A Complete Guide for Business Process Outsourcing
As we learned in our post on differentiating yourself in the cluttered digital space, the most successful agencies know their strengths and develop their service offerings around their core abilities. This allows successful companies to better align their practices with a target market and begin to craft a niche for their agency to capture. In addition, staffing initiatives can be executed with laser focus to build a team with top talent that can increase a business’ level of expertise in that niche.
Another great way to keep your team focused on your core business offerings is to outsource. Outsourcing to third-party agencies to handle business processes is not a new practice, but it is a practice that has gained traction over the last decade as businesses across industries embrace efficiency and streamlined operations and businesses are seeking solutions that free up their staff resources from time-consuming administrative and support tasks that don’t generate income.
At the start of 2022, UpCity partnered with Pollfish to explore how outsourcing had evolved, especially in the wake of the pandemic. The survey revealed that outsourcing has gained tremendous popularity in the last five years, with just over 30% of respondents working in businesses that have been in operation between one to five years now leveraging outsourcing practices, versus less than 14% in older firms. The most telling statistic to come out of this study, however, was that since COVID-19, 82% of our respondents have increased business process outsourcing.
This spike in business process outsourcing brings up the discussion that we’ve had with small business owners on how they decide whether to outsource or hire to close a gap in expertise on their team. We’ve included insight and guidance from several business owners and partners from our expert community of partners to give context to the best practices that we outline below.
Should You Outsource or Hire?
Staffing gaps are natural in the course of owning and running a business. As businesses evolve and organizations expand their services and product offerings, staffing needs naturally expand as well. Staff attrition is an equally natural cause for gaps in staffing. In either case in past decades, the natural response of most business owners would be to simply post for the open positions and eventually hire to fill those roles.
However, the pandemic has caused massive instability and uncertainty when it comes to employee retention and restaffing practices. The Great Resignation of 2021 saw an average of 4 million workers leaving their jobs every month, with more than 47 million workers total believed to have left their jobs willingly throughout the year.
To make matters worse, numerous factors in the wake of the COVID-19 pandemic, including rampant inflation and a potential recession darkening the economic horizon, are forcing business owners already running extremely lean, service-focused operations to make the difficult choice between two staffing solutions, each with their own merits depending on the company’s needs.
The first option is to hire staff to fill those gaps. This option means bringing on long-term hire, a process that requires a significant investment of time and money. If this provides your business with a solution to an ongoing need relative to a core part of your business, then it can provide you with future flexibility in the types of clients you can service. It can also provide scaled growth opportunities in a targeted way that meets your long-term growth strategy.
“We try to avoid outsourcing at all costs. So as a full-service, boutique agency, that means every member of our team needs to be an expert in more than one area or quickly become so. Finding the ideal new hire is seriously painstaking, but avoiding outsourcing, unless it is to a trusted expert, means avoiding sliding into that vast field of mediocrity littered with so many agencies.” – Rusty Pile, Avenue 25
Situations might arise where hiring a new employee isn’t an affordable solution to a business process need, so many businesses turn to outsourcing as a second alternative to addressing a gap. Outsourcing is often leveraged by small agencies and new startups to drastically reduce operating costs during the crucial growth phase.
“It’s much better to outsource services at the earlier stages of your business to reduce labor cost, management and training. That way, you can work with a team who is already proven to succeed at their specialty instead of creating your team.” – Oguz Konar, Local Marketing Stars
The benefits of outsourcing cannot be discounted when considering doing so instead of hiring to fill a gap. When you consider the associated costs of hiring an employee full-time, including benefits and salary, the costs of outsourcing can be lower. With the added benefit of increased efficiency across other departments in your firm as staff have their time freed up to tackle other tasks, your team has more flexibility to adapt to economic conditions. Because tasks are being handled by experts, the time to market for services and products increases, which can drive your bottom line profitability and allow you to take on more work faster.
Outsourcing should be approached with care, as you’re choosing to partner with business partners and agencies who have their mission and vision. There are several questions that you should address before choosing a third-party outsourcing partner in order to protect your brand and your customers.
Are Your Business Processes Aligned with Your Overall Business Strategy?
In such a cluttered and competitive economy, many small businesses fall into the trap of trying to chase new trends and short-term opportunities. Sometimes pivoting to expand your services or product offerings can be great for your business, but it can also be an overreach on your part. As a business owner, you have to consider whether expanding your services or business offerings aligns with your overall business strategy.
If service offerings stray too far and you find that you and your staff are having to tackle an increasing number of challenges your team isn’t equipped to handle, then outsourcing might be the best solution for continuing to offer additional value to clients if the demand is significant. Alternatively, if the demand for those services isn’t enough to justify outsourcing or the net profit gained from this arrangement isn’t worth the investment, it might be necessary to reevaluate service offerings to allow you to reduce costs and return your staff’s focus on what they are best at.
