It’s a classic balancing act: how do you grow your company quickly without getting buried by the sheer details that accompany that growth? As your business expands, you might struggle to hire people fast enough to keep up with the increasing workload, or unfinished paperwork might mount up in your back office until the place resembles a massive recycling bin.
These are just two of the many reasons more and more entrepreneurs are contracting out some of their business functions. Outsourcing, as a number of leading experts on the subject told PROFIT, has important advantages for growth companies. It promises business owners more time to concentrate on what they do best, it accesses expertise without adding to a company’s staff and overhead, and it allows you to keep up with highly analytical or technical functions such as one-to-one marketing or Web-enabled business operations.
But it’s not right for every firm, and companies poorly equipped to outsource can do so with disastrous results. Ask yourself these seven questions to help you decide whether outsourcing is a good fit for your firm.
- Are you a control freak? If you are, outsourcing likely won’t be a good match for your management style. “Business owners who insist on total control shouldn’t outsource because they won’t like risking their success on a partner’s performance,” says David Hatch, principal at Echelon Associates, a Toronto-based management consultancy. “Others may be reluctant to share business knowledge with an outsourcing partner or risk their reputation with customers to a third party.”
- Are you a do-it-yourselfer? Some people would never hire a real-estate agent to sell their house. Others wouldn’t even consider doing it on their own when they could hire an expert to do it for them. It’s the same with outsourcing. If your instinct is to seek out higher-calibre expertise than you have yourself, you’ll be comfortable with it.
- Is cost-effectiveness a top priority? Although outsourcing isn’t always cheaper than doing it yourself, a wide variety of potential partners are available with proven skills and technologies that will help you become more efficient and cost-competitive. This is especially useful if you’d rather focus on building and the creative aspects of your business than on controlling costs and improving processes.
- Do you frequently launch special projects that preoccupy your staff? Some businesses become involved in special projects such as bidding for new business that eat up so much of the staff’s time that they put aside routine matters. Outsourcing solves this dilemma, with outside partners taking care of selected business matters, so staff can concentrate on priority projects.
- Are you seeking new approaches to training and talent management? Outsourcing can be used to boost your staff’s capabilities. One effective method of on-the-job training is to have your staff work closely with an outsourcing service until they’re familiar enough with that business function or skill to bring it in-house.
- Does your business need a renewed focus? Sometimes companies evolve in convoluted ways that leave them handling some functions that don’t contribute directly to their success. Outsourcing can offer a chance to retune the mission of a business by transferring much of the non-essential work to outside partners.
- Is your company facing transformative change? If you’re in a situation that requires you to get rid of a part of your business or add a new component, outsourcing can be a great technique to make the transition. You can have an outsourcing partner take over the sunset business component while you concentrate on the parts of the firm with a future. If you’re building a new business component, outsourcing can also reduce your risks. Instead of making an upfront investment, you can work with a partner who already has the capabilities and infrastructure. If the idea is successful, you can then invest in your own capabilities or bring the partner in-house. If it proves unworkable, you can end the contract without having to make many cuts in your own operations.