Do Not Outsource Until You Answer These Six Questions

The Startup Business Solutions OutsourcingHopefully I could not be more up front, or in your face about this because I have seen some complete stuff ups.

Now just so you know, I include myself in that as well, I have not always been part of the solution if you get my drift.

But trust me, I am reformed now, I have seen the light at the end of the tunnel and I want you to see the light too!

You see, I have now concluded that before any business commits to the path of outsourcing, there are six questions you need to ask yourself.

Just six questions… that’s not too much to ask is it?

Regardless of the answers you give, the process of asking these questions will give you clarity and alignment to ensure outsourcing as a strategy is right for you and potentially identify any issues that you need to address first.

Now obviously, the larger the organisation, the more complex it becomes in terms of decision makers and distribution of responsibility – so my advice is that the core executive team, the ones who will be ultimately responsible for the outsourcing engagement, answer the questions first.

If you are not sure who that is, well Houston we have a problem…

DO NOT PROCEED UNTIL ROLES AND RESPONSIBILITIES ARE CLEAR! (SOL – yes this is me shouting-out-loud!!)

OK, we are clear on the roles and responsibilities, now let’s start with the questions and by the way, they should be generally approached in order, at least the first three questions should be…

Why

“Why” – not a difficult question is it, “why are we outsourcing?”, but for some reason it is often skimmed over by businesses.

You see, we often talk about the three C’s of Cost, Capability and Capacity as the “whys” or “drivers” of outsourcing, but the problem is that many businesses go in for one particular driver and then wonder why they are not getting other outcomes from the other drivers.

So you really need to be clear on your “why” and it understand that this may change over time – in fact it should. But make sure everyone is on the same page – particular your outsourcing partner! Don’t let them try to guess you because it is likely they will get it wrong.

It is therefore best for you to prepare a “road map” where for example, initially your focus might be on “capacity” followed by “cost” and then “capability”. For startup businesses, it is often “capability” initially. Either way, at minimum, be clear in what you want to achieve over time and ensure everyone is aligned to that – in other words they have bought into your vision.

What

Now what do you outsource?

This is getting a little tricky to answer these days as technology and cloud based applications are introducing some really cool capability in terms of automating processes and resulting in some outsourcing to become redundant. So you need to have a good understanding of what alternatives are available and what could be leveraged in the short to medium term. This may save you some pain in the future from bringing things back in-house for you to then automate.

Otherwise, if it is not technology dependant, to answer that question you are really going back to the fundamentals of the “why” but at a more micro level in your business.

How

This question is basically referring to how you will you manage the outsourcing engagement. Do you see it purely as a low end transaction, or do you see it pivotal to your business and partnering will be critical. The subsequent questions then will take you to the type of commercial arrangement you may like to put in place and this can be as simple or as complex as required – but again my view is always be strategic in your decision making.

Where

With globalisation and advanced technology, barriers in establishing virtual networked teams have been removed, so the possibilities are endless. However, the type of factors I think you should be considering are things around risk management and leverage.

When

Although this may appear to be a straight forward question, what can happen is the interesting distortion in larger organisations where annual reporting and performance reviews come in to play that may influence the timing of such decisions, or provide additional leverage for negotiations between your business and your outsourcing partners business.

Who

The previous five questions, have provided you the clarity for you to start preparing a list of possible outsourcing candidates. You are now more informed and equipped to conduct the appropriate level of due diligence for the final selection to take place. Also internal discussions around the type of “cultural fit” of possible partners should of also have taken place and I actually view this cultural aspect critical.

Let me explain…

In my early days as a newly appointed manager of people, I was given some tips by a HR practitioner when it came to recruitment in that there were three questions I needed to have answered when selecting a possible candidate which were:

  • Can they do the job? (skills)
  • Will they do the job? (attitude)
  • Will they fit in? (cultural alignment)

The first question is an easy one to answer, it is more about the second and third questions that take more time to discover – and that is no different to finding your outsourcing partner.

 

So there it is!

