Use this checklist to look at the pros and cons of outsourcing and decide if it’s right for your organization.
Business: The Ultimate ResourceIntroduction by Daniel GolemanPublished by Perseus Publishing August 2002; 0-7382-0242-8
DefinitionOutsourcing is increasingly understood to mean the retention of responsibility for services by an organization while the day-to-day performance of those services is devolved to an external organization, usually under a contract with agreed standards, costs, and conditions.
In this checklist the organization considering outsourcing some or part of its functions will be called the “Organization”; the external organization designated to take them on will be called the “Agency.”
AdvantagesThe Organization generally makes the decision to outsource for a number of reasons, including:
DisadvantagesOutsourcing can:
Action Checklist1. Create a Project TeamTreat the outsourcing proposal like a project. Select a project leader and team, establish terms of reference, a method of working, and an action plan.
2. Analyze Your Current PositionIdeally you should have conducted a radical review of the Organization’s processes — you don’t want to outsource a function that might be better integrated with one of your core activities. Maintaining a clear vision of where the business is going, make sure you evaluate:
3. Pay Attention to PeopleAs the contract stage approaches, your staff will suffer from anxiety and uncertainty. At best their working life will be transferred from one employer to another, at worst their job could be lost. Keep your people’s welfare at the forefront of your thinking.
4. BenchmarkSomeone somewhere is probably doing the same thing that you are in a better way, or in the same way at lower cost. Identify appropriate organizations to benchmark against, and establish which activities they are outsourcing.
5. Come to a DecisionIdentify your core areas — Tom Peters says, “Do what you do best and outsource the rest.” The principal questions are:
Then decide whether outsourcing should become Organization-wide policy for non-core areas or whether it should be used only as the need arises.
6. Decide What to OutsourceLogically, what to outsource follows from the decision process. If you focus on the core competencies of the Organization, on your uniqueness, then targets for outsourcing become the support, administration, routine, and internal services of the company.
Areas that have traditionally been subject to outsourcing include legal services, transportation, catering, printing, advertising, accounting, and, especially, auditing and security. More recently these have been joined by data processing, IT services, information processing, public relations, buildings management, and training.
7. Tender the PackageThe tender is an objective document detailing the services, activities, and targets required as well as a selling document designed to attract Agencies that can add to the Organization’s capability. Outsourcing is not just a matter of getting rid of problem areas.
Once you have defined an attractive package, send an outline specification and request for information to the Agencies that are likeliest to be interested. The outline specification should contain the broad intention of the outsourcing proposal and the timescales the Organization has in mind.
The request for information is a questionnaire type eligibility test intended to establish the Agency’s competence and interest. The second stage is the invitation to tender, a precise document that spells out exactly what Agencies are required to bid for.
8. Choose a PartnerThe tender process should be used to evaluate facts, but choosing an outsourcing partner is much more than choosing a supplier, because the process involves a customized service, agreement on service levels, and a contract. At this stage the Organization is looking for an Agency with which it can agree on objectives and values, hold regular senior management meetings, and share otherwise confidential information. Harmony of management styles is a key requisite for success.
9. Introduce Your Staff to the AgencyMembers of your staff scheduled for transfer to the Agency should meet their new management before any contracts are signed. Allowing employees to air their concerns may help to reduce the feeling they are being dumped or cast aside. On the other hand, glaring conflicts in style and personalities may emerge that could affect the contractual stage. Address other issues of terms and conditions of employment including appropriate compensation if Agency employment is not available or not required.
10. Draw up the ContractIf the project team draws up the contract, provide appropriate legal input. The contract should spell out:
11. Test the ContractMake certain that the contract will stand up to the rigors and complexities of actual operation. A trial period is ideal for making adjustments before the contract becomes final and for judging the likelihood of the partnership breaking down.
Dos and Don’ts for Deciding Whether to Outsource
Do
Don’t
Thought Starters
From Business: The Ultimate Resource Copyright 2002 – Bloomsbury Publishing Plc. All Rights Reserved. This [excerpt] may not be reproduced, copied or distributed in whole or in part, in any manner, or by any means, without the prior written permission of Perseus Publishing, Cambridge, MA
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