*Originally published on CommercialIntegrator.com
As an integrator sometimes it makes sense to outsource work for larger projects or when the amount of projects you have grows. However, you want to be careful of the pitfalls of outsourcing.
We are living in uncertain times. We are in our first modern-day global pandemic, we average a recession every 4 years, and we still have the threat of terrorism on our minds. All of these points in history have stopped our economy in its tracks and all have affected our businesses in various ways.
Let’s face it, we don’t have the largest talent pool in the world and all of us would agree that it’s hard to find (good) people. Our staff is also typically the most expensive lines on our PNL. Do we roll the dice and hire to grow our company’s or do we look at alternative ways to variabilize our expense structure?
Five years ago, I made the tough decision to start an outsourcing model within certain departments of my company. It meant I was going to move permanent jobs out of the company and hire subcontractors on a contract basis (or hourly). It was difficult to say the least and risky. We just had our fifteenth anniversary and all of our team members were full time. I knew we were going to impact people’s lives, but we had a fiduciary responsibility and I wanted to easily scale the business up or down given the current business conditions.
Outsourcing has truly worked for my company. We have a process in place, all team members have a regular cadence with our partners, and if/when there is another “event” that impacts our economy…we are ready! When we win that 7 figure job…We are ready!
We have incredible partners in our industry to leverage! USAV, Herman Pro AV, countless manufacturers offering support, independent programmers, colleges and universities, trade schools, and of course the unions, to name a few.
That being said, outsourcing is not for everyone. Before you move forward, it’s crucial to compare the pros and cons of outsourcing. And it’s also very important to understand the effect outsourcing can have on company culture.
3 Reasons Why Should You Outsource
1. You Don’t Have To Hire More Employees
When you outsource, you only pay for the time contracted or used. Remember, there is an average 20% burden rate (benefits, taxes, etc.) for a full-time team member. $50,000 is really $60,000
2. Larger Talent Pool
There are more outsourcing opportunities now than ever. CAD, Design, Labor, Programming, PM…it’s all out there as a variable cost. You can find the right talent, at the right price, in the right city
3. Scale Up and Scale Down
If the economy tanks, you can’t cut quick enough. Do you want to win that $2mm project? You can’t hire that quickly. Enough said.
3 Reasons To Think Twice About Outsourcing
1. Lack of Control
Although you can provide direction in regard to what you need to accomplish, you give up some control when you outsource.
2. Communication Issues
This doesn’t always come into play, but it’s one of the biggest potential drawbacks. I’m not going to get into should you offshore, nearshore, or use domestic labor, but…
- What time zone does the person live in and how does this match up with your business hours?
- What is your preferred method of communication – phone, email, text, pigeon?
- Does the person have access to reliable internet, transportation, and translating capabilities?
3. Quality Control
Despite all the benefits of outsourcing, it will only work if you have an air-tight scope of work, a process that’s repeatable, and a strong ops team to manage the subcontractor.
Outsourcing’s Impact On Company Culture
As a business owner, it’s easy to focus on the benefits of outsourcing, but you have to consider the impact it can have on your company culture. A positive culture leads to a higher level of productivity. Some of the ways outsourcing can negatively affect company culture include:
- Team members may feel they are being replaced
- Team members don’t understand why you are outsourcing tasks
- Challenges to the daily workflow of the company
There are many pros and cons of outsourcing, all of which should be carefully considered before deciding for or against this strategy. But, it is a strategy that can give you the ultimate flexibility and pay big dividends.