Outsourcing Evaluation Criteria: Everything You Need to Know
February 04, 2019 by Aley Brown
Are you looking to outsource part of your organization? If so, you are probably trying to evaluate different outsourcing partners that can assist you with this process.
But how do you choose the right partner? That is where we come in!
In this blog, we will go over the most important outsourcing evaluation criteria for your decision-making process.
Don’t want to read through the whole blog? You can download our outsourcing evaluation criteria form here.
But before we get into what evaluation criteria to use in your outsourcing decision, let’s first make sure that you understand the different terms associated with outsourcing.
Outsourcing Evaluation Criteria: Know the Terms
“Insource” or “insourcing” refers to the process of having an employee of your company complete a task or business process.
“Outsource” or “outsourcing” refers to the process of having someone external to your company, that is not an employee, complete a task or business process. This could be an outsourcing agency or a consultant.
Say, for example, that you have tons of accounts payable work at your organization. You could hire an employee at your organization to handle your accounts payable, or you could outsource it to a company that specializes in doing accounts payable. This is a great, and very common, example of choosing between insourcing vs outsourcing.
“Offshoring” is kind of like outsourcing. You’re taking a process or function of your business, and then paying another entity to do that work for you. The only difference is that when you offshore something, the entity you are paying to do the work is overseas. Hence the term “offshore”.
An example of this would be if you wanted to offshore the manufacturing of your tech gadget to a factory in China. Or maybe you are looking to offshore your Spanish marketing materials to a marketing agency in Latin America. Both of these would be examples of offshoring.
Now that you understand what each of these options are, it is also a necessity that you understand why making a decision to offshore or outsource is so important.
There is a lot at stake with this decision. Your choice could be the reason that your business grows at an exponential rate, or saves your company from going under. It could also be the reason that your business actually goes under.
This is a big decision! Which is why you should pay special attention to what outsourcing evaluation criteria you are using to make your decision.
Outsourcing Evaluation Criteria: What to Look For
There are seven crucial criteria points that you should look for when considering different outsourcing partners.
A quick side note: Every organization is different! You should use this list as a starting point for your own list, and then consult with your legal department on said list before making a decision. Make sure that the criteria you use is specific to your business objectives.
Cultural Compatibility: First analyze your culture, and the cultures of the teams that will be interfacing with the outsourcing company. Are they compatible? If not, are there easy fixes to ensure long term success?
Wondering why this is so important? Let’s check out an example.
Imagine an outsourcing company with a very laid back culture. They don’t have strict deadlines, strict business hours, or even dress codes. Now imagine your company is the exact opposite. You have very strict deadlines, work hours, and dress codes. When you need something done, you can’t be flexible about it. So in this case, outsourcing to a flexible organization, probably isn’t the best fit.
Data: Are they only providing you with data about if a certain goal is achieved? That probably isn’t good enough. You want to work with an outsourcing team that can set multiple KPIs and report to you on the success of each of them.
Yes, it is great to know if a high level goal is achieved. But outsourcing isn’t cheap, and you will want to have data to make sure that your money is being spent in the most efficient way possible.
Specialization and Expertise: Do you need a specific skill set? If so, make sure your outsourcing vendor has that skill set available from their workforce.
If you are a healthcare organization outsourcing your marketing content creation, you should make sure that the agency you are outsourcing to has experience in the healthcare industry.
This can be even more simplified: if you are looking to outsource your payroll, make sure you are working with a payroll outsourcing company. Same thing with data entry, accounting, logistics, etc.
Customization: Does your provider allow you to customize their plans to your needs? This is very important if you have specific objectives or goals that are outside the norm.
Sometimes, the bigger an outsourcing company gets the less they are willing to customize. This is because they have so many clients they don’t have the bandwidth to have customized plans for each of them.
This might be alright with you! If not, inquire with other outsourcing companies about their customization capabilities.
Client Success: You’ll want a client success manager who is helpful and friendly. Having someone who is responsive and ready to assist you with any issues that arise is really paramount for bigger outsourcing contracts.
In business, things can change really quickly. Meaning that you might need to change your outsourcing process very quickly. Because of this, you will want a great client success manager who can make sure that your needs are addressed. Having to wait several weeks to hear back from your point of contact is no fun, and could cost you money!
Contract Obligations: Make sure that in your contract you have the exact expectations outlined. Have the outsourcing firm guarantee that these will be met in exchange for the payments.
Ask question about the payment schedule. Is it monthly, quarterly, or annually?
What happens if you have to adjust the service level in your contract? Can you do that?
Experience: Get an understanding of the outsourcing company’s history. Have they been around a long time? Have they ever worked in your industry? Or for one of your competitors?
As mentioned before, this outsourcing evaluation criteria list is just the starting point for your company’s decision making process.
We recommend downloading our evaluation criteria form, and sharing it with everyone on the buying committee. Have people add their own qualifications underneath our categories, or allow them to create their own categories based on your specific business situation.
Outsourcing Evaluation Criteria: The Final Say
Outsourcing is a huge decision. Make sure that your buying committee understands the importance of this decision, and that they are fully aware of the different types of outsourcing evaluation criteria that they should base their decision off of.
In need of outplacement assistance?
At Careerminds, we care about people first. That’s why we offer personalized talent management solutions for every level at lower costs, globally.