9 Challenges To Face Before Outsourcing

Outsourcing is one of the proven ways to increase business efficiency by transferring non-core functions and tasks to an external contractor, as well as the ability to focus core resources on the core business of the company. The stable growth of the market for these services is ensured by the demand from companies and the effectiveness of the approach to the division of duties. This is especially noticeable during times of crisis.

Outsourcing companies often transfer such types of work as accounting, legal support, custom software development, mail handling, and recruitment. At the same time, new directions appear that affect the more conservative functions of the company, such as training and development of employees. Training outsourcing is the creation, maintenance, and development of a system for improving competencies in a company to meet business needs. Management, organization, and implementation of training programs are transferred to a third-party company. There are 9 typical problems that are usually encountered when outsourcing.



1. Outsourcing vs. Outstaffing

One of the first pitfalls is the confusion between the concepts of “outsourcing” and “outstaffing”. Misunderstanding of the differences between these two terms makes it difficult to correctly predict the results of the tasks, the amount of resources and costs expended. In some areas most often involved in outsourcing (accounting, law, link-building), there is a greater understanding of this process and successful experience of interacting with customers, in others, for example, in corporate training, there is less clarity.

In simple terms, outstaffing is the provision of “rent” of employees, where the client is directly involved in managing, setting tasks, monitoring employee performance, and assessing quality. Outsourcing, in turn, implies the complex execution of a specific business function or process, where the responsibility for the result lies with the company providing the service. This is often the case when outsourcing sales, human resources, or payroll process. The outsourcing company is engaged in the selection, provision, maintenance, management of employees and other resources that are necessary to achieve the goals.

2. Lack of reputation institution

The second problem of the outsourcing market is the weak development of the institution of reputation. In this regard, when choosing a third-party company to provide services, the client is guided by the recommendations of acquaintances or the information received within the framework of various conferences, which is not always effective. At the same time, it remains possible to reduce the risks of unreliability and low competence of the company by indirect signs. Clarify the difficulties and ways to solve them when implementing projects like yours. There are always problems and it is important to look at what methods and resources were used for solving, whether there are detailed answers with details.

It is necessary to evaluate the implementation timeframe specified in the commercial proposal and correlate it with the reality of your business area. It is unlikely that it will be possible to deploy a full-fledged training department with 3-4 trainers, a training manager, administrative support, and methodologists in 1-2 months, even if there are well-written training programs.

Transparency of estimates and financial documents is also an important criterion for evaluating an outsourcing company. For each item and figure, there should be a detailed answer with a rationale for why it is so important to clearly understand what you are paying for and what you are definitely not paying for.

During meetings with clients, quite a lot of time should be spent justifying why such a number of trainers is needed, what is the maximum and minimum workload per day, the cost of a week of work for employees, how long it takes to create new training programs, and how much to adapt current ones, what does a project manager do and to what extent. Such openness allows, first of all, to establish partnerships even before the signing of the contract.

3. Understanding your role.

When an outsourcing company does its job well, the manager on the client’s side does not need to quickly manage the process and put out fires. Of greater importance is the definition of strategic and tactical directions of development, informing the business about the results of work, on the one hand, and the outsourcing company about possible risks, on the other.

4. Awareness about the project within the company

Another mistake of a company that involves external performers to perform part of the tasks is the low awareness of its employees about changes in business processes.

At the start of the project, an information strategy must take into account all levels of the organization, regional offices, and agencies. The information content for alerting personnel should be adapted to all levels of management. The key task is to ensure that everyone has an understanding of the expected results, their roles and responsibilities, and the level of responsibility of the outsourcing company. Usually, the practice shows that the more meetings, letters, and announcements to the team about the transfer of part of the functions to outsourcing, the better.

5. Duplication of staff.

The next outsourcing risk is duplication of staff. In most cases, the outsourcing company will take part or all of the business process from an existing team within the client’s organization. Therefore, in order to reduce the cost of double payment for the same work, it is important to clearly define the areas of responsibility, and the process of regular feedback between the outsourcing team and staff members.

