Do’s and Don’ts of hiring an outsourcing company
By Alex Tanglao, Updated: 2023-03-30 (published on 2017-08-16)
Are you thinking about outsourcing? If yes, then you are on the right track since 90% of US companies outsource some aspect of their business (as per a survey by a global association of talent management groups, the Human Capital Institute).
There are many terms used for outsourced resources such as day labourers, freelancers, temps, and contractors.
Some companies are outsourcing most of their business’s functions and more are headed towards that direction, so much so that there were 2.38 million jobs outsourced in the US in 2015.
There can be many reasons behind outsourcing your work but cost reduction is one of the most compelling reasons. While other reasons include gaining access to IT resources that are not easily available internally, ridding internal resources of the excess work burden and accelerating the speed of a project of company reorganisation/transformation. Improving business or customer access, reducing the time for marketing and gaining access to expertise not available internally are some other reasons why a company might feel the need to outsource its work.
The market is a battleground, after all, and as the competition for the most talented resources increases, companies try to attract the best employees through cutting-edge IT services, tools and technology. Sadly though, access to the most advanced resources in-house is often too prohibitively high for small and medium enterprises, hence, outsourcing is the best bet.
However, in a rush to outsource, many companies make a few common mistakes; businesses usually protect their company’s secrets like a lioness protecting its cubs. On the other hand, outsourcing gives out intellectual property, customer information, trade secrets out to outsiders who now have your corporate information and understand business functions.
Don’t think of it as a quick fix
Outsourcing means taking a step towards the evolution of business, not a quick fix to help cut costs. It is a not a short-term strategy with vendors changing like musical chairs for a company. Outsourcing should actually be incorporated as a long term strategy for any business.
No longer considered a temporary fix for a need, outsourcing is being redefined as a permanent part of an organisation, says Katie Ratkiewicz, a practicing leader for the Human Capital Institute. An example is of Danny Wong, the co-founder of the start-up Black-Label.com, a Wellesley, Mass., maker of dress shirts for men.
Keeping the core team small with a total of 8 permanent staff members, he outsourced about 60 hours a week of live chat, emails, and content and programming creation. “It increased our quality of life and the quality of our service,” explained Wong. After his company had to respond to the same customer queries for the hundredth time, they decided to outsource customer service too.
Do think of it as a leaner way to grow
The outsourced resources are doing your tasks, so treat them as an extension of your main office. Think of them as partners, so work hand in glove with them to ensure that their goals are aligned with yours.
Outsourcing is a way to expand the talent pool of your resources and access various skill sets, all the while saving money. Since it is easier to discontinue or scale down outsourcing than to fire employees, outsourcing gives a higher degree of flexibility to your business.
You can adjust scale as per demand for your goods and services as well as attract workers who prefer flexible schedules. You can also stay technologically current at a fraction of a cost as compared to the expenses you would incur if you hired in-houses resources.
Outsourcing is “a new leaner way to start and grow a company with a lot less overhead,” says Fabio Rosati, CEO of Elance, one of the largest freelance job boards that has more than 30,000 new job postings a month. “Suddenly, small businesses are operating like mini multinationals.”
Don’t settle for less
When you buy a TV, do you just walk into a store and point at one or do you comparison shop first? Hiring external workers has a lot more at stake than the quality of HD you are viewing. So, do not be in a hurry to settle for the first provider that approaches you, no matter how juicy the deal they are offering seems to be.
Similarly, don’t appoint someone who views your company as a mere side project. Freelancers can see you as just another pay check or a project. They don’t really care about your company nor do they have the potential for a long-term relationship.
It’s best to research as much as possible when choosing your vendor. This includes concentrating on essential features such as relevant expertise, work profile, experience, their portfolio of customers and cost.
Ask for referrals and follow up on them. Check on forums to see if anyone has reported issues regarding them. Explore independent reviews on the firms you have shortlisted.
Investing time in choosing the right provider now will reduce the number of issues you may potentially face later on.
Strategise when outsourcing by hiring small; it is better to induct off-shore team members incrementally rather than hiring a huge team in a big-bang fashion just because you have the resources to do so.
With so many new people coming in simultaneously, the learning curve becomes steeper. Therefore, it is better to plan it out by starting small; use a small assignment/exercise to move through the curve with a lower degree of risk, rather than jump into the deep end of the pool.
Make a communication strategy to ensure nothing falls through the cracks. Conference calls, chat tools, application sharing tools, email, phone calls, one-on-one meetings and video conferencing are all ways that you can stay in touch with your vendors. Schedule in time to keep tabs on your providers and follow the schedule to ensure that your goals are being met.
Don’t outsource your core staff
Core employees drive and direct your projects and processes. They are the cultural center of your organization.
In 1989, Charles Handy, a management guru, predicted a “shamrock organization”. This kind of organization had the core tasks as one leaf, while the other leaf comprised process areas such as customer service, IT and financial management and the third leaf is projects such as content generation, search engine optimization and graphic designing.
Since outsourcing can affect the morale of your staff, keep the desirable work for your employees. As jobs go outside the company, your employees can become resentful and fearful and develop an “us” and “them” attitude.
When you outsource the relatively undesirable work, make sure your employees understand the difference behind the wage structures for them and the external workers. Differences include lack of job security, benefits and the employer’s share of taxes.
Do outsource infrequently used skills/expertise
Begin by making a list of your business requirements and divide them into the essentials that must be performed by your core staff, such as meeting up with principals, and those that can be outsourced, such as IT.
Try working on a trial basis with vendors, before being tied down in long term contracts. By experimenting with different service providers, you will be able to find the company that best fits your needs.
If you are a small company, don’t outsource the tasks that you or your employees have the required skill set to complete.
However, if you are lacking in expertise and your employees are failing to complete the tasks efficiently, then it’s recommended to locate a reasonably priced, reputable and experienced service provider.
To be satisfied with your contractors, you need to know the kind of person you want. Start your search with people you know such as peers, former employees who left on good terms, current employees or trusted advisors. To expand your search, consider business referrals. For example, if you like the design of a website, you could approach the owner to ask if he would recommend the company who produced it.
You can also use freelance job boards such as Freelancer, Guru and Elance. Web searches, want ads, social networks, cloud sourcing and staffing agencies are all avenues that you can explore that could help you find the vendors you are looking for. For example, if you are in Atlanta and looking to outsource management responsibilities and functions on a proactive basis, you could do a search on “managed services Atlanta” to find a list of possibilities.
All in all, outsourcing is the best way to grow on a budget. In the 1990s, the average portion of work outsourced was 6% but at present, it has grown to 27% and the trend is continuing to increase.
Despite the advantages though, outsourcing has its pitfalls too, the lack of control being one of the biggest ones. However, by doing your homework prior to hiring your vendors and strategising, your company can grow and make the most out of it.
Audrey Throne is a mother and a professional blogger by choice. She has completed her masters in English literature from the University of Birmingham. As a blogger she wrote quite a few posts on health, technology as well as management. Currently, she is associate with Spectrumit Team.
Find her on Twitter: @audrey_throne