[Cătălin Iorgulescu, VP ABSL] Increased productivity in the business services industry must be supported by investments in education

//[Cătălin Iorgulescu, VP ABSL] Increased productivity in the business services industry must be supported by investments in education

This article was originally published for www.wall-street.ro

We have talked quite a lot about the growth of our industry lately and the figures look good, they have the gift of reassuring, after a few years of sustained growth and ranking Romania in the first place in the category of mature outsourcing markets, according to a study by Cushman and Wakefield. The industry comprises over 265 companies, a motivated workforce, well prepared, very good foreign language, competitive at cost level and culturally close to European values.


A few years ago, I participated in a discussion with Ryan O’Neil, the commander of the SEAL elite unit of the US Navy that succeeded in eliminating Osama Bin Laden.

At the Q&A session, after the speech, someone asked: “What is the greatest danger in your job?”. The answer came instantly and I found it less predictable: “Success!”

I gave this example because as an elite unit, probably the best in the world in its field, not only not afraid to recognize to the public, but is actively preparing to avoid the relaxing effect of success. SEAL loses people every year during training to avoid further losses in combat.

I believe that the business services industry in Romania has reached a degree of development that demands a self-analysis exercise, meant to avoid the decline induced by success.

This is why it would be appropriate to look at the productivity growth and at the impact of this growth in our industry, but also in the Romanian economy.

Of course, approaching this topic (and especially the transition from theory to practice) is much simpler at the micro level (the decision-making power within a company is easier to coagulate) rather than at the level of the industry or the entire economy. However, the same factors play an important role: the                 well-educated human resource, capable of periodically reinventing itself and the large companies capable of building on this platform through investments and know-how brought to Romania.

While investments in technology and know-how are at the highest levels, with multinationals competing for the workforce on the Romanian market, I believe we cannot support the same thing about our education system.

From the annual industry report, published by ABSL together with KPMG, it appears that automation is current increasingly in the Business Services sector and is not just a passing trend.

Compared to 2018, for the last year we see a significant enhance of the interest for the benefits of automation, both in the case of simple solutions (Basic Automation) and especially in the case of advanced solutions, with a much greater impact on productivity. Industry companies are also concerned about increasing the level of autonomy of the implemented solutions, more precisely to develop solutions that do not require reprogramming to the smallest changes in the systems they interact with, but to learn to “adapt” itself.

Until now, the typical employee in the back-office or call center spent up to 80% of the time daily completing forms or processing data and orders, more exactly performing a variety of activities, vital for the final client, but chronophagic and inefficient for the employees.

Today, robots (software no.) are able to solve activities for which they are programmed up to five times faster, compared to company’s staff.

According to our study, 71% of the companies interviewed used simple automation (“Basic Automation”) in the company’s activities last year, compared to only 53% in 2018.

By adding artificial intelligence and cognitive automation, these robots become able to foresee and to include more actions, without the need for employee interventions (automated emails, virtual agents, interactive “IVR” voice responses, etc.).

Thus, 23% of the interviewed companies use cognitive automation in 2019, with a rate of 21% in the previous year.

According to the same report, the phenomenon of automation brings a significant increase in labor productivity in our industry, even though its impact on the increase of the average income per employee, of only 6% (29,200 euros / employee in 2018 vs. 31,000 in 2019), is smaller than the one expected due to the transfer of part of this benefit to the final customers of the current companies on the Romanian market.

It is normal to be so if we want to stay competitive. Without major investments and technology, this industry wouldn’t have existed in Romania, and most states in the Eastern European area are now making great efforts to attract similar investments. The only advantage of Romania, somehow harder to overcome, was the well-trained workforce and the ability of Romanians to easily learn foreign languages, advantages that are based on a highly performance educational system.

However, in the last 20 years we have seen a significant decrease in the results of this educational system, from one year to the next.

For example, the results of the latest PISA tests organized by the OECD are weaker than ever – both in Romanian language and in mathematics. We gradually went down in the ranking from 48/47 to 53/56 (mother tongue/math). This may seem insignificant, but the fact that we have been outclassed by Belarus, Ukraine, Turkey, Greece, Albania, Bulgaria and Malaysia, seems very worrying. I have all the respect for these countries that, with resources and tradition sometimes inferior to us, have managed to have these results.

A study by the OECD (organizer of the PISA tests) shows how, over the courses of 40 years, the percentage increase of GDP per capita is in direct statistical correlation with the performance of the education system – measured at the level of the entire population. With other

In other words, it is statistically demonstrated what we all intuited: a better educated population ensures a productivity increase and implicitly a higher GDP than a less educated one.

This is the argument for which the Romanian state should actively support the development of education throughout the country, which, in turn, will support the increase of the productivity of the Romanian economy.

Companies, however well-intentioned and eager to benefit from a superior workforce they may be, could not radically influence a state’s education system. They may have punctual interventions, for example, in a particular industry or city, especially at the higher education level. But it is almost impossible to get involved in the primary and secondary education system, at the level of an entire country. This area belongs by excellence to the state, which can however use the experience and aid provided by the business environment.

For example, ABSL Romania and the Academy of Economic Studies in Bucharest launched in 2016 the Master Program of Business Services, organized within the Faculty of Accounting and Management Informatics. The program is supported by ABSL funds (through the provision of scholarships) and the human resources of the organization. The member companies and the Association have directly contributed to the design of the necessary curricula and textbooks, which are now approved by the state authorities and are adapted to the current demands of the business environment and our industry. At the end of the studies, the first generation was already employed in a proportion of 98% – demonstrating a high degree of correlation of the subjects with the demands of the market.

But this program launches 30 graduates a year, and the industry currently has over 131,000 employees and an estimated growth rate of 9.6% (producing 13,000 new jobs, without taking into account the positions replaced by the                      above-mentioned technology. ).

At the same time, in the 2018-2019 academic year, at national level, the number of students enrolled in the bachelor’s program (approximately 400,000) is going down with 50% compared to 2010.

This is the reason why we need the involvement of the state in replicating this program at the national level, in the big university cities.

There is no need for massive investments by the state because the current human and material resources can be converted. We can analyze the percentage of employees in the number of graduates at the end of their studies and replace the programs that are no longer wanted with the current ones, dedicated to the growing industries. This should be a priority for any government that wants a sustained economic growth. Private initiatives for supporting education cannot achieve large-scale results in the absence of a partnership with the authorities.

In conclusion, I think we are in a very good position after many years in which our industry has experienced a steady growth, but we must continue to invest in modern solutions that will keep us relevant and act counter-cyclically, reducing the relaxing effect of this success. This is possible if we manage to maintain the advantage of a well-educated workforce that, judging by the latest PISA test results, is in sharp decline.

Investment in education, both at industry level and especially at national level, is essential to support productivity growth, GDP per capita and therefore a better life for all Romanians inside the country, not outside its borders.