Archive for category outsourcing
Successful outsourcing means more than just picking the right supplier. It’s now a mainstream strategy, it’s an indispensable part of small business operations.
But, what do you outsource? – IT, Human Resources, Wages, Training?
Should you avoid outsourcing areas of your business that directly impact your customers?
For example, is it better to outsource IT to one supplier or to contract with a few suppliers and choose the best one for each type of work? Failing to outsource effectively can cause damage to your business.
Outsourcing was the subject discussed at the Business Exposure Group meetings recently and members engaged in a lively discussion as to the benefits and pitfalls of outsourcing.
Successful outsourcing achieves:- cost reduction / achieving KPI’s / reduced time to market / process improvements / business agility / increased innovation / commitment to change with enthusiasm.
However, research shows that 15% of business owners think that outsourcing delivers reduced services, poor quality, and costs more when management and overseeing are factored in, and there is evidence of a high failure rate in outsourcing. The biggest hurdle to overcome is that the contract or piece of work must be commercially significant to the supplier, if the buyer is to receive an appropriate level of service.
Businesses can’t be as efficient in this day and age if we handle all tasks internally. But what is crucial to overcome the high failure rate is to have some sound service level agreements detailing: the minimum service offering / dealing with on time delivery / the volume of work / and the suppliers availability if your business needs a quick fix.
Time invested in managing outsourced relationships is time well spent but when choosing suppliers for outsourcing consider the following points:
-How do you get suppliers to collaborate with your established functions?
-How difficult will it be to swap outsourced suppliers?
-How often should you meet with suppliers?
-Lay down your terms of business clearly and set clear goals with service level agreements.
-What attitude should you expect from your supplier? They must show
a passion for excellence, rather than just satisfaction
commitment to success
take ownership of the work
bring brainstorming to the table
go above and beyond the contractual expectations
-Can you invoke penalties for failures in service / delivery
If you choose suppliers well then you will have a great resource, which is about much more than just saving costs. It’s about skill, innovation and giving your business a competitive edge.
Business owners commonly find themselves unable to delegate tasks because of the illusion that they are the only ones who can do the job properly. But if SMEs are to succeed in the long-term, entrepreneurs need to occasionally take a back step to allow their employees to drive business forward.
Business owners should prevent themselves from falling into the trap of micro-managing every aspect of their organisation. Staff should be allowed to flourish and get on with it.
Because if you check everything your employees do before long they will be less careful and you have given yourself another job.
Entrepreneurs need to consider how it would feel if every time they did something, it was pulled to bits by the boss.
Dispose of the tasks you don’t want to do by outsourcing non-key resources such as health and safety, administrative roles or accountancy. Also, hiring a good office manager can take away a large part of the burden, you can specialise on strategy and the important issues affecting your business .
The key is managing by exception rather than managing everything.
Build a system whereby you can spot check, but do not interfere with simple processes.
Last month’s Business Exposure Group meetings around the region were excellent and again generated some quality suggestions.
With 9 groups now operating across Manchester and Yorkshire, the main issues across several discussion groups included: –
– Is there a need for a business plan, particularly during a recession?
– Is social media a scary problem or a great business opportunity
– Whether to rely on freelancers or employ full time staff
– Techniques to control sales staff and make them accountable
– Methods used to get your business message out to a new market
– The value of purchasing a competitor in distress, purely to use it’s strong brand
– How to let go and have the confidence to allow your business to flourish
The high value of the group advice was commented on by the majority of the members.
Are you a Business owner or Director around Manchester?
Please let us know by return if you would like us to reserve a place for you around the table at our next meeting in Manchester city centre on the afternoon of Monday 4th July 2011.
The numbers are limited to 15 and this groups is getting full.
Outside the Manchester area, there are groups in Leeds, Bradford, Wetherby and Sheffield. Please let us know if you would like to attend any of these events during July.
Please email firstname.lastname@example.org for more information.
Businesses always encounter periods in which they need to draw upon the expertise of someone else to carry out a function that will improve their business or to cut costs where staffing is concerned. But the question we’re left with is if the economic climate wasn’t so challenging would they still be so keen?
New businesses usually tend to take on every aspect of their operation themselves but as they start to grow, the idea of outsourcing
becomes very appealing and many see it as a way of cutting costs and buying expertise without the hassle of employment issues. Like a wave effect, eventually that same business will bring everything back in-house again to re-establish control when they become even bigger.
There are a number of benefits of course to outsourcing, most notably the fact it allows you to concentrate on what you’re good at. It provides the perfect opportunity of acquiring the skills of external experts who can help give you a competitive edge and can reduce staffing costs.
However, there are as many pitfalls as there are advantages. You don’t have direct control, service delivery can be hit and miss and you can occasionally encounter problems with confidentiality.
There’s also the issue of training. If you’re outsourcing call centre work, they have to be able to deal with every eventuality facing them and how long is this training going to take and cost?
Obviously if you’re outsourcing overseas there are also big cultural differences. And when people already have staff and say they’re going to outsource does that create issues with the current workforce?
It is for these reasons why 50% of outsourcing fails.
But lessons have been learnt and there are factors which give outsourcing a better chance of working.
If you want to outsource, use it for secondary functions only such as IT, Lead generation, HR, and PR & Marketing.
There’s also a greater chance of success if time is spent building a relationship with the outsourcing agent and the expectation needs to be very realistic. Business people need to research the provider’s track record, take bank references, check out how stable they are and create a ‘ways of working’ document between the two parties.