Outsourcing is something that strikes a chord with many people. On one hand, outsourcing may have a negative connotation. For example, someone who has lost his job to outsourcing might cringe at the word. On the other hand, some people will jump at any opportunity to outsource.
Still, other people don’t know what outsourcing is all about. In that case, it’s a good idea to clarify what it means to outsource. After that, we can highlight the pros and cons. In essence, outsourcing can help you take things off your plate. Then, you can focus on the most important aspects of your business.
Now, let’s get down to business so that you can get back to business.
To start, we need to make sure we are clear about what outsourcing means. There are two ways someone can outsource. The first way concerns your supplier. So, if you opt to use an outside source to obtain your goods or services, then you are outsourcing. The second way to outsource concerns labor. That means, if you contract labor out instead of keeping it in-house, you are outsourcing.
To further clarify, let’s imagine some situations to illustrate examples of outsourcing. Now, let’s say you own a restaurant. You pride yourself on using organic produce for your ingredients. So, you had been growing tomatoes, cucumbers, broccoli, and greens in a garden on your property. After a while, you noticed you were spending a lot of time cultivating your crops for your restaurant. Upon calculating, you realized the hours spent cultivating were disproportionate to your revenue. You decided that you need to spend more time in the restaurant, and less time in the field.
Scenario 1: Outsourcing Goods
In scenario one, you decided to forego your homegrown produce operation. Instead, you got bids from a local organic produce suppliers. Once you selected your supplier, that company started bringing produce to your restaurant. You still had fresh organic produce, but it did not require your labor. Additionally, you were supporting a local business. That is outsourcing from a goods perspective.
Scenario 2: Outsourcing Labor
In scenario two, you decided to contract the work you’d been performing in the field to a laborer. You hired someone to come in to take care of your crops. That way, you could still have fresh organic produce from your garden. As a bonus, you could focus on operating the business. That is outsourcing from a labor perspective.
The Good, The Bad, and The Foreign
Now, people who have done a lot of outsourcing will probably be the first to list the benefits. On the other hand, sometimes outsourcing costs your company more than it saves you. Furthermore, sometimes outsourcing is a big gamble. Let’s look at the pros and cons of outsourcing, as well as foreign territory.
Here is a real-life story. Once upon a time, we lived in a small, cozy, manageable house. Eventually, we began to bust at the seams as we amassed stuff. When my husband decided he was going to build a bigger house for our growing family, I should have been happy. However, the only thing I could think about was how I could hardly manage cleaning our current home. I was working fulltime, pursuing a Master’s degree, and raising two small children. He was busy growing a business. Neither of us had time to dedicate to cleaning extra toilets or sweeping more floor space.
So, he asked what I thought about hiring a housekeeper to do a deep-clean every month. At first, I thought it was ridiculous, and a silly way to spend money. However, after thinking about it I realized that it was a good idea. It would reduce the stress for our family, meanwhile employing another small business. It wasn’t a silly way to spend money, it was a gift that would keep on giving. Since outsourcing our cleaning, our load is lighter, so we can focus more on the needs of our family. Furthermore, it gives additional business to our hardworking housekeeper.
Outsourcing for Your Business
While this example pertains to the home, there are plenty of situations that involve your business. Ordinarily, a new business will keep as much in-house as possible, as long as the bandwidth permits. However, the business will likely grow at some point. So, then it’s important to begin considering which responsibilities to outsource.
One huge pro for outsourcing is that in some cases outsourcing limits your liability. Take payroll, for example. When a business owner chooses to outsource payroll, the payroll company assumes liability. That means the payroll company’s responsibility is paying the taxes correctly. Furthermore, the payroll company must remain compliant with the newest payroll regulations. So, outsourcing payroll will take something complicated off your plate. Also, it puts experts in charge of an ever-changing task.
While you may giving a big ole thumbs-up to outsourcing now, some people will be quick to identify the cons. Here are some of the reasons why people may hesitate to outsource. However, you will notice that often the hesitations are a matter of perspective.
First of all, outsourcing costs money. One of the big reasons people choose to keep goods or services in-house is because of finances. Simply put, they feel it may be more cost-effective to do it themselves. This will typically be in the early phases of a startup company. So, even if your business is small, start anticipating growth. Then, keep outsourcing in mind.
Second of all, if you outsource the goods or labor, you feel you are taking it from someone within your company. While this may be true in a way, there is another way to look at it. Think of it as shifting responsibilities, rather than removing them. Consider outsourcing something tedious, and give your payroll person more profitable tasks.
Third of all, you feel you will lose a bit of control. Take payroll, for example. Some people argue that if they outsource to a payroll company, they won’t have flexibility. In other words, they are afraid that they can’t pivot when necessary. Maybe the office manager likes to process payroll two days before a holiday. She might be afraid that outsourcing payroll will require her to be in the office on her day off. However, many companies recognize the desire for their clients to feel in control. So, they will work with you so that you feel comfortable relinquishing responsibility.
Now, there are two things I’d like to point out here, because sometimes outsourcing is foreign territory. Often, foreign territory comes with a handful of misconceptions.
First, let’s just acknowledge the elephant in the room. Many U.S. citizens have aversions to outsourcing because the first thing they think of is “Made in China.” The second thing they think of is calling a customer service number answered by someone in India. While the frustration is understandable, this is just one way of outsourcing. It is quite possible to outsource and keep jobs in the U.S., and even keep them local. Outsourcing does not equal out-of-country. So, each business owner will have to decide for himself/herself to what degree to outsource.
The second thing I’d like to point out is that sometimes the high cost of outsourcing isn’t as high as it seems. Now, let’s consider payroll again. Many business owners argue that they can’t afford to outsource payroll. They say they won’t require an office manager without the payroll responsibility. To counter that, what is something else you could give to the office manager in place of the payroll? In other words, consider giving payroll to an expert. Then, think of something that would be more profitable for your office manager to work on. Furthermore, could you shift something off your plate onto your office manager’s plate? At that point, would it make outsourcing more affordable? Would this result in everyone working on something more profitable for the business? Do you think your business would operate more efficiently? Now there’s a thought!
Getting Down to Business
Now, remember that there will always be a tradeoff for any decision you make for your business. However, keep in mind that spending a little money in the right places can pay off dividends in the end. In other words, outsourcing can be a great way for your company to focus on the essence of what you do best. Whatever your specialty, you are likely not in the business of most of what you do behind the scenes. So, identify the tasks that require a lot of attention, and consider if it would be worth outsourcing.
Finally, if you feel uneasy about relinquishing control, do it little by little. You don’t have to dive in all at once. This is your business, after all, so give outsourcing a try in the way that you feel most comfortable. In the end, outsourcing the right things will help you get down to business.
About Journey Employer Solutions
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This is not meant to provide legal counsel or advice. Every situation is different. Please contact an HR professional or employment attorney before taking any action.
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