Outsourcing: Essential for Productivity and Focus

Too much on your plate? Delegate!

Want to grow? Stop doing the everyday execution and start focusing on selling, new projects, leadership and the future!

Yes, this will require that you let go. It’s the only way you’re going to be able to expand your success.

One way to delegate is to outsource, which is simply a term for delegating a task to an “outside” person or firm rather than to an employee. The great things about hiring an outside firm (outsourcing) vs. an employee are:

• Outsourcing can be an effective means for obtaining a person with a very high level of expertise (i.e., he or she won’t come work for you, but he or she will provide a service for you)
• Being that the outsourced person or firm will not office with you, you don’t have to incur the cost of providing an office, phone, computer, etc.
• Since the outsourced person or firm will not be an employee, you don’t have to incur the expense of payroll taxes, unemployment taxes, benefits, vacation, etc.
• You don’t have to worry about “having enough work” to hire an additional employee, as you just pay for what you use
• The outside person or firm should have all the equipment and tools necessary to perform the job, alleviating your need to provide them
• Termination of an outsourced relationship is easier, typically with less emotion and much lower cost and risk

Outsourcing has some pretty compelling benefits? You bet.

The most commonly outsourced functions today are printing, janitorial, legal, tax, payroll and computer/technology maintenance. But rapid advances in technology and communication, and the ongoing trend toward specialization, have opened almost every imaginable service to outsourcing. This trend has brought great minds to the question of how outsourcing fits into business strategy.
In other words, “What functions should a business outsource?”

The generally accepted answer today is: all “non-core” functions. By non-core, we mean all that are not critical to the unique value that you and your firm provide. For example, to a talented artist, his artistic creations are “core” to his value engine. He gets paid for his creative work. Every minute he spends on non-core activities, such as printing, mailing, bookkeeping and technology, he is losing money. He should utilize outsourced experts to get the non-core necessities completed.

In addition to the core/non-core question, you should ask, “What functions of my business might I be able to get someone else to do and thereby lower my cost and/or improve the results?” Bookkeeping is a logical one, as is “rent a CFO.” By getting a part-time “rental” CFO, the business owner often finds that he or she gets much more of what he or she needs (good financial data), at a very reasonable cost, and is freed to work where he or she is best able to contribute meaningfully.

Another angle to consider is outsource the things that lie outside of your passion. We all are better at things that are interesting to us (if not passionate about). What in your business is drudgery to you? Maybe by outsourcing to someone who IS passionate about that type of work everybody can win.

Areas to consider outsourcing:

• printing, collating, binding and mailing (on demand)
• tax preparation
• fulfillment (mailing)
• CFO/financial management
• computer maintenance
• hiring/employee selection (the initial 80 percent)
• bookkeeping
• manufacturing
• payroll
• maintenance
• employee benefits
• personal bills, lawn care, house cleaning, auto repair, etc.
• travel bookings
• sales and marketing
• creative (materials, website)
• editing/proofing.

Finding Outsource Providers

Once you identify a function of your business that might be an outsource candidate, consider the type of person or firm that might be ideal for the job. For example, D. L. Perkins, LLC – the publisher of this journal – prefers to outsource to individuals (as opposed to companies) whenever possible. This is because individuals will often place great importance on their relationship with our company and this gives us a higher level of service than a larger organization that has many clients – some of whom will be much larger than us. Also, individuals will often charge a lot less than companies. The downside is that when an individual becomes unable to perform, you’re stuck. So, you must have replacement options readily available.

D. L. Perkins, LLC uses home-based individuals for editing, research, newsletter layout, website development and conferencing. It works great.

Individuals can be found through general internet searches; postings on www.guru.com; searches at www.iavoa.com; classified ad placements; and via networking through existing employees, service professionals and friends.

Outsourcing to organizations is better for services that are more complex, mission critical or risky projects. Clearly, payroll processing, employee leasing and some technology services are better outsourced to professional organizations that have a stable track record. Finding these firms is a matter of talking to peer groups, such as at your trade association conference, and searching the internet for candidates.

