The majority of companies love the idea of outsourcing. It is mainly because of three typical reasons. Outsourcing ensures financial, operational, and logistical convenience. However, with many advantages, outsourcing comes with risks as well.
For example, the cost-saving percentage your business is expecting is not achieved with outsourcing. Or the service provider is not able to handle the requirement of your business. Or it can even happen they lack in personnel skills to execute your required assignment. Sometimes the quality of the service is also not up to the mark.
Even with multiple risks, the outsourcing business model is still living up to its hype. There are multiple reasons to adopt it. You can choose a domestic or international outsourcing partner to help you with your hiring needs. But don’t forget when you are outsourcing you are sacrificing a lot of information. Such as information about the operations, confidential details, and other records.
Today, we are going to understand the risks associated with outsourcing and how you can minimize the risks of it. So that you can manage your outsourcing process effectively.
8 Crucial Steps to Reduce the Risk of Outsourcing
Here are the top 8 essential steps your business must take to minimize the risks of outsourcing.
1 - Dialogue on Critical Concerns of Outsourcing
The first and foremost step is to converse about the risks. Discuss and evaluate all the issues that come with an outsourcing company. Structure a firm model based on an agreement on the success of the project. Both parties i.e., your company and the third-party outsourcing provider must share joint responsibility throughout.
2 - Sharing of Responsibilities
Outsourcing is technical and requires careful decision making. Both the parties involved must manage the burden of the risks together where you and the service provider share equal responsibility for the precise execution of the project. In this way, neither one can blame or hold anyone accountable when something goes south.
3 - Accomplish Business Goals
When forming an outsourcing agreement, make sure it yields the specificity of your business model. Outsourcing should never be a channel of achieving inexpensive labor for your business. However, it should define your expectations and strategize your business goals with your service provider. Aligning the outsourcing partner about your business goals and targets can also contribute towards the achievement of your objectives.
4 - Determine Quality Standards and KPIs
Documentation plays a pivotal role in the progression of any business. It is necessary to define the parameters of your company before you plan to start your operations. Moreover, it is important to measure the success and failures using performance indicators. Create timelines, set KPIs, and mark benchmarks for achievements. Set quality standards and follow them. Through this way, you can evaluate where things went wrong. When any indicator is breached, the penalty will be imposed on the party involved. Hence, through thorough inquiries, failures of outsourcing can be minimized.
5 - Manage a Trial of the Outsourcing Services
Businesses must opt for a trial period to test the outsourcing company’s credibility and ability. Set one month to three-month time duration to evaluate if they can manage the assigned work. With the trial system, if the service provider fails you will always have the option to switch to another firm. Otherwise if you are satisfied with their services, you can finalize the agreement and collaborate with them for long-term uninterrupted engagements.
6 - Maximize Flexibility
The business scenario constantly changes for companies. These changes always have an impact on your firm as well as your service provider. For this reason, it is always recommended to keep the outsourcing model flexible. The operational model should be adaptable that even the slightest changes never fail the process. The overall process must be agreed upon by both the parties, to manage activities smoothly at times of alteration
7 - Ensure Discretion and Privacy
Confidentiality plays a crucial role in the modern business model. Businesses have to share their confidential information with service providers. However, breach of confidential information can lead to crises for your business. Therefore, get a non-disclosure agreement signed by your service provider. In this way you can restrain the outsourcing company from sharing your private information. You can also visit the physical location of the service provider to ensure the safety of your data.
8 - The Right Recruitment
Always choose the right person for the right job. Many businesses insist their service providers supervise the recruitment process. This way, they save time and go for the right person only in the first place. You as a business should also go for this process. Get on board that person who fits your job criteria and has the right skill set.
How to Improve the Overall Effectiveness of Outsourcing
When you are hiring a third-party service provider, you are handing them your secrets. This confidential information can impact your stakeholders, clients, and exclusive business partners. For this reason, you need to improve your outsourcing procedure to ensure trust and reliability. Here are the top ways how you can utilize to improve the efficacy of outsourcing.
Maintain a Detailed List
When you are planning to outsource, it is better to make a list of the operations first. Whether it is payroll management, tech support, invoicing, modern digital marketing, or customer service. Ensure to maintain a detailed list that brings clarity to the operations and the process. It will help you in allocating resources effectively and effectually.
Look for Relevant Providers Only
Searching for a reliable third-party service provider is crucial for your business. Therefore, search for all the relevant profiles that meet your business requirements. Cross verify their track record; analyze the list of fruitful results they have provided for their clients. Take time and weigh all the pros and cons before approaching any service provider.
Cherry-Pick the Best After Evaluation
Approach different service providers before finalizing anyone. Get their proposals and study them in-depth. Don’t just compare the cost associated with it. Read their terms and conditions and also understand the services they are offering. Only with a comparative analysis, you can find the right service provider partner for your business.
Start with Experimentation
Once you have chosen the service provider from a pool of potential ones. It is time to test their credibility, reliability, and trustworthiness. Instead of signing the agreement for a long-term partnership instantly, enter the experimental phase. Take a minimum of one month and a maximum of three months time to evaluate them. Evaluate whether they have the ability you are looking for or not. Once you uncover all the reality and are satisfied with their services, sign the agreement.
Establish a Monitoring Team
You always need to monitor the progress of the service provider you have selected for your outsourcing needs. Especially when you are in the experimental phase, critically monitor their performance. Take regular follow up on their achievements of the target and missed goals. It's recommended to include a senior staff member in the monitoring team. With their exclusive experience, you can easily evaluate and supervise service providers' performance.
Ensure Complete Documentation
The service level documentation must be complete. Don’t leave anything undocumented and restrain from verbal agreements. The paperwork must be in detail, covering every possible aspect. The document must demarcate the responsibility and the accountability of both the parties. Don’t forget, outsourcing can lead to legal clashes due to carelessness. Therefore, make sure your business takes appropriate actions to ensure a well-optimized process.
Autonomy and Accountability
It is important that the outsourcing partner takes the responsibility for the project. They must hold accountable in case of underperformances. However, you cannot ensure this immediately. Give them time to settle and understand your business operations. Once a good amount of time has passed, give them the autonomy to operate with accountability.
Keep a Track of the Performance
It is vital to keep a track of the performance of your service provider. Review their services and the outcomes monthly. If there is any shortfall, ask them immediately to rectify it and ensure a smooth process. You can engage KPIs as well to assess them.
Ensure Consistent Communication
Don’t wait for an issue to arise to communicate it with your third-party service provider. Keep in touch with them by conducting weekly conference calls. Understand their clarifications and explanations in case of a mishap. Through this, you would be able to resolve conflicts even before they arise.
If your business and the outsourcing service provider have everything planned out. Then there are higher chances of success. However, the outsourcing model is risky but accountability and responsibility can make the process safer.
Always outsource your business process to a reliable and competent service provider. Experienced partners can help you in streamlining your business while boosting the productivity level. Moreover, it saves cost and enhances the competitiveness of your business model.
Tkxel’s BPO services can help your small and medium-sized enterprises to excel in customer care and handle your core business process professionally. Let’s connect today!