“It’s almost always best to hire. I’ve seen a lot of folks who outsource because they have a need they can’t cover, and can’t afford to hire someone full-time. This is because they’re expanding horizontally rather than focusing vertically. As an example, we do software and digital marketing, and occasionally someone asks us for IT needs. Sure, we could probably find someone to lean on for outsourcing services and fulfill their need, but why? We might make a little extra money, but it’s not a service we desire to support or that we’re passionate about.” – Dustin DeVries, Caffeine Interactive
“Over the years we have found that we can’t be great at everything. So instead of trying to do everything, we do what we are great at and hire out to subject area experts for everything else.” – Clifford Almeida, HIREAWIZ
“If you don’t have the infrastructure to provide the service yourself, or if you can’t afford to have a full-time employee for a particular service, then it might be time to look for a good outsource partner.” – Bill Sheikh, U-Thrive Marketing
Is the Business Process Core To Your Service Offerings?
Rather than absorbing a new service or product into your operation and outsourcing to support it, many companies act as “middle man” by referring their clients who demand them to an outsourcing partner, and this is a great way to keep your team focused on what they do best while still building revenue, gain new clients, and expand your relationship with existing customers.
“We focus on hiring new talent when it is core to our service offerings, and we are reaching 85% of capacity. We outsource whenever we can if the deliverables are not central to our core business, and this approach keeps us focused on what we are great at.” – Karl Hindle, Wellspring Search
Will Outsourcing the Business Process Improve the Quality of Your Services?
No matter how talented your team is, for small business owners and startups, it’s not possible to be an expert at everything. Outsourcing can increase the quality and depth of the services you provide, simply by providing your clients access to individuals who are experts in that field, rather than your team member who, despite being an expert in your core competencies, might be juggling multiple roles and is only peripherally familiar with a specific service offering your clients are requesting.
“Ask yourself if the job is pivotal to the core competency of your business. If the job lies outside of your core competency there’s probably someone else out there who does consider it their core competency; they can likely do the job better than you can.” – James McKinny, Traction Video
Are You Trying to Solve a Temporary Need or a Long-Term Business Requirement?
The decision to add a new service offering or product comes with new business processes which might be beyond your current team’s abilities. Sometimes, these service requests are seasonal and don’t figure into your service model for the remainder of the year. In these instances, outsourcing can benefit your team in the short term.
“For some agencies, your work can be seasonal and at times, it is better to outsource if there is not a guaranteed volume of work. This can be a great opportunity to test someone out for a limited period to see if they could turn into a long-term hire or a trusted partner.” – Mikel Bruce, TinyFrog Technologies
Seasonality aside, there are going to be instances throughout the year where your small-to-medium-sized business might experience a massive influx of business that your team can’t handle in the short term. In those cases, you have to decide if you’re trying to solve a permanent business need by hiring or mitigating the stresses brought on by a temporary business need through outsourcing.
“When we have an influx of projects or when we have smaller projects that we don’t want our seasoned professionals to do because we want them to focus on higher-level projects. We may also outsource when a client needs a project at the last minute and we don’t have anyone in-house available after-hours.” – Valentina Huff, Hughes Media
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“We only outsource for two reasons: managerial issues or workflow issues. The managerial issues have to do with managing staff employees. If managing someone else becomes too difficult, we will sometimes look at contracting options. We will also outsource certain tasks when we experience an unexpected increase in demand. We try our best not to fall behind on work, outsourcing helps with that at times.” – Adam Draper, Gladiator Law Marketing
Can Your Team Perform More Efficiently if You Outsource the Business Process?
Your business should be built around efficiency and profitability, and your bottom line should be the bottom line when it decides whether to outsource or hire to address a gap in your ability to carry out necessary business processes. If you find that your team is spending more time trying to execute a process you could more affordably outsource, and it starts to impact the customer experience and your bottom line, then outsourcing is the way to go.
“What’s more important for this role: an intimate understanding of your business or an intimate understanding of the tools needed to accomplish the task? There’s always some gray area when answering this question, but if the latter is generally more important, you should outsource.” – James McKinny, Traction Video
Choosing the Right Outsourcing Partner for Your Business Needs
Once you’ve worked through all of the above factors and determined that outsourcing is your most viable solution, it’s important to identify a business partner that brings the necessary experience and value to the arrangement. In weighing your options, you have to consider which service providers can best support you, align with your mission and values, and can execute on a quality level that will provide your clients with the desired results. Dig into their background to find out if their other clients and previous business partners found them reliable and consistent, so you don’t have to focus on managing the relationship and instead focus on your core business.
