This week's topic: Maximizing Cultural Compatibility - Why more companies are outsourcing finance and accounting to the Philippines.
Organizations have a lot to consider when they decide to outsource a part of their finance and accounting operations to an offshore location, including the infrastructure, culture and ease of doing business in their target country. Increasingly, the Philippines is that target country, thanks in large part to what organizations considering outsourcing see when they make those considerations. That's why Megan Weis — VP & General Manager, FAO Services sat down to speak with Paulo Cheung, Personiv's VP and Executive Site Head in Manila this week to talk about why on the third episode of CFO Weekly.
Listen to Episode 3 on Apple Podcasts: Maximizing Cultural Compatibility: Outsourcing F&A to the Philippines with Paulo Cheung
How the Philippines Became a Popular Outsourcing Location
The story of how the Philippines became a top destination for U.S. companies actually began centuries ago, if you ask Cheung. It's done multiple stints as a colony or territory over the years – passing through Spanish, Japanese and – you guessed it – American control over the past few hundred years, before becoming a self-governing constitutional republic. This history is part of what makes up the unique culture you'll find there today if you find yourself doing business in the Philippines.
Cheung explains that part of the reason Americans in particular find the Philippines so attractive when looking for an outsourcing location is a real sense of cultural compatibility that comes from the colonial mentality the country's history left behind. "Our number one sport here is basketball. You go shopping here and it's like you're in L.A. – all the shops are made in the U.S. Look to your left and to your right and you'll see McDonalds, Starbucks, 7-11 and KFC," he joked with Weis, who has spent significant time there herself as a key touchpoint for many of Personiv's clients. For these reasons, the two agreed, many Americans feel right at home when they visit or do business in the country.
But they aren't the only reasons. Another huge one is the near non-existence of a language barrier for English speakers. Cheung points out that there's a 97 percent English literacy rate in the Philippines, ranking it third among Asian countries in English proficiency and a very impressive 20th in the global landscape. He credits one of America's contributions to the Philippines for this, telling Weis that "Americans changed the landscape of education by introducing the free education concept wherein all Filipinos can go to school and finish college – for free."
Filipino Communication Skills and Hospitality Are Second to None - Outsourcing Cultural Compatibility
It's possible that this dedication to education – a system that's been steadily improved upon by the Philippine government over the years – combined with this same language proficiency, is part of why Filipinos are such excellent communicators, Weis posited, and Cheung agrees.
“A [Filipino] call center agent can make small talk with a U.S. customer about the latest fashion trend in the U.S.," Cheung told her, often with a near undetectable accent. And it isn't just call center customers and creative services clients that end up reaping the benefits of these communications skills and culturally compatible parallels.
Filipino culture is family-focused and deeply faith-based, so many foreigners find that they're welcomed as honored guests when they visit. "Every time I visit the Philippines," Weis told Cheung, "I'm always amazed at the level of hospitality that you guys show me. It's like a red-carpet reception is being rolled out every time."
Cheung agreed with a laugh, explaining that, "Hospitality is certainly a trademark of Filipino culture. It's characterized by heartwarming generosity and friendliness toward others. We want to be sure that our guests have the best time when they visit our country, and it's the same thing in a business setting." The site head explained that the welcoming atmosphere many Americans experience as newcomers to the country extends to the workplace, just one more reason it's an excellent destination for U.S. companies who are considering outsourcing there. "We always give our best when we have our customers and clients visit at work and the way we do that is a high level of service by producing high quality results every day."
The Bottom Line: Cost and Availability of Qualified Talent in the Philippines
As Weis says in the podcast, "Cost is just one factor," for companies who are considering outsourcing some of their finance and accounting processes to the Philippines. But it can be a significant one, so the two turned the discussion to what organizations can expect for their bottom line when they create a Philippines-based team to help make their operations more efficient.
"Let me just put it this way," Cheung begins, "Our current minimum wage here in the Philippines is 11 dollars. Not in an hour – in a day. So, due to labor arbitrage companies can easily save 70 percent of their cost when they outsource here." Weis recalls that when she first learned how much it costs to employ accounting talent in the Philippines, she was also surprised to see the quality of life that a wage like that can provide for the workforce there, which can be quite comfortable in a city like Manila.
And it isn't just that Philippine talent is affordable, according to Weis and Cheung. It's also plentiful and highly qualified, thanks to robust government support of the business process outsourcing (BPO) industry as a whole, which includes university linkages.
That support has paid dividends for BPO providers and clients alike, Cheung points out, explaining that the country produced nearly 700 thousand new college graduates a year, nearly 200 thousand of which will take the certified public accounting exam, which is administered to the same standards as the U.S. test. Of those almost 30 percent will go on to become CPAs.
Many of those CPAs will go on to work overnight to support their U.S. client's finance and accounting operations, which brought Weis and Cheung to the final topic on their agenda – time differentials.
In order to support U.S. operations, explains Cheung, about 80 percent of the BPO workforce comes into the office overnight. "We just want to be an extension to those U.S. teams," Cheung explains, with Weis adding that shift incentives and a vibrant nightlife that supports night shift workers in the cities they live in ensures that overseas teams are in good company, well-supported and in very good company when they work a shift that coincides with a working day stateside. The quality of work doesn't suffer, and U.S.-based organizations know they'll be able to get ahold of their Philippine counterparts when they need to in order to keep everyone on the same page.
To learn more about what you can expect when you outsource your finance and accounting operations to the Philippines, tune in to the entire episode of CFO Weekly over on Apple podcasts or wherever you get your favorite podcasts, where you can also subscribe. If you like what you heard this week, don't forget to leave our podcast a five-star review, and if you want to get in touch with a great idea for our next topic or to be Megan's next guest, just click the link below.