Common Outsourcing Failures That HR Should Consider
February 14, 2019 by Josh Hrala
Outsourcing is a great way for companies to get tasks done without bogging down their current organization. This can be either by saving the company money by not hiring new workers, or by taking a whole department and having the work done by an outside consultancy that will cut costs in the long run.
Whatever the reasons for outsourcing, HR and others involved in the decision need to pay close attention to common outsourcing failures to ensure that whatever plan they put into place will work to the best of its ability.
To help better understand these outsourcing failures, let’s take a look at a few of the most commons ones so that you know what to expect when having work done outside of your organization.
Outsourcing Failures: Bad Communication
One of the biggest risks that can pop up during outsourcing is the fact that you may not be communicating with the contractors or agencies in a way that allows them to completely fulfill your requests.
For example, if you are outsourcing a creative endeavor, let’s say a marketing campaign, you will need to have a whole plethora of meetings with the agency to ensure that they are creating something that is on brand and performs the exact way you want it to.
This means, basically, that you have to fully understand the project from start to finish if you ever want to manage it properly. If you are unsure of the details and rely solely on the outside group to carry out the project, you may be setting yourself up for disappointment.
After all, the outsourcing company cannot read your mind. They need a detailed report of how things are going and what needs done if you are going to be happy with your business decision.
Also, if you do not fully understand the project, you will be unable to gauge its success, which can cause a bunch of problems. This is why poor or bad communication is one of the biggest outsourcing failures around.
Outsourcing Failures: Managing Expectations and Performance
Okay, so, say that you do know exactly what you want outsourced and how exactly that thing should be done. You have planned meticulously, have done your homework, and have seemingly thought of everything.
This is great news because you’re probably going to be able to communicate your needs in a way that the organization or contractor will be able to follow.
Now you need to understand one thing: you may be disappointed.
Depending on your budget, what agency you go with, etc, you may find the work to be sub-par or at least not what you expected.
It can be hard to outsource a project to an outside group because they may not have the same standards you do. So, in order to get around this outsourcing failure, you need to do a thorough examination of how the outside agency works and what their success is like. This will also likely be dependent on your budget and things of that nature. Do not expect to get out-of-this-world performance for next to no money, even though you are trying to cut costs by outsourcing in the first place.
This goes into the second half of this section: poor performance. You need to be ready for work to be late, unfinished, or just plain bad at times. The only way to avoid this sort of let down is to work with the agency as closely as possible to mitigate this risk.
When you do things in-house, you have full control and you can manage the project so that the outcome is exactly what you want. By giving up control, it’s always a risk.
That being said, make sure that your expectations are aligned with your budget. The agency can do their very best at times, but if your demands are unreasonable, you may want to consider a different approach.
Outsourcing Failures: The Goals Are Misaligned
This is one’s a bit more complicated. You need to make sure that you and your outsourcing provider are on the same page and want the same things.
For example, say that you want to outsource the production of shirts you sell. Instead of producing extremely high quality textiles in-house, you find a provider overseas that can do it for way cheaper.
This is a common example – it happens quite a bit. However, your quality may suffer if you go with the cheapest provider. So, you need to find a provider who is also known for their stellar quality.
In short, you may be focused solely on quality but the producer may be working with a ton of other businesses, making them more obsessed with cost. Sure, the product will be cheap, but is that a good thing if you are looking to make the highest quality products? Maybe not.
This outsourcing failure goes hand-in-hand with the previous one. You need to ensure that you are on the same page, performing your due diligence before outsourcing starts. Chances are, you will find that the cheapest solution ends up costing more in the long run because of errors and things of that nature.
If you do not pay attention to these conflicting interests – cost vs quality – you may lose public support, tarnishing your brand.
That’s also where the next tip comes in:
Outsourcing Failure: The Court of Public Opinion
What will the general public think about your outsourcing initiatives? Will they be on board or will they view your company in a different light?
Right now, there is a major emphasis on spending money to outsource jobs in the US, meaning that instead of sending money to overseas businesses, you may want to focus on US-based outsourcing providers.
If you have a tech-based product that requires customer support, you may consider having a call center in Asia. After all, a lot of tech companies do this. However, will your customers be annoyed by this move?
The same can said for quality materials that go into your products. Look at Apple. They make their phones in overseas countries and it’s been a point of contention for the company forever. Sure, people still buy their products, but the way they are made can cause a public rift to form.
This comes into play a lot more when companies decide to outsource departments to overseas locations, laying off American workers. For instance, if you have a plant that produces cars and you decide to ship that work overseas, there are a lot of people impacted. In fact, a whole town might have to get up and move to find new work because they were so dependent on your employment. This scenario can seriously turn the public against you.
That being said, sometimes it’s a necessary move. We’re not tying to criticize people here, but you need to look at your practices from a PR perspective to ensure that the move is the right choice for you.
Outsourcing Failures: The Takeaways
When it comes to outsourcing failures, many of them are under your control. You can pick and work with whoever you outsource to to ensure that products are made the right way and that projects are handled with care, allowing you to manage your expectations, have great communication, and keep your brand in tact.
If your outsourcing initiatives require layoffs, always make sure you layoff workers in the proper way, using a strong severance agreement and outplacement assistance services to help workers find new roles.
There are also times where outsourcing failures come about in a way that you can’t control at all. For these situations, make sure you try to correct them as early as possible.
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