Five Steps for Outsourcing Success
The practice of outsourcing, or moving job functions from internal staff to outside vendors, has increased dramatically in the past few years. Organizations large and small have turned to the practice of outsourcing to improve efficiency, cut costs and free resources up to concentrate on core competencies.
Yet turning key functions over to an outside entity, regardless of its qualifications and expertise, comes with its own set of challenges. Companies must take a measured approach, from selecting the right outsourcing partner all the way through to managing and integrating the now-outsourced process into overall operations, in order to reap all the benefits of outsourcing.
These best practices can help your outsourcing program succeed:
Understand your competencies
Outsourcing can't be done offhandedly. You need to define your company's core mission and determine which operations are central to that mission. Then consider outsourcing non-essential functions. For example, if your key differentiator is customer service, it may not make sense to outsource your call center, since you can potentially lose control of quality and customer feedback. Rather, it may be smarter to deploy full-time, highly trained employees on that core function while assigning HR, manufacturing, logistics or other less strategic functions to an external partner.
Exercise due diligence in evaluating partners
Just as you would check references and investigate the background of a potential full-time hire, the same rigorous vetting process should apply when taking an outsourcing partner. Ask for feedback from other clients who have used their services and be sure to voice any and all concerns about their abilities or how they work. It makes sense to select an outsourcing partner who has specific expertise in your particular market segment – for example, if your business is technology manufacturing or mass-market retail, find an outsourcing provider that has industry knowledge and clients in that particular area.
Clearly define scope and schedules
Define your requirements and expectations carefully, and communicate them clearly and continuously to your outsourcing partner. It helps to give outsourcers as much information as possible about the way you work and how you expect their service to be delivered. This is especially important in heading off misunderstandings with overseas outsourcers, where relationships can be complicated by language, legal, cultural or time-zone differences. Specify in writing your payment terms, service-level agreements, schedules and milestones, and any other aspect of your product or service delivery. Communicate changes clearly as they occur so no one is left in the dark.
Start small
To be sure you are comfortable with an outsourcing provider, start with a small pilot project. This lets you work out any kinks without jeopardizing mission-critical business practices. This also provides a manageable and measurable basis upon which to quantify results.
Avoid the "out of sight, out of mind" trap
Many companies outsource a key business function only to have it fall off their radar. In order for an outsourcing relationship to work, companies have to establish key knowledge transfer mechanisms, which keep the core business connected to the outsourced function. Establishing internal liaisons to work regularly with the outsourcing provider is one way to ensure this happens. Companies also need to formalize how the outsourcing provider communicates key information. This kind of feedback loop ensures that your business is not at risk of losing control of the outsourced function.
