Today's Challenge: Outsourcing

Each week, I respond to a question I’ve been asked by another leader. Over the last couple of years, I’ve commented on a wide array of topics. Today’s question surfaces a controversial topic… Why are you a fan of outsourcing?

I want to begin by saying I don’t think outsourcing is the right answer in every situation. However, there are several reasons to consider outsourcing as a legitimate component of your staffing strategy.
1. Expertise. Early in my career, I was given the opportunity to build our corporate communications function. It was suggested that I hire a writer for the team. I was just a kid, but this didn’t make sense to me. My rationale — I knew there were different types of writers – some were good at writing speeches, some were good at writing training materials, others had a special talent for journalism. My fear… if I hired a writer, he or she would have to write everything. I wanted the expertise of a specialist not a generalist. That same logic still makes sense to me – for specialized skill sets, outsourcing may be the right answer.
2. Flexibility. So, if expertise is what you desire, why not just hire full time experts? You certainly can. However, what happens if you decide to change your strategy? What happens when the world changes? What happens when technology makes your expertise irrelevant? Experts and specialists often have difficulty changing roles. Because of this, it’s exceedingly more difficult to be nimble with full time staff. One way to combat this is to select a generalist – however, then you can lack the depth of expertise referenced in my first point. Therefore, outsourcing addresses both issues: Expertise and Flexibility.
3. Scalability. Outsourcing is also a strategy that can create a dynamic workforce. When workload swells, if you rely exclusively on full time staff, you’ll encounter capacity limits. When you outsource with the right partner(s), it’s much easier to expand your workforce as the workload dictates. Also, it’s much easier to cut back when the demand subsides. We just came back from a big event; we used scores of outsourced talent. Now, the event is over, and we don’t have the ongoing cost of maintaining those people on our payroll.
4. Cost. Many people believe outsourcing is more expensive than full time staff. Sometimes it is – often it’s not. To assess the real cost, you need to first assign some value to expertise, flexibility and scalability. These are real, tangible advantages of outsourcing. Also, you need to think about the cost of your overhead. If you have a rich benefits package, it can actually be less expensive to outsource.
So, what’s the right answer? It depends. Try to avoid a blanket position on this topic. If you take a stand for or against outsourcing, you’ll be wrong. It is not a black and white issue. Sometimes it makes perfect sense, and sometimes it does not. Judgment is required. That’s a good thing – judgment should be one of your strengths.[GLS_Shield]
Where do you stand on outsourcing? 

Leave a comment



Stephen

7 years ago

Two thoughts- the first was a flashback to Tony Hseih in Delivering Happiness- “never outsource your core competences”. He tells the story of Zappo’s early and failed attempt to outsource their fulfillment center. They soon realized this function was too close to the heart of the organizations core purpose to rely upon those outside the culture, and they rebuilt their organization around bring it back it in house.
Second, Often outsourcing is incorrectly equated with poor value or inferior. I take an alternate view- outsourcing allows us to focus on those things which we are able to do best. Great business relationships develop over time through outsourcing done right.
As in most decisions, begin with the results in mind, then trace through these principles to see if outsourcing works.

Bob Adams

7 years ago

Good points Mark! Another thought I’ve been having is the tendency for many to become “free agents”. We should position our company to leverage these free agents when we need them. While it’s not “outsourcing” per se, it might be justification for looking for a supplier who has a Rolodex of free agents who provide niche expertise.

mark

7 years ago

Thanks, Bob. I agree, in some circles, outsourcing gets defined very narrowly. The leader’s challenge is to get the work done with excellence at a competitive price. “Free agents” are a legitimate option. Thanks for pointing that out. And, thanks for joining the conversation! Mark

Dennis Forbes

7 years ago

These points and more absolutely apply to the software development/IT process. Unfortunately many internal teams become very defensive about the notion of outsourcing any element of their function, under the flawed concern that to give an inch will quickly turn into a mile. In actual practice such resistance usually instead leads to so much inefficiency and lack of scalability that the C-level resorts to much more dramatic initiatives that usually do end up “taking a mile”.
I wrote about this at http://goo.gl/gcJWWV if you don’t mind the bit of self-promotion.
Thanks for the read.

mark

7 years ago

Dennis, I agree. When an organization loses competitive advantage, leaders must take dramatic actions. My preference is to lead such that dramatic actions are rarely necessary. This includes embracing new, different and innovative ways to get work done… even outsourcing. Thanks for joining the conversation! Mark

Michael Cooley

7 years ago

I really love this topic!
Outsourcing can too often be (mistakenly) motivated by the temptation of “the grass is greener on the other side of the fence of our business.” This can make it easy to believe anyone doing things ‘differently’ must be doing them ‘better.’ In addition, because he or she is an outsider, little motivation exists for listening and learning the culture of the new group. After all, if this company was doing so great, why did it hire an outsider?
When an organization outsources to someone who may or may not have had any contact or interaction with the company in the past, special care ought to be exercised. Only a truly brave soul will speak up and say, “I understand this person has achieved great things in the past, but he/she knows nothing about our organization, and the organization he/she has worked is nothing at all like our organization.”
While he or she received credit for success in working with another group, did anyone verify this person actually held wrench in hand and turned the nuts and bolts that led to achievement? Chances are good success actually came as a result of a talented team and highly favorable circumstances, things that will not be following this person to a new work.
The most crucial aspect in the discussion of outsourcing, it seems to me, is the preservation of corporate culture.
One unanticipated result of the fluid job and career market is the loss of unique corporate cultures. There are exceptions, but gone are the days of the life-long career in one company. What happens resembles how conquering nations in ancient times successfully destroyed cultures, making them easier to manipulate: exile half the population of a conquered nation and replace them with inhabitants of other conquered nations. The watered down culture would likely disappear within one generation taking with it the religion, values, and patriotism.
On the other hand, outsourcing makes perfect sense if those inside the business value and protect the unique character of their culture enough to seek those eager to embrace, rather than reform, the corporate culture of the host company. It requires a lot of attention!

mark

7 years ago

Michael, great to hear from you! I agree completely. One of the challenges with outsourcing is to maintain the corporate culture. I don’t believe the two are mutually exclusive. The trick is in the partner you select. When we outsourced our IT help line, we had to be extremely careful regarding who would take the calls. If you get the wrong vendor, you will damage your culture. Thanks for joining the conversation! Please call on me if I can serve you. Mark

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