Entrepreneurship Productivity

How to Successfully Outsource your Business Processes & 7 Mistakes to Avoid 

Evan Goodman
Written by Evan Goodman

When done right, outsourcing can help you find the best person for a project, cut business costs and ramp up productivity. Outsourcing gone wrong can be costly, reduce productivity, damage your business’ reputation and even affect customer relations. After years of business coaching, I have identified seven common mistakes that many small businesses make when they begin outsourcing. Keep reading for expert tips on how to avoid these mistakes.

Outsourcing processes that the customer experiences directly

While every business process touches the customer in some way, some touch them more directly than others. Fulfilment, for instance, only indirectly touches customers. A call centre that responds to customer calls, on the other hand, directly touches them. Many businesses outsource their customer service, exercise little control, and see customer satisfaction go downhill, powerless to do anything to stop it. It’s important to resist the temptation to outsource these first-hand processes, even if it seems like a cost-effective choice. If things go pear shaped, you may not be able to stop the damage in time.

Overestimating the savings that outsourcing makes possible

There is a misconception that outsourcing will usually result in big savings with minimal effort. But getting it right involves investing considerable time and money to develop and manage a relationship and ensure that the outsourced work meets quality standards. You also need to be prepared to step in and help with unexpected situations. In general, cost savings tend to be about 30 percent lower than initially predicted. This doesn’t mean that outsourcing isn’t profitable – you just need to be realistic about your expectations.

Neglecting to provide adequate guidance

Outsourcing is most effective when every detail, task and milestone is clearly laid out for the outsourcing partner to follow. Surprisingly, businesses often cut corners when they initially document the guidelines, rules and procedures that need to be followed. As a rule of thumb, prepare double the amount of guidance or instruction for outsourced tasks as you would tasks completed in-house. Businesses often make the mistake of believing that there are things that go without saying. It’s important to realise that nothing goes without saying.

Rushing the outsourcing process

Sometimes, the only way to financially justify outsourcing work is to outsource large parts of your workload all at once. Business processes tend to be complex, however, and outsourced workers are rarely able to get everything right on the first attempt, much like in-house workers. They’re also at a disadvantage because they can’t just stroll up to a colleague’s desk and informally ask for advice. There may also be time-zone differences that cause communication lags between head office and outsourced workers. Turning over entire projects to outsourced workers can be a recipe for disaster. It’s a much better idea to outsource projects in parts. Outsourcing partners (whether individuals, teams or whole companies) should earn larger shares of work by doing well with what they are given.

Neglecting to monitor the quality of outsourced work

When businesses outsource processes, they no longer need to deal with them day-to-day. This can cause many businesses to insufficiently monitor that particular process, as it is out of sight and out of mind, so to speak. And if you fail to properly monitor a project, chances are the quality of the work outsourced will drop.. Many businesses use mystery  shoppers to sample the quality of completed work, for example. You have to remember that as the small business owner, the buck stops with you.

You put all your outsourcing eggs in one basket

Businesses usually hedge their bets by making sure that they have multiple suppliers to turn to for critical products and services. Your outsourcing plan should be no different. If an outsourcing partner were to go out of business, you were to experience a spike in workload that your partner can’t handle, or any other unforeseen event were to happen, it’s important to have a backup plan in place.

Not having an exit strategy

When you draft any business agreement, you should be sure to include a formal disengagement strategy. In the event that your outsourcing partner doesn’t maintain the quality standards that you expect, has insufficient capacity to meet your needs, or fails to deliver the savings you had hoped for, you should have a legal, straightforward way out. Be smart when you start out, and avoid this rookie error. A little more time when initially drafting a contract could save you a lot of time and money later down the track.

Outsourcing can help businesses farm out difficult and time-consuming tasks, seek out experts and save money. It’s important to remember that outsourcing is most effective when done behind the scenes. You need to take it slow and work out how to best monitor productivity, quality and output. In business coaching, a lot of work is done with clients to ensure that their expectations of others are clearly defined, understood by all, and that the expectations are met – Outsourcing is largely an ‘expectation’ piece. When you avoid these mistakes, outsourcing can truly help your company focus on its main responsibilities.

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About the author

Evan Goodman

Evan Goodman

Over the past 30 years, Evan Goodman | Business Coach has founded numerous ‘start-ups’, built them into successful businesses and gone on to sell them. He has experienced and overcome most of the common challenges faced by business owners and leaders and understands the pressure and stresses that running a business can cause.

He also recognises the value and importance of getting sound advice and support when faced by these common challenges and of being prepared to openly discuss issues with a coach or mentor.

Since building up his last business into a national company, and selling it in 2009, Evan focusses on coaching SME business owners on how to become business leaders. He has a Masters of Business Coaching degree UOW; creating a unique blend of experience, expertise and coaching best practice for his clients.

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