D. L. Perkins, LLC uses a well-established and bonded company for the printing and fulfillment (labeling and mailing) for our newsletter and handling of the confidential mail lists.

Assessing the Viability of an Outsource Option

Clearly, any outsource option must be analyzed for feasibility. For large projects, such as manufacturing, the cost analysis can be cumbersome. It entails obtaining quotes from outsource candidates and carefully considering all costs associated with the outsource option. Then, one must compare this with the costs incurred when fulfilling the function in-house. Direct and indirect costs must be included. When you are comfortable with your analysis, you must then consider the quality, risk and intangible dimensions of the decision. Keep in mind that if the outsource effort fails, you can always bring the function back in-house.

In summary, the pressure to improve productivity is tremendous today. Outsourcing non-core functions is becoming an increasingly popular strategy for reducing cost, improving quality and allowing you to focus on the value-added components of your business. The benefits are substantial. In fact, we believe that outsourcing is no longer an option for business owners, but an imperative. q

Outsource Options

Print, Bundle and Mail Your Information Materials – On Demand: The regular mailing of information is burdensome for many small businesses. Consider a print-on-demand service, like Mimeo.com. Log onto the Mimeo.com web site, open an account and simply use a browser to:
1) upload the documents that need to be printed; 2) select your type of paper, binder type, tabs, etc; 3) proof finished documents online, in real-time; 4) stipulate who should receive a copy of the package, and how many; and 5) store and share documents in a digital library for quick reorders.

Lisa Copass, a public relations consultant, uses Mimeo.com to print, assemble, bind and ship press kits that can reach 100 pages. She says, “We’ve cut time spent on documents by 80-90%.”

Employee Payroll and Benefits Administration: Small- and mid-sized firms spend a lot of time and money on the administrative burdens of having employees. Professional Employer Organizations (PEOs) are a compelling option for outsourcing this entire burden. PEOs, such as Odyssey OneSource, assume responsibility for meeting payroll and paying the appropriate taxes and administrating benefits. Your employees thereby enjoy the buying power of the larger organization, and have access to large-company benefits such as health care, retirement savings, etc. The workers compensation and unemployment insurance rates are also that of the PEO! By outsourcing to a PEO, your costs may not decline but you’ll get more for your money.

Instant Conference Calls and Web-Meetings: Traveling is incredibly expensive and time consuming. Technological advances have vastly expanded the quality and quantity of alternatives. First, telephone conference calls are now cheap and it is incredibly easy to get multiple people on a single phone line. Just contact Webex.com for your call-in numbers and pass codes, which you give to whomever you wish to participate in a call. Don’t stop there, however, as you can have those same callers log onto a website that displays your presentation materials (which you load onto the site in advance). You can direct the viewers using pointers, discuss issues just as an in-person meeting, and utilize various tools for confidentially obtaining feedback and questions from attendees if you wish.

Payroll Processing: Get rid of the burden of payroll processing. Companies like ADP (Automatic Data Processing, Inc.) will do it for you so you can focus on running your business. This is a no-brainer. The basic service includes the calculating of and distribution of paychecks (hard copy or electronic debit); calculating and paying withholding and employment taxes; preparing and distributing W-2s and 1099s at year-end; and handling employee payroll inquiries.

Don’t underestimate the value in outsourcing responsibility for correctly calculating and paying, in a timely manner, payroll taxes. Business owners regularly get into trouble in this area. By outsourcing, you almost guarantee that it is correctly and fully handled.

Background Screening: It’s the people that make a business perform. The quality of the business is the quality of the people. You must hire well. Clearly, this is a tough task to master. Fortunately, there are firms that can help. For example, HireRight.com will perform background checks, drug screenings and assessment services to give you the information that is not evident in the resume or provided voluntarily during interviews. HireRight’s mission is to “empower businesses with the information they need to hire qualified individuals while ensuring safe and secure workplaces.”