Outsourcing, for some organisations, is almost second nature and they do it well. Suppliers providing call centres, IT management, payroll, HR and many other services are regularly used successfully but there are also a number of organisations that have tried outsourcing but who have had a bad experience. Many of these actually failed to set up the operation correctly and so, when things go wrong, consider that it is the concept of outsourcing that is the problem but it is actually the lack of planning.
Recently a new client of ours handed over their learning and development to another company. The chief execs knew each other and one company had a training department and so it was decided that it could run our client’s training as well.
There were no clear goals, only some loose talk about what would be done, costs were expressed very loosely, performance levels weren’t talked about and guess what – it all ended in tears. It wasn’t that the function couldn’t be outsourced successfully, it was that it was actually set up in a way that was destined to fail.
So here are some tips that may make the process more likely to result in the goals that an organisation wants it to achieve.
Outsourcing must be something that is done to achieve strategic objectives such as to reduce (or not increase) overhead, gain specialist knowledge, start a new service etc. At the very outset an organisation needs to carefully consider questions such as – ‘Is this function our core business?’
Maybe there is a large IT support department which does not have sufficient knowledge for a growing construction business. Or. ‘Is this function contributing directly to profit?’ You probably wouldn’t outsource your sales department but could you outsource the admin side of it?
These days organisations need to look at the nice-to-haves and really consider whether, in these hard times, they can be afforded.
Outsourcing isn’t just about saving money. If that is the only objective that is set, areas such as quality may suffer. So before even considering to whom to outsource, decide what you want to achieve, not only from a strategic point-of-view but what results will be required that will increase efficiency, as well as minimising cost.
Results must be measurable and a reporting system set up, to ensure that they are on target. To get an accurate quote on the cost of outsourcing a service, the supplier needs to be able to evaluate your requirements. If they cannot, you will probably be met by the nightmare situation of finding that the cost that you thought would be a fixed overhead, is now full of extras because the specification wasn’t comprehensive enough.
Once you have set clear objectives and can brief a possible supplier on what is required, then you need to find the right partner. There are various ways of doing this but by far the best, initially, is to speak to others who already outsource the service that you want to.
This can often be achieved by contacting people via websites such as Linkedin, or via networking or business groups. If you can’t find out possible suppliers by these methods, there is always the internet.
Once you have a shortlist of a few possibles, treat taking on your partner, in the same way as if you were employing a senior person. Interviews and taking up references are vital and you should try asking for the name of a client of theirs who no longer uses them – they are often the best source of honest appraisal.
The pitch that you should have any prospective supplier make, will normally be undertaken by a salesperson or possibly a director – both of whom will probably be well versed in presenting their company in the best light possible.
However, if they get the contract, you can be pretty much assured that you won’t be working with these people. So insist on meeting the person who will be ultimately responsible for the day-to-day running of your contract and then for one or more of the people who will actually be doing the work. Have those of your staff who will be interfacing with them, be a part of the meeting because if they don’t get on, there is bound to be tears!
Once you have chosen your supplier, you must have a contract that fully sets out your expectations, including provisions such as the deliverables, payment terms (which, where possible, should be tied to the achievement of results, not just the amount of work done),
Service Levels, penalties for poor performance and termination details. It is important that these are properly set out in a legal document, preferably drawn up by someone who knows what they are doing – normally a lawyer. The contract, in common with any contract, is probably going to sit in a drawer whilst things are going well but it is when the job starts to crumble that they come into their own.
If you can take the time to set up the exercise properly, it will be far more likely to succeed because both sides will be fully aware of the expectations of the other. ‘If you fail to plan, you plan to fail’ is probably the most relevant business saying that comes to mind in this context!
Tony Willson is Managing Director of outsourced learning and development specialist Helmsman Services Ltd.