. But, you know, if you were to start again, whether it be The Nile, or whether you were starting a business from overseas, could you see yourself, you know, literally building the entire team in the Philippines., and obviously, using that cost arbitrage has one of the significant competitive advantages. Do you see any reason now why you wouldn’t necessarily have any staffing based in a whatever a hometown or home country?

David Prichard: I think the answer is that we would do as much as we possibly could, I would do as much as I possibly could, in the Philippines. Probably in my case, because now I’m in far more of an expert and in managing and dealing with people in this environment than I ever was in Australia. But also, you have the cost advantage, you do have certain skill sets that are strong here, perhaps stronger than most offshore markets like Australia or the US. A lot of said, for example, in a customer support context, is one function.

I think it’s a bit of a cliche, in certain respects, unlikely particular light, but there is something to be said and the fact that Filipinos are quite passionate about customer support. And they go to it with a greater degree of sincerity and passion than the typical customer support people you generally find out in Australia now. Not a criticism of everyone who works in customer service in Australia, and it’s also just one example, but you could sort of pointed things in different areas as well. So there are definite benefits to do it in the Philippines beyond just cost certain functions.

I have to be honest, in our context, we probably wouldn’t think of doing in the Philippines on day one, obviously, you’ve got things that require a physical presence. So in the case of our business, you’ve got our fulfillment centers, you know, where we have to ship things to customers and store stock. Well, that makes sense due to geographical issues. But there are also things that, in principle could be done in the Philippines.

But to be honest, we would probably still do in Australia, at least on day one. For example, we have managers and Sydney account managers who deal with our vendors. So vendor relationship managers, and there’s a lot of cultural contexts there. Just sort of understanding the way that Australians communicate, understanding the way the different retail industries operate out of the way, we’ve just found that most Filipinos would struggle to understand all the jargon and just to sort of understand those subtleties of communication. And so those roles still do in Australia. And certain sort of high-end customer service roles, where you want a really strong cultural affinity, like certain specialized roles with customer support for our baby accessories, we need to understand the context of Australian parents and what they’re looking for.

We have chosen, despite the higher cost, to do those in Australia. So there are still certain roles where I think the cultural barrier and challenges of doing it here, we would still lean towards doing it and in Australia. But other than that, if it’s something that I think could be done effectively here, our first preference would always be to do it in the Philippines.

Future of outsourcing

Derek Gallimore: Yeah, interesting. Isn’t that cultural alignment and affinity is huge, isn’t it? And, you know, I think, if there’s friction of doing business or interactions, then it’s most obvious there, just in general interactions, and the nuances of cultural alignment. And that can sometimes be very costly in terms of business interaction. 

Now, let’s go into the future, David. And I know that you’re very abreast of your current affairs and politically aware and global trends. Where do you see outsourcing going? What’s going to happen in the next 10 to 20 years? You know, recently, it’s been dredged up again, that Donald Trump is threatening, you know, banning outsourcing. No doubt that’s because he’s seen a weakness in that part of the economy for the US and maybe the First World.

Where do you see the global trends of employment going with outsourcing being a part of that? Is all of this going to come to the Philippines? Are there going to be job losses in the West? Is it? Is it a good outcome or a bad outcome?

David Prichard: I’m certainly not an expert in any of this stuff. It’s all just speculation. But the two major threats that people talk about to outsourcing in the Philippines, one is the one that you meant, which is, I guess, a kind of resistance in those onshore countries. People want to keep jobs in the US, for example, and so that that’s a certain constituency that Donald Trump, for example, appeals to say, No, we want to keep jobs onshore. So we want to penalize companies that are doing outsourcing and apply various carrots and sticks to keep these jobs on short. Right.

That’s on the face of it, you would imagine as a threat to the burgeoning outsourcing industry reason countries like the Philippines. And then the other one, of course, is the great threat of automation that everyone talks about, you know. You’re building all these jobs and the Philippines ‘ major advantages are the fact that it’s an English-speaking country. So you’ve got all this voice capacity, which few other low wage cost countries do. And but all of a sudden, automation could just sweep the carpet from underneath that because you won’t need humans with voice capability for the basic stuff. 

Those are the two kinds of challenges that you usually hear bandied about. I’m sure there are more, but those are the two that popped into my head. About the political aspect, I think you can’t as much as you could kick things around and apply incentives penalties, I don’t think you can change the fundamentals. I mean, people will just find other ways, to achieve an outsourced outcome. I mean, if wages are going to remain as high as they are in countries like the US, it’s going to be incredibly expensive, and the natural advantage that low wage countries have is still going to be there.

