Outsourcing in the business world

Outsourcing is often defined as the strategic use of outside resources in order to perform activities that are usually handled by internal staff or resources.

It’s a strategy that many organizations now use to contract out major functions to specialized and efficient service providers who end up becoming valued business partners. In some cases, you may find that it involves transferring employees from within the company to the outsourcing company.

Outsourcing overview

Even though there have been many calls to bring jobs back to the country, outsourcing is still a much-used tool for many corporations. This is because often the pros can outweigh the cons, and it the current climate saving money and time where you can is vital.

Why do companies utilise outsourcing? 

There are many different reasons why a company might choose to outsource certain business functions. Some of these include:

• Improving company focus
• Controlling and reducing operational costs.
• Having access to world-class capabilities that you may not find in-house.
• Freeing up internal resources to work on other priorities.
• Increasing or streamlining efficiency with time-consuming functions.
• Maximizing the use of good external resources.
• Sharing risks with a partner company.
• Accessing skills in areas such as PowerPoint creation with a PowerPoint agency to ensure business meetings are conducted fluently and professionally.

These reasons alone, aren’t enough to implement an outsourcing program. Companies need to ensure they are considering every component and can meet the requirements for successful outsourcing.

Who is using outsourcing 

It wasn’t until the 1990’s that outsourcing started to make more of an impact, it was introduced and utilized more often because cost-saving became a big issue for a lot of companies. This is when the resources that were outsourced were the tasks that didn’t have a huge impact on the core of the business. A large proportion of these were customer service-based roles and was handled over the phone. It still very much exists today, however, outsourcing has multiplied two-fold and now includes a huge variety of tasks.

Many key industries choose to use outsourcing, these include retail, IT, manufacturing, pharmaceuticals, computer technology, software, and financial services. This is not an exhaustive list, but it does show you the key players that can be outsourced.

What are the requirements for successful outsourcing? 

In the early days, headcount and cost reduction were the two most important reasons for outsourcing. Today, the drivers are a little more strategic and focus heavily on carrying out value-adding roles in-house to strengthen a company’s core business competencies. Some of the critical areas include:

• A strategic plan and vision.
• Relationship Management.
• Outsourcing selection
• Clear company goals and objectives.
• A properly crafted subcontract and vendor agreement,
• A good, open line of communication
• Involvement and support from senior leadership within the business.
• Careful attention paid to personnel issues.
• Short-term financial justification

Let’s have a look at two of these requirements below in a little more detail:

A good, open line of communication with stakeholders

Support from senior leadership and open communication is particularly important to succeed in the outsourcing process. On top of this, consideration should be made to create a workable Service Level Agreement, that is openly available for any staff who are involved.

Whatever the outcome is from an outsourcing arrangement, managing any change is a fundamental element to the success of the program. It’ essential to assess the stakeholder requirements as the initial part of the process, having open lines of communication through this time is essential. Anyone who is concerned should be involved.

Involvement and support from senior leadership within the business

Objectives like outsourcing initiatives need to come as a top priority for companies. It is the role of senior management to articulate the objectives and goals of the outsourcing initiative and communicate exactly how the process is going to benefit the company.

The managers of today are looking forward and recognizing that it is their responsibility in order to ensure the success of any outsourcing initiatives. It certainly doesn’t stop when the dotted line has been signed, the needs to be close monitoring and relationships built.

How can you avoid failed outsourcing through relationship management? 

The combination of lack of attention and uncertainty can create a present-day scenario where outsourcing contracts need to be canceled or renegotiated within three years. This makes ongoing management of any contract vital for its success. Senior management needs to stay involved during the initial start-up of any contract made.

There needs to be a clearly defined escalation process, as well as heavy management involvement in appropriate intervals to discuss, review, and manage the outsourcing relationship. There should also be regular meetings to help at the operational level to look at the workings of the outsourcing contract in place. This will enable them to resolve problems and agree on changes to ensure the contract is continued to a satisfactory level.

Advantages of outsourcing

Been aware of the benefits that come with outsourcing will enable you to decide if it’s something that could work well for your business. Some benefits include:

• Less Recruitment – Although you do need to source the right outsource contract, you lose the need to recruit additional staff in-house. When you work on a contract basis, you can avoid unnecessarily, it can you both time and money.
•  Access To A Larger Talent Pool– Usually when you recruit locally, you only have access to the local talent pool. It gives you access to a much larger pool of talent right across the globe.
• Lower Labor Costs- You can save a considerable amount of funds compared to recruiting inhouse.

Cons of outsourcing

Although there are many benefits of outsourcing, you need to be aware that there are also potential drawbacks:

• Lack Of Control- You can provide direction with what you want to achieve, but you do give some element of control away when you outsource. It’s best to make sure you discuss this in-depth before you sign a contract with a service or freelancer. Give them a full, in-depth brief that clearly outlines what you want from the service. It’s also not considered bad to lose some of the control, as it means they know what they are confident with your vision and what they are doing. If you have any concerns, make sure you hold regular reviews.
• Communication Issues- This doesn’t always happen, however, one of the biggest drawbacks is the potential communication issues such as different time zones, different preferences to communication, and internet connection. It’s a good idea to include your requirements within your contract. So, if you need someone to be available at particular times of the day or they need to be able to access the internet on a fast connection, include it in the outline to the job.
• Problems With Quality – Ultimately outsourcing is only food if you are getting the quality that you expect, anything less than this is just going to leave you disappointed. Make sure that in your outsourcing contract you include the details regarding quality, list exactly what your expectations are, read reviews about the service or freelancer, and approach them if you are not happy.
• Impact On Company Culture-  It can be really easy to focus on the potential benefits of outsourcing instead of focusing on the impact it may have on your business as a whole. You need to ensure you to the relevant steps to ensure it doesn’t end up having a negative impact on your company culture. Having a positive work culture leads to higher labels of productivity, so you don’t need ot do anything that will damage this. It can sometimes lead to your employees feeling like they’re been replaced or leave them confused because they could have done a particular task.

Outsourcing, however, doesn’t always have a negative impact on your companies culture, but you do need to make sure you protect it before you move in this direction. This usually involves a discussion with your employees so they understand fully how they will be impacted.

Many companies that are successful with using outsourcing within their business, regularly speak to employees about what their thought and feelings are about it. Include discussions about things that involve:

• The simple tasks that take up valuable time that they could be putting to good use elsewhere in the business.
• The tasks that they think could be simple enough to outsource.
• Anything that might be to complex or out of the skillset that they have, or could be completed more quickly and more professionally from a skilled service.
• What their skillset is – you may find that many employees have skills that reach far greater than the role they are filling within your company.
• How they feel about your outsourcing in particular areas.
• Areas that they would appreciate the opportunity to train in.

There is much to learn about outsourcing in the business world, and you need to make sure you are making the right decision for your business. With the ability to affect your company structure and company culture, it’s certainly not something to take lightly.

 

25/08/2020