By Francesca Roland

What do you think of when you hear the term outsource? Is it positive or negative? Is it an option you have ever considered and if so would you know what options exist and how to start?

Outsourcing takes many forms and most associations and not-for-profits can (and do) benefit from it. But, to really consider outsourcing we first need to understand it. Hence this series – Outsourcing 101 for Associations & Not-For-Profits.  Over the coming weeks, I will explore how to go about outsourcing and how best to manage an outsourcing relationship. But in the following article, the first in the series, I explore why, as the bare minimum you should at least consider outsourcing certain functions of your organisation’s operations.

Whether it be basic admin, member services, specialised projects or senior leadership, we (the royal ‘we’ because truthfully I mean you) should all consider outsourcing for the benefit of our (your) organisations.

#1. WHY you should outsource

Outsourcing is not a new practice. It is a well-established and well-respected process that is proven to improve business processes and ultimately have a positive effect on an organisation’s bottom line. However, whilst it is commonplace in the corporate world, the association and NFP sector have been more reluctant adapters to the outsource model.

Whilst certain skills and services are now readily outsourced (graphic design, advertising / PR etc), other business components such as management, marketing, finance, leadership and business development remain coveted inhouse roles. But, if an association or charity is to grow and thrive in the current market then they must evolve with the times. Outsourcing should be a consideration for everyone. Let me tell you why…

  1. Focus

Despite the best of intentions and intrinsic processes, dividing business responsibilities amongst busy team members can dilute the focus needed on the task at hand. Outsourcing key responsibilities, e.g. business development, to a specialised provider ensures that the job attracts the focus necessary and is not one of many items on a to-do list. I particularly like this quote from the New York Times,

“Focus on your core business. Every business has limited resources, and every manager has limited time and attention. Outsourcing can help your business to shift its focus from peripheral activities toward work that serves the customer, and it can help managers set their priorities more clearly. Level the playing field.”[1]

  1. Skills on demand

Hiring inhouse staff is a lengthy process, in part because you have to assess how many boxes each candidate ticks. Outsourcing business elements eliminates this problem, and in fact presents new opportunity. Using Outsource Service Providers, or OSPs,  means you can pick and choose the skill and experience level of the people delivering work.

Leading US based Association Management Company (AMC) SmithBucklin’s 2015 Outsourced Services Study confirmed that skills on demand is one of the primary purposes businesses look to outsource;

“When asked to explain in their own words how they used or planned to use outsourcing to achieve their organizations’ goals, most respondents focused on outsourcing specific skills (53 percent), followed by supplementing in-house staff (34 percent) and saving money (27 percent).”[2]

  1. Scalability

In addition to controlling the variety of skills you require, outsourcing can allow you to upscale and downscale staffing (hours) as a project dictates. While a short notice period may be required, a good OSP will be in the position to increase your hours and provide the support you need when you need it. This may be ongoing, it may be a project or it may be for an unknown period of time.

Where this may present an issue with inhouse resources, outsourced work allows for an association or NFP to effectively control the volume of work being done. Much like turning a tap on and off.

  1. Cost efficiency

Sometimes outsourcing is more affordable than inhouse resources. Sometimes it is not. However, it is nearly always more cost efficient. Many outsourced service providers will approach a piece of work with a team and divide the scope of work into elements that are managed by specialists. This means that the work attains the focus of multiple professionals working towards the same goal.

The cost efficiency here means that you do not pay a senior manager to deliver basic admin and vice versa.

To optimise the cost efficiency available, it is really important to be clear on your expected deliverables and identify the work you are outsourcing. Avoid outsourcing part of a project, keep it simple and outsource the entire project. The phrase too many cooks is incredibly applicable to outsourcing and only allocating part of a project is likely to result in double handling which will inevitably have a negative effect on the cost efficiency.

The following quote from The Real CFO aptly captures this sentiment;

“The question of whether your business is ready for outsourcing is a fallacy. Every business, no matter how big or small, can utilise outsourced expertise to grow. The real skill is to identify what parts of your business to outsource.” [3]

A good outsourced service provider will work with you to establish how best to approach the project and assist in refining your brief.

  1. Accountability

This is a self-explanatory benefit.  Outsourced projects and services by nature commence with a clearly defined brief and identified, measurable deliverables. When you outsource, you know up front what will be delivered and will receive detailed and regular reporting to highlight the work done and outcomes achieved; a level of clarity and transparency often hard to find in a traditional employee model.

  1. Risk and continuity

One of the most attractive features of outsourcing is the risk reduction it carries.

“Every business investment carries a certain amount of risk. Markets, competition, government regulations, financial conditions, and technologies all change very quickly. Outsourcing providers assume and manage this risk for you, and they generally are much better at deciding how to avoid risk in their areas of expertise.”[4]

As well as assuming and managing risk, OSPs also provide continuity in terms of resources. A good OSP will provide a team structure that protects your business from the potential loss of information when a key inhouse staff member leaves. And training is taken care of by the OSP, meaning more productive and cost efficient work structure.

  1. Access to a Larger Talent Pool

Much like the skills-on-demand, access to a larger talent pool is a key draw card for small to medium organisations that have limited internal resources.

“When hiring an employee, you may only have access to a small, local talent pool. This often means you have to compromise.”[5]

Outsourcing means that you do not have to compromise on the skills you require. Beyond this, it also allows you to tap into a much larger, national or global business network which may come with additional benefits and offerings.

  1. Innovation

OSPs are commercial entities. To retain business, they need to move with the times and offer new and innovative ways to deliver service.

The 2016 Global Outsourcing Survey conducted by Deloitte, highlighted that OSP users are increasingly relying on their outsourced relationships to generate new opportunities or benefits to customers, clients or members.

“More than one-third (35 percent) of survey respondents say they already measure the value of innovation in their outsourcing relationships. In response to the increasing emphasis on delivering value beyond cost savings, service providers are rapidly evolving into innovation centres with the aim of creating improvement opportunities for their clients.” [6]

A Balanced Argument

Of course, as with any business, there are also potential pitfalls of outsourcing. Some of which are concisely highlighted in this 2017 article by Small Biz Trends, Advantages and Disadvantages of Outsourcing.  However, the majority of these disadvantages can be avoided by having a clear and refined brief, an experienced and professional provider and clear and ongoing communication and management.

With they WHY explained, our next Outsourcing 101 article will focus on HOW you should outsource; looking at how best to break down projects and set yourself up for success in your outsourcing relationships. Stay tuned…

Francesca Roland is Partner at Verdant Management. Verdant provides leadership services on demand to the not-for-profit and association market. Read more about Verdant Management and the services offered at www.verdantmanagement.com.au.

Sources:

[1] https://archive.nytimes.com/www.nytimes.com/allbusiness/AB5221523_primary.html?mcubz=1

[2] http://www.smithbucklin.com/news/outsourcedservicesstudy/

[3] https://therealcfo.com/outsourcing-big-business-trend-2016/

[4] https://archive.nytimes.com/www.nytimes.com/allbusiness/AB5221523_primary.html?ref=smallb

[5] https://www.forbes.com/sites/deeppatel/2017/07/17/the-pros-and-cons-of-outsourcing-and-the-effect-on-company-culture/#4a181385562d

[6]https://www2.deloitte.com/us/en/pages/operations/articles/global-outsourcing-survey.html