They will just have to be realignments and people will have to find ways around it. But companies are still going to be looking for ways to do things offshore because it’s more effective. So I think, I think really, those kinds of political movements are probably going to backfire for the US because it will make everything more expensive. And when things are more expensive, the quality and the business itself suffers. 

The ticket prices case of the US resistance to outsourcing, it will be a distortion, and ultimately that will lead to pressure for outsourcing to become possible through some other means. Concerning automation, I think, yeah, I think that is ultimately a natural challenge for the outsourcing industry. But I think we’re still a long way off. I think we still face challenges, cultural challenges, you mentioned nuance earlier, at least what you’re talking about customer support or any kind of voice function.

You know, in Filipino employees, we train them up and they get very skilled at delivering customer support. And they understand, they speak good English, too, they understand the questions customers are asking them, and they understand how to give the best answers they possibly can. But the reality is, language is an incredibly complex thing. And, you know, if you’re speaking Australian English, for example, there can be five or six different ways of saying the same thing or asking the same question.

The slightly different word you use, even though on the surface is just a synonym, that can have a huge amount of meaning. And there’s a lot of subtext in the way somebody is asking a question, which tells the listener what they’re looking for, the outcome they want. And we naturally understand that if we’re from the same country or the same environment, that we face that challenge with Filipinos who come from a very different environment, even though they speak English, they speak English differently.

They use terminology differently. So you have that challenge between having somebody that’s onshore doing customer support, and someone in the Philippines, well imagine how much harder that’s going to be if you’re talking about a robot, trying to train the robot to understand all the niceties and subtleties of the way people communicate. 

And basically, you don’t hear very often people saying how great artificial intelligence is now, yet people sort of say, Oh, it’s going to be the future, it’s going to get better. But my own experience, anyone that’s ever really tried to use Siri properly, or any of these, or spoken to, has called up a support hotline and spoken to a robot, generally, they get very frustrated, and the robots can understand what they’re asking unless it’s a very simple query.

So I think there’s a heck of a lot of work for artificial intelligence before it gets to that point where it can replace humans, which buys the Philippines a little bit more time. But they’re still going to have to get smarter, we’re going to have to train up workers, like I said, to be those drivers of change, to be the guys that maybe it’s my previous interview, I’m not sure but to be the guys that drive innovation, and actually deliver by helping you improve your business not just fulfilling a specific task you asked them to do. So there needs to be a lot of investment in and building up the workforce to have greater capability and to be able to deliver more value.

Derek Gallimore: Absolutely. I couldn’t agree more. And, you know, on the point in terms of labor migration, and Trump and things like that, I just find it an incredible concept that previously labor, you know, which was the currency of work, and the labor force, was actually geographically contained, and people could be stopped at borders. And that was a country’s way of metering and monitoring the amount of labor supply.

Now, everything is online, and the majority of productivity in a country is done online, from behind a screen and keyboard, and it just cannot be policed anymore. The lever that countries had, which was stopping people at borders or issuing several visas is no longer applicable anymore. And, you know, you could have, you know, the vast majority of the productivity, an entire country done remotely. And I think it’s something that the country hands are still grappling with, in some sense. And, because of that, I just don’t think that it’s in any way enforceable police force, or even, you know, people can’t monitor this anymore. So it’s going to be fascinating to watch it play out. 

David Prichard: I agree. I just don’t think with political tinkering, you can change those fundamentals. At best, you can achieve kind of distortions, and you can sort of try and try and realign incentives, but ultimately, nothing that a government can do can change the fundamental fact that most work can be done remotely now. And that is not constrained by physical borders.

So a country or a government that tries to prevent its own companies from outsourcing is simply going to put those companies at a disadvantage. Somebody else and other people, may be in another country, that does it in the same industry will be able to do it and they’ll have a major competitive advantage because of their costs

Derek Gallimore: Absolutely. But sensibility is never really stopped politicians tinkering previously as it so is interesting to watch it play out. So thank you so much, David. And again, it’s just been incredible insight. I always learned so much talking to so thank you for your time. And if anyone wants to reach out to you, of course, or learn more about The Nile, how can they do that?

David Prichard: Check out our retail website, which is The Nile, as in the river of Egypt, thenile.com.au, and I’m always happy to be contacted by anyone. So you can just look me up on LinkedIn. I think I’m the only David Prichard in the Philippines.

Derek Gallimore: Fantastic. Thanks so much, David.

David Prichard: Thanks very much there.

Derek Gallimore: That was David Prichard of thenile.com.au. If you want to get in touch with David or know any more about this episode, go to outsource accelerator.com/259. And as always, if you want to get in touch with us, just send us an email to [email protected] See you next time.

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