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Why outsourcing sometimes fails

It seems like a no brainer: you need help with some of the more periphery parts of running a business or there are some key tasks that you don’t have the time, expertise, nor interest in doing, yet you are not ready to hire someone permanently. In an ideal world, you would just outsource the job to a contractual worker and get it done at a fraction of the cost it would take to hire someone permanently.

But life (and business) don’t always go according to plan, and what may seem like a can’t-lose situation, may end up costing an inordinate amount of time and money, leading to many a headache down the road.

While there are several reasons why an outsourcing arrangement would fail, usually it is due to one of the following five causes:

1. Lack of direction. Many business owners go into an outsourcing arrangement with only a vague idea of what they want accomplished and how they plan on managing and monitoring the new set up. But outsourcing “on the fly” generally doesn’t work. Those business owners who take some time beforehand to think through the details will be in a better position to see good results from outsourcing

2. Unrealistic expectations. Another common problem plaguing many small business owners is the unrealistic expectations they have for their contractor’s productivity and work quality. This usually comes up when businesses seek out virtual assistants- especially if these virtual employees are remotely located in a country where the standard of living is lower. Here the phrase, “you get what you pay for,” still applies. Moreover, business owners need to exercise their due diligence to ensure that the hired contractor actually has the necessary qualifications and equipment to complete the job at hand. Lastly, Moreover, some positions are just better suited to a full-time employee rather than an independent contractor.

3. Mis-communication. Much time and money is wasted because contractual and temporary workers were unclear about what was expected of them. This is particularly important for those working with international contractors In this case, there is much to gain from learning about the cultural differences that exist in the contractors’ host country.

4. A high learning curve. Unless the task at hand is specific and well-defined, much time may be required to answer questions and clarify confusions. This means that the initial productivity of a contractual worker may be very low. Business owners should also keep in mind that such an arrangement will affect the productivity of those designated to assist the worker.  Moreover, where an independent contractor will interact with customers or customer information, a mistake could cost the business future contracts or customers.

5. It costs too much. Often, the wage paid for contractual help will be higher than the regular benchmark amount for the full-time position. This premium on the services rendered is especially relevant when using a temporary employment agency which must cover its administrative and human resource costs. Business owners should also consider costs associated with hiring and training as well as the learning curve mentioned above. Taken together, the over all cost to hire a contract worker may end up being higher than hiring someone permanently.

In short, even with the best of intentions, business owners can sometimes get it wrong with their outsourcing efforts. But often all it takes is a little forethought and knowledge to make those mistakes give way to a successful and profitable experience with a contractual worker.

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One Response to Why outsourcing sometimes fails

  1. Jenny Brennan September 20, 2012 at 11:51 am #

    Hi Rachel,

    Great piece about out-sourcing. In my line of work I often come across clients who don’t have a direction for a given project. I always ask clients to fill out a questionnaire. I can then assess what the client actually needs, and can give a comprehensive quote. It vital to manage expectations and that is an integral part of the success of the service I offer, therefore communication and efficiency are key.

    All too often people will set-up as a contractor offering services that they may not be qulaified for, it is indeed for the client to ensure that the service provider is qualified for the job, however if you are not skilled in an area – don’t take the piece of work on or have the resources in-house to offer them!

    I find that a great way of ensuring you have the right contractor (Virtual Assistant in my case) is to ask him/her to do a small amount of work initially, perhaps a small project to assess the results. In fact when I identify a business owner that needs our services I offer a free trial – some may say this makes no sense, but in my experience 99% of those clients either continue to use our services, come back to us at another time or refer us to another business contact.

    Thank you for this useful piece – it is a good reminder for those of us offering a service as well as those seeking our services.

    Jenny Brennan
    Virtual Office Worx

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