Establishing the reasons to outsource specialist skills for your business requires a straightforward investigation. On the face of it, the benefits seem obvious, and outweigh the downsides.
Outsourcing skills isn’t anything new or hugely radical. Contracting specialist knowledge and talent has long been the go-to for many industries and forward-thinking organisations. Tapping into resources which aren’t required permanently, or for a specific project or business outcome all makes good business sense. It’s a strategy many organisations deem to be their ‘competitive edge’.
But like any alternative means of sourcing talent for your business, there are risks and potential shortcomings.
Today, I’ve taken the spotlight to the reasons to outsource, looking at both pros and cons, so you can make better, more informed HR resourcing decisions.
Reasons to Outsource: Cut Talent Costs – PRO
Cost-cutting is the major benefit to organisations, when establishing the reasons to outsource.
The most significant costs your business will avoid by outsourcing, include:
- The long (and expensive) hiring process: highly qualified talent or those with specialist skills, aren’t easy to come by. Especially on a permanent basis. So, your business needs to devote significant amount of time and internal resources in the talent search – this time represents a major cost to your business
- Recruitment agencies: most often, when looking to hire permanent talent with great credentials, your first option is to engage recruitment agencies. The cost to your business can be anywhere from 15% to 20% of the hire’s first year of salary. For hard-to-fill roles, this fee can be as high as 30%
- Hiring permanent talent means you have additional fixed costs on your P&L. Unlike short-term hires which cost the business for only a finite period
- Government taxes and other statutory obligations, all compound to a major talent cost
Centralization of business functions that take advantage of economies of scale, offshoring or outsourcing work to low-cost providers and co-sourcing are common practices.
Reasons to Outsource: Access Highly Specialist Skills – PRO
Another of the most popular reasons to outsource, is the ability to access quality, diverse or highly esoteric skills, when you need them.
This means, projects can go ‘live’ faster, and be completed sooner. All this efficiency makes for overall better business outcomes.
It also means your organisation has access to fresh ideas and perspectives. It’s hard to place a value on new ideas, but it’s a sufficiently strong competitive advantage. Just make sure you’re in the right mindset internally, to extract and act upon new viewpoints.
Reasons to Outsource: Boost Business Efficiency – PRO
At any point in time, your business has access to only so many resources. Right?
So, what if, instead of having existing resources stretched beyond their capacity or capability, you outsource key deliverables. This means, your existing workforce can be optimised to perform at their peak in their current role. And new, short-term resources can carry the surplus load.
In this scenario, your business gets a dual efficiency boost: capitalising on existing people, and ensuring projects get completed with the added support of outsourced talent. Win-win.
Do you know the cost of stalled or failed projects? At a macro level, major consulting firms and corporates do. From accounting practices to building and infrastructure failures, don’t risk compromising your business due to poor or poorly allocated resourcing. Outsource instead.
Reasons Not to Outsource: IP Risks – CON
By taking tenure-limited talent into your business, you’re exposing them to potentially sensitive information. Trade secrets, enterprise IP and exclusive data and insights can all hypothetically be accessed and – worse still – leaked to industry.
If your short-term worker hasn’t signed a water-tight, carefully worded non-compete and/or trade secret contract, then you’re putting your business at risk.
Reasons Not to Outsource: Cultural Risks – CON
When new workers are coming and going from your business regularly, you’re creating an environment that could potentially unsettle your permanent workers.
Culturally, your workers may feel like they’re being replaced. Or they’re not ‘good enough’ for the tough gigs.
Also, if the appointment of temporary outsourced workers happens without consultation or communication, your existing, loyal employees may feel unclear about the strategy. They may not understand why these new short-term workers are in their midst. It has the potential to create a disconnect between your base-line workforce, and your business goals.
With careful planning and open lines of communication, this is a situation that can be avoided.
Reasons Not to Outsource: Loss of Control – CON
Although you can provide guidance and direction with what the outsourced worker/s need to accomplish, you immediately give up some level of control when you outsource.
There are a couple of key reasons for this:
- In the era of COVID, many outsourced workers operate remotely, so your ability to be more ‘hands on’, especially in the early days, is reduced
- An external worker doesn’t have the insight into business or project vision (at least not at the start of their tenure). And with this limited lens, they may decide to take their deliverables in a slightly (or largely) different direction. This lack of control wastes valuable time and money
Losing control, like most business challenges, is best mitigated via various means:
- Thorough planning
- Open, transparent and consistent communications
- Robust briefing prior to the outsourced worker commencing
- Clarity on the project deliverables, and milestone achievements
Outsourcing is a huge opportunity for business to boost efficiency, output and market share. It’s where the business can find knowledgeable experts to deliver specific functions (or even entire departments) typically within a limited timeframe. The cost savings and efficiency gains are potentially huge.
However, these gains are only truly realised, when detailed preparation has taken place; when the team, including the leadership team are on board; when open and transparent communications are in place; and when all legal risks are covered.
If you would like to discuss the reasons for outsourcing in your business, it would be great to hear from you. You can reach me here.