Outsourcing can be a strategic tool for making your business more productive and profitable - if you know when to take advantage of it. Consider the following criteria when deciding whether to outsource:
- The activity isn't central to generating profits or competitive success.
- The job is a routine one that wastes valuable time and energy.
- The task is a need that's only temporary or that recurs in cycles.
- It's less expensive to have someone else do it than to do it in-house.
- The activity can be done cheaper in-house, but drains resources that could be better used elsewhere.
- The skill required is so specialized that it's impractical to have a regular employee do it.
- The activity isn't one that people enjoy doing.
Outsourcing is a viable option for everything from payroll, accounting, manufacturing and delivery to customer service, employee training, property management and computer services. The key advantage of outsourcing is that it enables you to invest your resources into more profitable activities. Companies, however, should be careful not to outsource functions that appear negligible, but that are actually essential, such as customer service operations in a small business that relies on building rapport with a loyal customer base.
Once you've decided to outsource a particular area, here are some tips for finding and working with a company that's right for you:
Do your homework. Ask companies in your area for recommendations on good outsourcing firms, and search the Internet for a more comprehensive list of services available.
Ask the companies you research to give you client references, and interview these clients to find out how reliable and flexible their services are.
Select a compatible company. Choose a company that understands your needs and can accommodate them. Devise a contract that allows you to adjust the terms of the agreement to suit unforeseen changes. An arrangement that's satisfactory now may not work in the future if the company expands or competition increases.
Establish the standards you expect. Outsourcing will mean the loss of direct control and supervision, so communicating the standards of performance you expect is a must. Outline these standards in the contract in detail, and check up on the company periodically to make sure that it's doing its job correctly.
Arrange for constant communication. Schedule regular meetings with your outsourcing people to stay informed and discuss the day-to-day problems they've encountered. By staying aware of what's going on, you can prevent potential problems and improve how your business operates.
Secure insurance for emergencies. Make sure you have a backup system in place in the event that the outsourcing company can't carry through. An accounting service, for example, should provide your company with a copy of backup records or store them in a separate location.
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