In recent years outsourcing has gained popularity because it is commonly perceived as an efficient way of implementing cost-cutting measures. Outsourcing, for example, reduces the cost of people administration such as talent replacement, vacation leave and sick leave management, since the actual human resources are managed and administered by the outsourcing company.
While cost-cutting, is surely one of the benefits of outsourcing, there are other aspects of outsourcing that are worth considering. One key aspect is flexibility for capacity building. The emphasis is how this flexible approach to outsourcing talent requirements can be used to increase the capacity of your organisation.
External resources allow a business to respond to changes in the market by rapidly increasing or decreasing capacity. In evaluating an outsourcing decision there are instances where the actual per hour cost of outsourcing may be more expensive than in-house employment. However, the benefit of flexibility could outweigh that cost. For example, using an outsourced resource to handle peak hours of a work-week will be more cost effective then recruiting an additional resource when this not required full time.
Outsourcing non-core activities
In a recent article on outsourcing we discussed that, when considering outsourcing, firms should typically focus on outsourcing functions that are not core to their operation while maintaining full control over the delivery of functions that are core. Some non-core examples to outsource are:
Housekeeping and maintenance roles: Businesses benefit from fully or partly outsourcing these roles. Such roles do not add direct value to the core operations of a firm and yet, it is a commonly shared experience that for various reasons, sourcing and managing employees in such roles is time consuming.
Admin duties – While these functions are close to the core of the operation since they tend to support it, in our experience, we see that typically companies have started outsourcing functions such as printing, scanning, mail sorting, postage of letters, deliveries, billing, invoicing, receivables, HR administration and payroll. This outsourcing has enabled companies to focus their effort on the core functions that they are good at delivering while using external outsourcers to supplement the support functions in the background.
Talent challenges – There are several non-core functions that have developed a requirement for specialised talent or talent that is not east to recruit or retain. One such case is IT. Most companies require some form of IT function. It is however clear that in the challenging recruitment landscape we operate in, IT talent is difficult to recruit and maintain. If IT is not a core activity for the company, many IT staff may not be able to see long-term IT careers in such roles. In cases of such knowledge-based employees, companies need to strike the right balance between in house teams and external providers, while also being able to handle the spikes in IT projects and requirements through time. This is a common challenge especially faced by growing companies where they walk the fine line of balancing how they can add capacity in the area without breaking the bank while still retaining the staff or skills.
Outsourcing core activities
While the current examples cited for outsourcing tend to refer to non-core areas, it is also a reality that some core areas can be outsourced too for reasons related to cost/skill benefits. These are typically areas where the task needs to be carried out by staff that are highly skilled and where they might be better found external to the company. Some examples are:
Lead generation – Marketing is a core function of a company and works together with the sales function. With the increase in digital marketing, the marketing talent required is actually available on the job market. However, as with other activities dependent on specialised skills, it is sometimes more feasible to outsource such tasks to external specialists who are highly talented and can deliver more efficiently. It is also more difficult to retain such employees since, working on a wider spread of tasks and clients, could keep their technical appetite and growth better satisfied. In addition, keeping such a core activity in-house carries the risk that internal employees, might not be as up to date with the fast changes in the sector as external specialists.
Outsourced Senior Expertise – This is where certain expertise is outsourced in order to gain knowledge, skill or motivational injection into the company. One key example here is where C-level skills are outsourced in order to give external skills, experience and vision input to a company’s owner or management team. The advantage in outsourcing such a function instead of recruiting a consultant is that the skills injection happens on a continuous level rather than a one-off exercise done by an external person. The consistency and continuity of the outsourcing process creates a deeper relationship that can be exploited to grow internal management in the process rather than just obtaining a service for a cost.
The post-Covid-19 recovery phase is one that has created so much uncertainty that any practices that can afford organisations the flexibility to cope with the changing environment, like outsourcing, have increased in relevance and value.