“Many potential partners try to be everything to everyone and rarely admit they may not be experienced in the type of work you’re requesting. Grill them on relevant work experience, ask hard questions, and speak with other clients they worked with previously in a similar capacity. Just because they say they’re willing to help doesn’t mean they’re the most capable partner on the market.” – James McKinny, Traction Video
Find a Partner You Can Trust
The risk that you’re assuming in outsourcing is allowing another business to provide services in your name. You have to be able to trust that they can deliver and perform according to your service agreement and that they will do so in a way that is seamless to your customers. A strong indicator of this is whether or not they have processes already in place for communication and delivery that are easily adopted by your team, which provide a foundation for trust to both parties.
“Trust is the number one factor when choosing a partner. Trust is key, not only in their outstanding quality of work but in them representing the best interests of our company and clients.” – Don Schechter, Charles River Media Group
“You need someone you can trust, someone who will be there for the long haul and has a vested interest in your success. Unfortunately, many outsource partners do not, or they’re juggling so many clients that they’re getting a fraction of your attention, and sometimes only doing a fraction of what they said they would do.” – Dustin DeVries, Caffeine Interactive
Communication is Crucial
Trust grows out of reliable communication. Any issue can be mitigated with open dialogue as long as that dialogue can take place promptly before an issue can escalate into a problem. An effective means of communication allows you to address shortcomings and provide feedback throughout a project, rather than finding a deal-breaker of a problem during the delivery phase of a joint project. From the outsourcing partner’s side of the relationship, you should be able to expect them to provide timely notification of potential delays or concerns throughout the project, allowing both parties to plan and troubleshoot accordingly.
“Communication is essential. An agency should never go radio silent after a project kicks off. Regular weekly updates should be part of the arrangement so issues can be addressed immediately and feedback is provided along the way.” – Michael White, The Creative Momentum
Use Small Projects to Gauge the Skill of Any Agency You Plan to Use
There’s no reason to lose business if your team lacks the expertise to address new business processes that have the potential to become a permanent business need if you’re willing to outsource. With the ability to hire quality talent severely hampered in the post-COVID economic landscape and the subsequent Great Resignation wreaking havoc with the supply of job seekers, outsourcing is a way of performing that job hunt while alternatively seeking an alternative potential long-term solution through outsourcing. It allows you to experiment with different business partners to find a perfect fit, while also allowing your human resources department the breathing room it needs to perform an exhaustive candidate search.
“It’s difficult to screen an outsourcing partner, and most agencies struggle to find an outsourcing partner that they are happy with. Expect to spend a lot of time and some resources on tryout projects before you find a good outsourcing partner. Very few agencies pick a great service partner on the first try.” – John Locke, Lockedown Design
Make an Informed Decision When Considering Business Process Outsourcing
Business process outsourcing isn’t a new business strategy by any means. Businesses have been working with agencies, freelancers, and consultants for decades to fill gaps in the expertise of their teams. Traditionally, managed service providers and outsourcing providers largely focused on providing information technology services. However, as economic conditions have evolved to a point where many business owners rely on lean and minimal staffing models for competitive advantage to maximize profitability, business process outsourcing has evolved to encompass a wider range of services. There are increasing instances where outsourced teams can even supplant the traditional functions of entire departments.
Today, an outsourced company can provide any range of business process management beyond IT services, such as social media management, media, and marketing services, and even telecom-related services. When it comes to customer service and client management, many companies are outsourcing call centers to third parties rather than managing them as an in-house process. Cost-effective solutions to project management and bookkeeping and accounting services are starting to saturate the market as well.
Despite this tremendous expansion, outsourcing has not yet reached a point that it’s considered standard practice and many businesses across industries continue to rely on staff expansion and in-house resources to address business process gaps. Hiring staff in-house allows businesses to control outputs and timelines more effectively. In having more control over timelines and production values, companies unwilling to start outsourcing feel that hiring new staff is a more cost-effective approach.
The decision between outsourcing and hiring is never easy because both options can have measurable effects on your agency’s bottom line. Be sure to weigh your options carefully to decide whether hiring or outsourcing is the right move for your agency. Remember: the more you’re able to focus on the core components of your business, the better you’ll be able to service clients and scale your operations.
“I outsource anything that doesn’t help me build a better mousetrap. I’m in the business of building better mousetraps, so anything that doesn’t help me to that end is a distraction. As a result, I outsource everything from advertising to accounting.” – James McKinny, Traction Video
Whether hiring or outsourcing is the best method to address your own business needs is a decision your leadership will have to make. But it’s not a decision they have to make without guidance. The UpCity Experts portion of our website provides powerful and insightful content that will help guide your team, while our marketplace of experts can connect you to consultants and outsourcing partners.