8 ways to outsource successfully

8 ways to successfully outsource

Farming out non-core functions has widely been seen as the preserve of big companies, but there’s no reason why SMEs can’t do it too. Outsourcing offers them a number of advantages, including access to a breadth of talent that they might not be able to attract themselves. But, while many smaller firms have started to reap the benefits, there are some crucial caveats to consider before entrusting any process to a third party.

1.Choose what functions to outsource with care

Activities that are not strategically important are clearly the most suitable ones to farm out, says Kathryn Moran, head of outsourcing at chartered accountancy firm haysmacintyre.

‘It can be helpful to look at what you’re hoping to achieve through outsourcing and then work backwards. We tend to see businesses looking to strengthen resources, improve processes and achieve cost savings,’ she says. ‘But it is important to outsource elements that you understand, so that you can keep control and measure the providers performance.’

It’s also a question of ensuring that any outsourcing decision is closely aligned with your firms strategic direction. So says Simon Barter, head of Lex Autoleases SME direct division, who stresses how important it is to ensure that any outsourcing relationship helps the client to achieve its core commercial objectives.

2. Dont choose a supplier based on price alone

Moran recommends researching at least three suppliers. If possible, agree on a trial period before signing a contract and a service-level agreement with your chosen provider. It may be tempting to pick the cheapest option, but that may lead to problems down the line.

‘If a supplier offers a service far below the price you currently pay, you need to be sure how it’s achieving that,’ warns Keith Thompson, services development director at Procurement for Housing. ‘If it’s simply paying lower wages, how does that benefit you? You want one thats invested in automation or has enough clients to allow it to hire the best people and utilise them to their full potential.’

3. Visit your chosen provider before signing anything

It could prove a big mistake to seal the deal on the basis of a suppliers impressive-looking website, a few friendly phone calls and one meeting with its account director, according to Dino Forte, managing director of Ventrica, an outsourced customer-contact centre.

‘It’s essential to go to the providers premises and meet the people their face-to-face, so that you can judge how they work and sample the sort of atmosphere and culture that exists,’ he advises.

‘If you’re outsourcing customer service, it’s important to know what the contact centre looks like and whether the people working there are motivated to represent your brand in the way you’d expect them to. Look for a partner that operates a relaxed, always open door policy,
allowing you to pop in and see exactly how it’s performing on your behalf.’

4. Focus on the providers industry know-how

It almost always pays to appoint a supplier that has first-hand knowledge of your companys markets.

‘A great outsourcing partner will be one that can work collaboratively with you to redesign operational processes and introduce innovations to better serve your business and its customers,’ says Rick Sturge, European vice-president at outsourcing provider Firstsource Solutions.

A supplier with specific experience in your industry is likely to be more prepared to invest in cutting-edge technology that could help your business provide more value-added digital services, he adds.

5. Consider the impact on your customers

If a company is outsourcing a customer-facing function, it’s important for it to understand the providers recruitment, learning and development programmes. So says Sarra Bejaoui, client services and operations director at SmartPA, which provides secretarial services.

‘You need to consider how they keep their team members happy. After all, these people may be directly reflecting your brand,’ she stresses.

It’s also crucial to recognise that an outsourcer may be handling sensitive customer data, says David Bate, CEO at call-centre provider Callcare.

‘It’s important that you discuss such processes with your provider. You need to feel confident that it will deliver in the same way that your company does, day in, day out,” he says. “Setting agreed frameworks for this will help.”

6. Consider the impact on your employees

The outsourcing of an entire function is likely to cause anxiety among the staff affected. Despite this, HR issues often come too low on the list of management concerns, according to Barter.

‘Successful partnerships often depend on how employees are treated,’ he says. ‘Businesses should keep their staff onside and ensure that everyone understands why the decision to outsource the function in question has been made.’

Employers in the UK also need to understand their obligations under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (Tupe). Any employee of a service provider who spends most of their time working on your contract may be covered by Tupe.

This means that they would automatically transfer to the employment of any new provider you might hire. Or, if you should decide to take the service back in house, they would become an employee of your organisation.

7. Ensure you retain management control

Clearly, you can’t absolve yourself of responsibility for a function just because you have farmed it out. As with any other business relationship, outsourcing poses risks that the client needs to manage.

‘Firms must ensure that they go through accurate due diligence, or they could face the reputational, legal or financial consequences,’ warns Melanie Campbell, MD at Dun & Bradstreet.

Justin Baxter, a partner at accounting and consultancy firm Crowe Horwath, suggests three key questions to consider when managing the risks of outsourcing. ‘The first is: do we have full inventory of our outsourcing agreements?’ he says. ‘The other two are: do we know that our relationships comply with the agreements in place? And how do we efficiently manage all relevant third parties to an outsourcing arrangement?’

8. Be prepared for inevitable teething troubles

It’s essential that you iron out any kinks at the start of the outsourcing relationship, so expect to be heavily involved during those first few weeks of the settling-in period,’ warns David Brock, MD of LetUsFixIT, a provider of remote IT support.

Amelia Bishop, MD of Weenie Business Solutions, agrees. She recommends drawing up a plan that specifies exactly which processes are being outsourced and which are being retained. ‘Include a timeline with this, so that you have something against which to measure your progress,’ she advises.

The full article and magazine can be accessed using the link below (page 21):

http://fmapp.cimaglobal.com/seven/financialprototype/index.html#issue/february