The ‘real’ story behind Convergys closing

Armchair Mayor column, Saturday, Aug. 8, 2009

Kamloops will lose a good employer when Convergys phases out the last of its staff next April.

Though the call centre in the former K-Mart shopping centre in Valleyview was controversial when established nine years ago, it has provided many hundreds of jobs for local residents.

Working at a call centre isn’t everyone’s cup of tea. Stories are legion about people going through training week, starting work and, a couple of days later, deciding unemployment is better than life on the phones.

Staff turnover at Convergys has arguably been the highest of any company in town. That’s just the way it is with call centres — the HR department is engaged pretty well full-time filling empty chairs and keeping staff happy.

A website, convergyssucks.com, is dedicated to former employees trashing the company over everything from wages to dress codes to alleged fistfights in the hallways at its various operations.

When news started leaking out late in 1999 that our city was on the radar for a major call centre, there were those who questioned whether those were the kind of jobs Kamloops needed. Never mind that the unemployment rate had topped 13 per cent and we would have welcomed with open arms just about anything short of a nuclear arms plant.

Then there was the parking lot thing, when the landlord erected those big concrete barriers to keep Coopers food store shoppers out of the soon-to-be Convergys parking area.

Nevertheless, Convergys filled an employment niche here.

This week’s announcement that it will shut its doors due to “the effects of current economic conditions” is puzzling, since Convergys chose Kamloops in the first place in large part for reasons relating to the poor economy at the time.

The key was a large available labour pool. The company needed 600 workers to service its contracts, it said. Kamloops was able to provide those workers. When it opened, the call centre actually began with 100 employees, but that soon increased, and only two years ago 1,200 people were working there, making it the largest private employer in town.

This, despite increasing difficulties in filling vacancies as the economy turned around and the unemployment rate dropped like a stone. Now, with the economy back in a slump, the local unemployment rate is back up to almost 10 per cent, and that flexible labour pool so important to call centres is once again available.

So, how can an economy that helped convince Convergys to expand into Kamloops now be responsible for it leaving town?

Convergys is in the business of “relationship management,” that is, keeping the customers of various corporations happy. Its call centres make their money through contracts with those corporations.

In an economic downturn, some of those corporations are going to experience belt-tightening, which includes customer service, and this is bound to affect a company like Convergys. A Daily News story Friday was headlined Economic Crash Hit Convergys: Analyst.

Key to the health — and the size of the workforce — at the Kamloops centre has always been those contracts with corporate clients. While Convergys keeps information about those clients tight to the chest, we do know that, from time to time, a client will be lost and must be replaced.

American Express is often mentioned as a major client, and word is that contract is coming to an end.

Yet, there is no overt indication that Convergys is downsizing. Just two weeks ago, the company announced the opening of a new facility in the business district of Makati City near Manila in the Philippines.

“This opening marks the fourth of five facilities Convergys has added throughout the country following its major expansion announcement in May 2008,” said the press release, which quoted Convergys Vice President and Country Manager Marife Zamor as saying, “’We are growing exponentially.’”

The company has also recently announced major expansion plans in China. That doesn’t sound like a company pulling in its horns.

Indeed, as it was announcing the closure in Kamloops, Convergys was announcing second quarter revenues of $683 million, down only marginally from the same period last year.

“We delivered very strong free cash flow and significantly improved our liquidity position in a challenging economic environment,” said David Dougherty, the company’s president and CEO.

Clearly, there are nuances to the Convergys decision that are not being explained. A strong clue could lie in the fluctuation of the loonie.

Dougherty was quoted earlier as saying the company was planning tough action in connection with foreign exchange issues. “Most notably we’re being hurt today in Canada and we are taking action to close centres there and move work to other geographies.”

Translated, Convergys can work more cheaply, and realize more profit, by moving its call centres to other countries such as the Philippines and China.

In addition to Kamloops, Convergys has already made a major cut to its Winnipeg operation. Red Deer has closed. Twelve thousand jobs in 15 Canadian centres are on the line as Convergys re-aligns its call-centre operations.

All this is just elementary arithmetic, two plus two: changes in the economy (and a robust loonie) plus opportunities to cut the cost of doing business equals an exodus from Canada, including Kamloops.

The future of Convergys in Kamloops has been the subject of speculation for several months, but confirmation of its closure this week was still something of a shocker.

Nobody can fault a company for seeking the most efficient and economical organization of its work force and technical operations. But Convergys needs to understand that a lot of Kamloops families are being impacted by this business decision, and more explanation than “the effects of current economic conditions” is called for.

After all, Convergys was gifted with a $450,000 “training” incentive from the B.C. government to come to Kamloops, plus $1 million from Ottawa.

That alone should be worthy of a more complete reckoning.