Outsourcing is one of those buzzwords that gets thrown into business-related conversations endlessly for a while before the hype dies down. Sound principles then get absorbed into the fabric of business management, while those ideas that haven’t stood the test of time simply fall by the wayside. Outsourcing is undergoing the transition from fashion to business staple, but its reputation has been tarnished by high profile failures that have been reported widely on the news. These examples often relate to public bodies and institutions like the NHS, who have outsourced a branch of their operations to a private firm in order to improve efficiency and make cost savings, only to be adversely affected when the firm turns out not to be doing a very good job. For small businesses, however, there are significant advantages to adopting the outsourcing model.
Deciding how outsourcing can work for your business
Outsourcing works by removing a task from yourself or your staff and paying an outside agency to do it. This can be very effective in improving efficiency and making cost savings, if the task is proving expensive to undertake in-house, or you lack the expert skills required. Therefore, the most important first step is to calculate which areas of your business are suitable for being outsourced. You need to identify possible tasks such as payroll, marketing, production, accounting, or any process relevant to your business. Assess how well the tasks are being done in-house, and where there could be improvements in terms of cost savings and/or more efficient task completion.
When not to outsource
By following the basic guidelines above, you will identify likely candidates for outsourcing. The next stage is to analyse each task and establish why it is not being completed as cost-effectively and efficiently as it could be. In some cases, the problem may be a lack of staff training. You will need to work out a comparison between the cost of using your staff and getting them properly trained, against the cost of engaging an external service. By determining the reason for any task being highlighted as a candidate for outsourcing, you will be able to calculate the most effective solution. For example, say your payroll is taking far longer to complete each week than seems appropriate. Look at the systems you have in place – are they the best they can be for your business or are you using outdated methods that could be replaced by more efficient ways of working, such as using a paystub maker to create salary advice slips.
Having identified which aspects of your business would genuinely benefit from outsourcing, you then need to find the right people for the work. For small businesses, freelancers are a good choice, or you could use a specialist agency for tasks such as IT maintenance or cleaning. Get several quotes from different sources, and remember the cheapest won’t necessarily be the best. Outsourcing is most likely to go wrong when you award the contract to someone who is not the best fit for the work, so finding the right person or agency will be key to your outsourcing success.