15 essential outsourcing tips for better decision making

by Rob Rawson
outsourcing tips

If you’re a business owner or manager and are considering outsourcing of any type, you’re probably aware of the huge risks that can be involved. If you’re not, you should be. Placing the future of your business into the hands of strangers can quickly go pear-shaped.

While hiring staff that you may never meet face to face, might seem like a gamble, there has never been a better time to try to leverage online outsourcing, especially once you know how to avoid some of the more common pitfalls involved.

Check out our Complete Guide to Outsourcing.

So what specific steps can you take to ensure things run smoothly?

We’ve drawn up a list of the best practices to help you avoid outsourcing mistakes; these 15 best practices will hopefully save you time and energy and shield your business from the sort of mistakes that could bring your efforts undone.

1. Outsource the right activities

Outsourcing is a huge step, and the question of which activity to outsource is one of the most important. Be careful not to give up your company’s competitive advantage. Retain control over aspects that make you unique or define your business. If you’re already a leader in price or service levels in an area, don’t outsource it. While you need to have a good grasp on an element to be able to effectively manage it, it’s important not to change the parts of your company customers appreciate the most.

Increased demand doesn’t always mean outsourcing is the answer. If you already outsource some work to freelance agents, ask them if they’d be willing to take some more on. Perhaps some area of your business has extra staff or time to complete a new project. Working with someone you know who is already performing well makes sense, and you’ll save time training newcomers.

Avoid outsourcing any areas of your business that will directly impact customers. Although there are some companies that do well hiring vendors for customer service or sales, it’s a risky venture that small businesses or companies in transitory stages can not afford.

If demand in a part of your business is outgrowing your staff or resources, outsourcing is a natural decision. Does one department moan that they just don’t have time to keep up with all the work? Maybe you stay up all night working on web design when you should be sleeping so you can make smart decisions the next day. Either way, outsourcing this element of your company can reduce stress and help you meet customer demand.

2. Own your website

If you’re interested in making a move toward outsourcing, the chances are you already have a presence online. Your own website is the beginning and end of your presence online, so make sure people will always be able to find you.

It’s a common mistake to let a supplier control your domain, and one of the most potentially disastrous. When someone else owns (or registers) your domain name, your site could be taken down by a programmer, designer, or even the software running the site. Be sure you’re registered as the owner of the domain by using a service such as www.whois.com, and be sure you have registrar control – find out who currently has registrar access and be sure your name is included. Never share your registry level access with a programmer. Even the most complex of changes can be easily coordinated via registry support, or by coordinating a team viewer session with the programmer so you can see what they are doing.

3. Consider all outsourcing costs

Although many times companies decide to outsource because they expect to save money, bare in mind that it is very unusual for actual and projected savings to match. Particularly in the first several months of a partnership, plan to save about three quarters of your projected amount, due to adjustment, time loss, and other factors.

Beginning an outsourcing relationship has costs that may not come to mind at first. For instance, when choosing the right vendor, you will lose time and may encounter fees from networking websites or other sources. Negotiating and drawing up a contract in some instances can carry legal fees, and continuing the relationship will have costs in time or possibly travel.

4. Choose the right help

It will take time to select the vendor or workers that will fit best with your needs, so resist the urge to hire the first party you contact. Even if they end up being the right decision, take the time to compare and contrast their strengths with other providers. Also spend time shopping around on outsourcing sites. Choose a company who specializes in just what you need – you want their strengths to line up with your goals.

There are many factors to consider when choosing who to start a business relationship with. Of course a quality product and great price will factor into your decision, but that isn’t all that’s important. Has the provider shown consistent improvement during its time doing business? Are they well-established in their field? You’ll want to take experience, location, flexibility, tax laws and language or cultural barriers into account.

5. Consider reviews and feedback

You may be hiring a contractor on a website that lets you view other users’ feedback or reviews. Read these carefully, and take them into account when weighing one contractor against another. If a member with a substantial amount of positive feedback will be a bit more expensive than a member with negative or no feedback, it’s probably worth it.

In other situations, the best reviews come from other business people or your friends. Ask them if they’ve had experience with any companies in the area you need. They may have tried-and-true suggestions that will make the whole process easier.

6. Interview carefully

Since in most cases when you outsource you’ll be monitoring the area from a distance, the interview process is your one opportunity to really get to know a potential employee or contract hire. Talk to a prospect for long enough to get a real feel for their personality.

Ask questions based on prior experience – suggest a situation and ask how they may have handled events before. Listen carefully for red flags such as a negative attitude, disregard for rules and deadlines, or aversion to feedback.

7. Rule out lowest bidders

Although saving money can be tempting, as the adage goes, you get what you pay for. While you don’t need to hire the most expensive option, the pay a worker requires is often a reflection of education, experience, and work quality.

While you don’t have to splurge, don’t skimp too much, either – you may regret it.

