Top 10 Mistakes Business Owner Make When Outsourcing

In today’s world of increasing competition, businesses have to strive hard to generate values from their core functions. Business these days due to time crunch struggle to manage the non-core functions efficiently. By outsourcing, business can outsource their non-core functions to a third party and work on their core services.

Despite the fact that outsourcing is a handy tool for business, owners sometimes fail to read between the lines of it. Entrepreneurs end up taking some missteps which harm the outsourcing deal and their business. Below are some of them:

1. Not being sure of how much to outsource

Every business has its classified blueprint to be outstanding in the market, be it core services or functions. Entrepreneurs often lose track of materials being outsourced.  Consider an example of an automobile firm. For an automobile firm, outsourcing options could be advertising, call center operations or public relationship management. What if automobile parts manufacturing is outsourced or even the assembly is outsourced? Those being the core services of the firm need to be carried on within the firm.

2. Unnecessary Outsourcing

It is very important for the business to know what should be outsourced and what need not be outsourced. These days certain things are mechanized and can save your time and money. Certain tasks like payment of cheque to vendors, monthly fund transfer to agencies, sending out timely advertising emails or newsletters are all automated. Hiring a third party for such automated tasks will lead to unnecessary expenses.

3. Less is not always good

Outsourcing parties advertise themselves over social media and other such platforms. Most of the times they try and attract potential customers by offering very less price per hour or very less fixed price. Business owners tend to select such parties due to low cost and remember low cost never ensures high quality. Owners should always judge the quality VS price factor.

4. Outsourcing VS Insourcing

Sometimes business owners tend to underutilize the hired talent. Owners assume that work which is being outsourced cannot be done by his\her employees. Owners guess that the outsourced work can be done 100% just by them or by outsourced vendors. But, it is always better to have in-house talent working for your business than outsourcing due to “sense of belonging” feel.

5. Insufficient communication with outsourcing parties

Business owners usually consider that since their work is in the hands of professional company, they do not have to give an elongate talk about the work needed. But, in no cases it is possible for even the most intelligent person to give 100% of what you expect.

It is always necessary and better to sit down, have long meetings, detailed graphs and charts, explaining the party even the minute details of the work needed. Feedback is another face of communication. Honest feedback to the vendor will always help in better tasks in the future.

6. Not knowing timeframe for starting and finishing the work

Business owners seldom forget to figure out how long an outsourced work might take and when it absolutely has to be completed. It is usually stressful to provide services for a client in a rush and the people whom the business owners outsource to are no different.

7. Outsourcing to the wrong vendor

This is the common mistake business owners do. They wind up choosing service providers without enough experience or parties who are not an expertise in their domain. This will lead to no room to grow for the business. Owners do so either because the outsourcing party is ready to offer a cheaper deal or because the outsourcing party cannot be negated. Owners fail to screen the third parties and also fail to understand that outsourcing leads to profit always in the long run not short term.

8. Not monitoring outsourcing services

Many a times, business owners after outsourcing, assume that the outsourcing parties have complete control over the outsourced tasks. Owners neglect the fact that time to time follow up with the third parties is required. When owners fail to do so, it might lead to unsatisfied services from third parties.

9. Signing borderless deals

Business owners lack mature processes to accurately control provider performance. “The typical blind driver tracks costs, but does not measure performance,” Vitasek says. “Eventually the relationship fails because of unclear definitions of success.”

10. Not understanding third party’s work ethics

One of the common mistakes companies make is that, their business model and the outsourcing contract are not aligned. Business owners fail to understand the outsourcing parties’ work culture or business model. Owners presume that the other party would work in the direction to add extra value to their business, but third party might end up working for just what they are paid for and nothing more complimentary.

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