DILEMMA: My company is growing so fast it is proving hard to manage. Should I consider outsourcing and if so which functions?
ISSUES: Outsourcing can be a good option but shouldn't be undertaken lightly. Too many organisations contract out functions because they have lost confidence in their ability to manage them - this is particularly true of IT. With no clear idea of why it is better to outsource a particular function, many businesses are fleeced and their relations with suppliers and/or customers are soured.
Don't see outsourcing as a panacea. It must be considered within the context of your overall strategy and resources. Think about whether you are building value or just activity. Could you grow more quickly or make more money by doing less?
Once you have identified an appropriate function, consider whether outsourcing it will reduce cost, hassle, risk, or capital used. Will you be able to offer a better service or speed your rate of growth when you can't add internal resource quickly enough?
If outsourcing is appropriate, you will need to select a partner or partners you can trust and work with. Many service providers will make extravagant claims. Few will be able to meet all your needs and you may all have to learn on the job. The main thing is to be sure your chosen providers understand your business and its objectives before they start.
You also have to consider how hands-on you want to be and how much direct contact you wish to maintain with your customers and suppliers. There will be knock-on effects for them.
Outsourcing is like delegation. You need to pick the right people, train them well and give them clear boundaries.
- Think about the overall strategy of your business.
- Identify the capabilities of your existing employee team. How can these be enhanced and/or most usefully deployed?
- Identify which services could be outsourced. Popular ones include facilities management, payroIl, web sites, and recruitment.
- Be clear about why you are outsourcing a function. Choose those that will have most impact but start with something small, from which you can learn by experience and develop principles.
- Appoint someone internally to manage the outsourced function and to liaise with your service providers.
- Determine the criteria for selecting your service providers.
- Carry out a regular review of your outsourced functions.
Patrick Dunne works with 3i.