How To Avoid The 6 Worst Outsourcing Mistakes
According to a survey of 800 executives in the United States, cost savings is the primary driver of outsourcing.
No doubt about it. Outsourcing cuts costs. And sometimes quite dramatically.
But if that’s your only reason for outsourcing, you’re missing the boat. Outsourcing is also powerful weapon that can transform your business.
And if you’re not taking advantage of it, you’re costing you’re business revenue. To get the most out of outsourcing, you must take a strategic approach.
Only then will you be able to reap all its benefits—whether you’re outsourcing tech support, customer service, or another process.
Enjoy Full Benefits
Put simply, you need to do three things to enjoy outsourcings full benefits—take a broader, long term approach, set pragmatic goals, and form a partnership with your provider.
More important, you need to avoid making key outsourcing mistakes.
Below are six of the top mistakes in outsourcing and tips on how to avoid them:
1. Counterproductive Incentives
Incentives spur superior performance. But they can backfire with outsourcing. If your incentives are too hard to achieve, they can demoralize both your people and your provider’s agents.
Instead, choose challenging but modest goals. Then, as time passes, increase goal levels bit by bit. Achieving these goals builds agent confidence, fosters a partnership attitude, and boosts morale.
Action Point: Create a list of goals for an outsourcing project. Break them down into more modest goals. Then assign incentives designed to drive these goals.
2. Measurement Overkill
Not measuring performance accurately is a major outsourcing mistake. So is its opposite— measurement overkill. While the intent is good, few companies have the manpower or means to measure everything effectively.
Instead, pick out a few key metrics, measure them accurately, and check them regularly. Also, send a report to everyone and act on the report’s findings.
3. Hands-off Management
Measuring performance and then not acting on the results leads to outsourcing failure. If you don’t use your metrics to improve, you’re doomed to fail. And if you’re not acting on performance results, your customer service or tech support can only be mediocre.
4. Outsourcing High Touch Activities
Not every process is ideal for outsourcing. Understanding what processes to outsource and what not to outsource is critical to success. Invest time into deciding which processes should be outsourced and which should not.
One way to decide is to map processes against two variables: in-house effectiveness and business value. Outsource processes that have low business value and low in-house effectiveness or that have low in-house effectiveness but high business value.
5. Outsourcing Core Competencies
Outsourcing works well when it addresses processes not critical to your success. Involvement in these processes distracts you from what’s truly important—your core competencies.
First, determine your core competencies. Next, determine how well you do these activities. Then outsource anything that doesn’t relate to your competencies or you don’t do well. Keep in-house anything that’s critical to those competencies, you do well, and has high business value.
Action Point: Determine your core competencies. Then create a list of key processes that drive these competencies. Decide which processes you do well and which you don’t.
6. Avoid the “Honeymoon Effect”
Many managers fall prey to the “Honeymoon Effect.” At first, the provider works hard to impress and everything goes well. Then after a while performance declines, but the provider fails to make changes.
Now you’re thinking about switching providers. But switching is time-consuming and costly. It’s also risky. Instead, address the issue with the provider. Work out a plan together to improve performance.
Outsourcing is more than just a chance to cut costs. It’s a powerful strategy that can transform your company, but only if you avoid making the mistakes discussed above.
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