When implementing a project on outsourcing training for an industrial organization, the following distribution was made: programs for line managers and middle managers are given for outsourcing. The forces of the internal training department closed the rest of the programs, including the introductory course, safety precautions, and so on.

6. Lack of regular control system

To avoid losses from the use of outsourcing services, it is necessary to regularly monitor the implementation of approved KPI / KRI, transparency of the financial component, risks, and opportunities in the operational implementation of tasks, as well as logging work hours. A well-established communication system at different levels will help with this. For example, in the course of working on some projects, you can follow the schedule: once a year, a meeting on the direction of development strategy, highlighting the main initiatives.

Quarterly – summarizing the results for the period, synchronization with the strategy, if necessary – reviewing priorities. Monthly – provision of data for the period for the central office and regional divisions, 2-3 times a week – meetings on operational tasks and additional projects with the client’s managers in the regions, as well as with the client’s project manager. There are many digital project management applications that can help you streamline this control system as well. 

7. Feedback.

The absence of user feedback tools from the outsourcing company is another pitfall that the customer’s business can crash against.

 The head of a company delegating part of the projects to outsourcing should have an understanding of the processes for their implementation, the presence of challenges and ways to overcome them, as well as suggestions on how to solve the problem more efficiently next time. On the part of the contractor, the initiative should come from participating in the operational and strategic plans for the development of the customer’s business, understanding the current picture of the activities of the partner and departments. This will allow not only optimal use and distribution of current resources but also optimize them.

8. Planning for expansion of outsourcing services

A typical mistake of outsourcing service customers is the lack of risk planning with regular changes in the business environment and process adjustments in a particular company. As practice shows, in the case of successful implementation of an outsourcing project, there is a desire and a need to increase the volume of its implementation in the company. In order for this process to be more predictable and manageable, it is necessary to jointly determine the steps for increasing the share of outsourcing in the business, using the experience of an external contractor and an understanding of the goals on the part of the customer.

According to the experience of our company, after successful trainings, there are requests to refine employee training and development programs, expand the pool of training formats, switch to blended learning – the synergy of traditional forms of classroom training with elements of e-learning, as well as to review job profiles and on/off boarding processes (retention /dismissal of employees). If there is a need to expand the presence of outsourcing employees in the customer’s company, both parties need to determine the stages, required resources, and feedback formats for further interaction.

Furthermore, as businesses look to adapt and grow, formulating a robust go-to-market strategy is indispensable. A go-to-market (GTM) strategy offers a detailed roadmap on how a company will sell its products or services to customers. It includes planning, promoting, selling, and delivering products in the market. By combining the advantages of outsourcing with a solid go-to-market approach, companies can ensure they are positioned for sustainable growth and success in competitive landscapes.

9. NDA risks

And the last piece of advice – be sure to predict NDA risks before outsourcing business processes. NDA (non-disclosure agreement) is an agreement on non-disclosure of confidential information, which is concluded between the customer and an external contractor. This is necessary because, in the current economic situation, commercially interesting information can be disclosed by those who have access to it and want to profit from its distribution. For example, transfer to competitors.

Conclusion

Summing up, it is worth noting that outsourcing allows you to increase the efficiency of the company’s service functions and is interested in partnerships with the customer, developing his business. The advantages of this type of service are also savings due to more efficient use of the resource and time of the internal employees of the company.

Efficient use of resources is when the employees of an outsourcing company are experts and professionals in their field, can and should cope with more complex tasks than full-time employees, and be able to quickly expand or curtail activities that are required by the business. All this increases the flexibility of the client’s company. At the same time, outsourcing is now gaining popularity: new outsourcing products are emerging and it is possible to choose a company that will increase the efficiency of the customer’s business.

Featured image by Unsplash.

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