Should You Outsource?

Many companies are outsourcing manpower and production. But how do you know if it is a good move for you? Let’s take a deeper look at this hiring alternative.

What is Outsourcing?

Outsourcing can be referred to as the strategic use of external resources to do tasks usually performed by internal staff and resources. This strategy is one where a company contracts out functions to skilled and qualified service providers. These people ultimately end up as important business partners. Sometimes, outsourcing also includes transferring employees from the organization to the outsourcing company.

In recent years, there are major calls to bring back jobs to the US. It was a big part of President Trump’s election campaign and term. However, despite such please, outsourcing remains a top choice for many companies.

Advantages of Outsourcing

So you have to assume that there are many benefits to this strategy. There are different reasons for companies to outsource certain tasks and functions. These include:

●     Reduce the costs of operations

●     Gain access to world-class skill

●     Improve the organization’s focus

●     Free up internal resources for more important tasks

●     Maximize external resources

●     Increase efficiency for more time-consuming tasks

●     Share risks with another company

It is good to keep in mind that even though these sound like amazing things to accomplish through outsourcing, it’s not all easy as pie. Your company should make sure to consider every factor involved to find success in this strategy.

Disadvantages of Outsourcing

For full transparency, we’ll also look at the possible downfalls that can arise from outsourcing. Despite viable reasons to make outsourcing highly effective, many organizations need to weigh the pros and cons. Here are some of these disadvantages:

●     Current staff can feel threatened in terms of job security

●     Staff redundancies

●     Geographical differences in quality standards can result in issues with products and services

●     Loss of policy and procedure control

●     Communication barriers because of different time zones and languages

●     Possible data security risks

Choosing to Outsource

It was not until the 1990s when outsourcing became popular. The cost-saving factor became a huge pull for a lot of companies. During the time, outsourced resources were used by the company but didn’t often make a large impact on the operations. Usually, these functions include customer service tasks that can be performed over the phone. This model still exists today.

Since then, many important industries have been outsourced, such as retail, manufacturing, financial services, software, computer technology, IT, and pharmaceuticals. There are more not on this list, but these represent the major players that can be outsourced.

How to Be Successful in Outsourcing

Back in the day, reducing headcount and operating costs were the reasons to outsource. Today, it is a more strategic method of hiring, focusing on churning out value-adding tasks in-house, where the company can maximize its core functions. The critical factors that can render outsourcing successful include:

●     A strategic plan and vision

●     Clarity and transparency with goals and objectives

●     Proper vendor selection

●     A good working relationship with the service provider

●     Open communication with owners and stakeholders

●     Support and involvement from the senior leaders

●     Well-structured vendor agreements and contracts

●     Meticulous attention to personnel concerns

●     Short-term financial justification

Importance of Communication

It’s important to have all things set in place, but open communication is particularly important in making sure your outsourcing plans pull through. You should also be able to provide a proper Service Label Agreement (SLA) when it applies, as openly available to everyone involved.

Whatever the results of the arrangement, it is fundamental to manage change to ensure success. Assess the requirements of stakeholders first. Then keep all channels of communication open during this time. Anyone concerned must be involved in the process.

Support from the Executives

Outsourcing initiatives and other strategic objectives should come from the topmost rank of your organization. Senior management should also express the objectives and goals of this initiative, communicating openly as the process unfolds.

Managers today often look ahead and recognize that the responsibility of making sure the enterprise’s outsourcing efforts are successful doesn’t stop after the contracts are signed. It does happen, unfortunately, but it is not ideal.

Avoid Failures with Outsourcing and Relationship Management

Combining a lack of attention to detail and uncertainty with goals can create worst-case scenarios where the contracts are either canceled or renegotiated in just a span of years. That’s why a continuing, consistent, management of relationships between involved parties is crucial. Senior management must make it a point to always stay involved during the contract’s implementation.

The proper escalation process should be clearly defined early on. Plus, senior managers should talk regularly to discuss the relationship with the outsourcing providers. Meetings at the operational level can also help improve the health of the whole strategy. These measures help identify and solve problems early on, ensuring continued productivity and satisfaction to all involved.