Ethical advantages of outsourcing in your firm
- January 16, 2019
- Posted by: Arron Skillen
- Category: Small Business
Outsourcing has swept the professional services industry over the past 10 years and whilst some excellent efficiencies can be created, questions are raised at times on the true value of outsourcing. Organisations that choose to outsource are more within their right do so. After all, the concept of outsourcing is not necessarily new. But the challenge for these organisations is to outsource ethically and for the right reasons.
I have worked in a number of firms that have viewed outsourcing purely as a means of increasing their bottom line, thus increasing their profit draw. Now I appreciate the aim of doing business is to make money. But surely we, as business leaders, need to think more broadly about how to do that ethically. Outsourcing to simply save a few dollars is no more a good reason for wanting to. The desire to outsource should be a strategic one that has more deeply rooted motivations that aim to improve how business is conducted.
Improve business process
The first advantage to outsourcing to is to improve your internal business process. There are a number of tasks which are very routine and can be structured in a way that anyone, with or without background knowledge, can complete the task. Examples include trial balance entering, bank account reconciling and scanning and saving of source documents. It makes total sense to outsource these simple, repetitive tasks to an outsourcing company or to a software using AI. But where most fall over is not setting up the correct structure around the process so to eliminate 99% of errors thus causing rework that could cost more than if entered in house in the first place. With a correct structure in place, all jobs should be then outsourced, not just those ‘ugly’ jobs. This means that you have thought about process improvement and leverage off the outsourcing for the second advantage.
Re-imagine your service offering
The second advantage is to better utilise your staff time. Now that routine processes are taken care of, there are a couple of options to help your clients ethically. The first is to simply pass the savings onto the client. A job that used to take you $1,000 to process now may take $500 so passing this saving onto the client is ethically correct, but I don’t think I have come across a business owner yet that has taken this approach. So the next ethical method of using this saving is to provide the client with some form of differentiated service. Use that $500 of time saved to interpret the financials and provide management actions points, or provide suggestions etc; anything that would give the client additional value. By doing this as well, you open the opportunity up for further advisory work.
Another advantage, but one not viewed as a tangible one, is providing a revenue source opportunity to an emerging economy. Emerging economies are taking advantage of the outsourcing opportunity. Whilst the minimum wage for these workers seems small in comparison to the equivalent in Australia, the opportunity that exists for these workers is undeniable. Furthermore, it also allows a knowledge transfer from developed economies to emerging. Some may view this as a threat to Australian jobs, but we are fortunate to be in a position to re-skill fairly easily and take on more advisory jobs. These are circumstances that other workers in emerging countries simply do not have access to.
So be it a change of service offering, taking advantage of a better business process or providing an opportunity to a worker in an emerging economy, outsourcing done ethically has some great advantages other than banking profits.