8. Take your time

In addition to not rushing the choice of a vendor or contractor, you don’t want to fly through the transition process either. The partnership will be more successful if you give the contractor a bit of control and assign the rest based on performance. This period will allow you to ensure things are going well before entrusting them with a larger portion of business.

9. Maintain control over outsourced components

It’s critical for you to remain in touch with the elements of your business you’re outsourcing. The best way to do this is to have staff whose sole responsibility is overseeing the relationship. These employees should be skilled managers who understand your corporate vision well and can monitor the outsourced activity to be sure it’s in line.

10. Set clear objectives

While you want your team to work well independently, it’s important to keep lines of communication open, especially when it relates to your goals and expectations. For whatever projects you’re outsourcing to become successful, you must clearly communicate exactly what you need and provide your vendor or employees with a description of their roles. Be detailed and specific when explaining metrics to meet, quality expectations, scope, and deadlines for the project.

Think about what components are important to the project and come up with a scale to judge them on. In some situations, it may be possible to monitor quality by having your own personnel play ‘mystery shopper’. Be sure every aspect of quality monitoring is clearly defined and can be tracked consistently.

Whether your team is meeting goals or falling short, you should pass that feedback on to them directly. As long as you focus on the positive as well as the negative, they’ll appreciate the direction. Be as specific as possible – receiving a failing report is useless, but getting suggestions on how to improve can be valuable. Which leads to the next point:

11. Write everything down

In many outsourcing situations, you won’t have very much face-to-face contact with those you’re employing. This can make clear communication tricky. Meetings by telephone are a good idea, and a way to bridge the gap working long-distance can create, but they aren’t the best way to pass along important information. Technical difficulties too often get in the way, and there’s no way of knowing whether the person you’re speaking with is in a calm area or a distracting one.

Written communication, whether it’s a memo or an e-mail, has the crucial benefit of leaving behind a clear record. Anything you want your team to remember or refer back to should be communicated in writing. Talking face to face is an excellent way to build relationships, but important information should always be written down, including feedback, guidelines, procedure manuals, and expectations.

12. Aim for transparency

Since outsourced work, by description, takes place out of your sight, it’s important to make up for that by putting transparency practices into place. Set meetings periodically – once a week, once a month, or whatever makes sense for your partnership – and discuss key elements of your business. This “face time,” whether it’s an in-person meeting or a video chat, will help avoid delays, setbacks, or misunderstandings and keep both parties informed. Don’t forget to send a memo afterward highlighting main points of the discussion.

13. Write a solid contract

This is especially important when dealing with a services vendor. Your contract determines the dynamics of your partnership, and works in two ways. It establishes expectations at the outset of the relationship, and serves as a record to refer to from then on.

A contract should outline specifics about payment, creative and other rights, expectations and roles, and outline an exit strategy. It’s vital to have a lawyer review any contract you sign.

If the vendor isn’t meeting your established quality expectations during a specific time period, the contract should provide you with the option to terminate your agreement. If this isn’t possible, at least set a date when the contract will be up for renewal so you can consider whether you want to continue.

14. Manage current personnel carefully

Once employees find out your company intends to outsource, everyone can’t help but be on edge. They wonder whether they will be affected, and may be hurt or offended. Employees may feel your decision reflects on their capabilities. The best approach is to be forthright with all staff and partners, disclosing information once decisions have been made. Taking this step will let your employees know they can trust you and eliminate fear and rumors in unaffected areas.

Some transitions may include your staff, in whole or in part, beginning to work for your new partner. It’s important for you to facilitate the transition, communicating with the employee so they understand what to expect and making sure their loyalty is maintained. During this time, it’s also beneficial to identify key employees in areas that will be outsourced and recruit them to other areas of your company.

Even if personnel will be replaced by the outsourcing vendor, there are things you can do to facilitate a smooth transition. Treat employees with respect and let them know they are valued. Sometimes staff can be given the option of transferring to other areas of the company. If not, provide opportunities for training that will give employees an advantage in their job search.

It is never appropriate to ask current staff to train those who will be replacing them. Their emotional response to the request will not result in proper training, and it’s in poor taste. If you want to entice employees to continue working until a cutoff date, it helps to reward those who stay with severance packages. These sometimes include health benefits and can be a lump sum or several payments, the amount depending on years of service and pay.

15. Keep the end in mind

All good things must come to an end, and hopefully your outsourcing partnerships will end gradually and on mutual terms. However, it’s best to be prepared in the event of the worst – for example, if demand increases drastically or a vendor goes out of business.

Have a plan in place that you could put into action tomorrow if needed. Can other areas of your business take on the workload? Is there a similar provider you’ve interviewed and are comfortable with? While you hope a transition will occur when you have time to prepare, the safest route is to plan for just-in-case.

When you’re well-prepared, outsourcing can grow your company in key areas. It’s an opportunity to capitalize on your strengths and find ways work more efficiently. But it’s also a time when mistakes can be fatal. By avoiding the pitfalls in this list, you’ll be able to focus on increasing productivity, quality and savings – and isn’t that the point?

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