Only six questions you need to ask yourself before you start outsourcing – the Why, What, How, Where, When and Who.

It’s not academic is it!

But then again maybe it is…

You see if you are still wondering whether they are indeed the right questions, let me refer you to an interesting study that I came across in which the authors (Hätönen & Eriksson) went through 30 years of outsourcing research to basically validate these questions…

Outsourcing Research

Hätönen, J & Eriksson, T 2009, ‘30+ years of research and practice of outsourcing: exploring the past and anticipating the future’, Journal of International Management, vol. 15, no. 2, pp. 142–4.

Now I am sure you have better things to do, so get on with it – but let me know if you are interested and I will see if I can get a copy of their study to you!

 

Finally, if my words or the research Hätönen & Eriksson is not enough to get you going then perhaps this from Australian author Sarah Henderson…

“Don’t wait for a light to appear at the end of the tunnel, stride down there and light the bloody thing yourself.”

The Seven Practices Of Highly Effective Outsourcing

The Startup Business Solutions OutsourcingWhat are the practices of highly effective outsourcing?

In other words, what do you need to do to ensure your outsourcing is successful regardless of whether you are a large corporate, or a startup entrepreneur?

You see whether you have been outsourcing for some time, or are considering using outsourcing as a strategy, wouldn’t it make sense to know what are the things you need to do in order to be successful?

Surprisingly however, very few outsourcing engagements can be said to be “best in class”. This is not just some wild statement, this is backed up by solid industry and academic research (get in touch with me if you want the specific studies).

So the first question you must ask yourself is “do you want to be mediocre or do you want to be great, to be excellent?”

For more than twenty-five years, I have worked in the outsourcing industry (yes you heard it – industry or profession) and I have observed some real disasters. However, every now and again, I do see some great work being done – real high performance taking place on a daily basis by teams working together achieving shared outcomes.

If one could generally accept the proposition in business we are all seeking high performance, then why is it that many outsourcing engagements are mediocre at best? Wouldn’t you agree that this is counter intuitive to the demands of business?

Yes or no?

You need to then ask yourself “why aren’t you getting what you want?”

This specific question took me on an academic journey over six years, where I basically researched this phenomenon in outsourcing.

Reviewing countless studies and papers, I also interviewed formally and informally hundreds of business executives and managers, established entrepreneurs and founders of startups from both sides of outsourcing to understand what are the success practices.

The outcome of all this is what I call The Seven Practices Of Highly Effective Outsourcing.

The Startup Business Seven Practices Of Highly Effective Outsourcing

Now to succinctly reduce years of study down to a few paragraphs is a challenge but I will give it a go…

Basically to achieve success in outsourcing, we must see it is a lifecycle – there is a birth, an adolescence, a mid-life (sometimes crisis too) and retirement (which can be renewal or… yes death). At each point in this outsourcing journey there are differing needs and approaches that need to be taken into account. The problem is however we do not always grow (or mature) at the same time – hence a disconnect in expectations and rapport between client and outsourcer.

Let me explain…

I can reflect on situations where my outsourcer was behaving as a teenager – not disciplined or structured (of course there are many teenage client firms as well!).

When I worked with outsourcing companies, there were times where my client was growing faster (maturing) than my organisation as their service provider – we could not keep up with their expectations!

I have also had experiences where my outsourcer was behaving like the new kid in town, telling us what they will do – yet after years of a substandard relationship all we were thinking of was to put them out of their delusion and misery.

Look, I know these analogies or metaphors, are of course simplistic, but I do think they work to get my core argument or premise across in that you need to have alignment and grow together if you are to achieve effective and successful outsourcing.

However, there is one exception to this.

The dynamics in outsourcing is such that the client often looks to the outsourcer for specific capabilities like a “big brother” or “big sister”. I mean I am sure you have all been around when this question is asked by the client…

“you must of done this a thousand time with other clients – what’s you experience or point of view – don’t wait for us to tell you?”

So while partnership is required, the outsourcer must be proactive through leadership.

The-Startup-Business-Dr-Ross-McKenzie

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