Approximately 300,000 jobs are outsourced by US companies every year for a wide variety of reasons. Depending on which position you take, outsourcing either kills US jobs or helps US companies stay competitive in the global market. The reality of outsourcing is rarely so black and white, however. When handled properly, there’s no reason the benefits of outsourcing can’t improve in-house employee morale and company competitiveness.
That said, outsourcing isn’t something to leap into without carefully considering the advantages and disadvantages. Outsourcing pros and cons vary depending on individual companies, the tasks being outsourced, and corporate culture.
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Benefits of Outsourcing
The benefits of outsourcing include more than merely cutting costs, although doing so is certainly a factor in some companies’ decisions. Common outsourcing advantages include:
● Access to larger talent pools. Hiring locally may not provide a company with much-needed skill sets. One of the greatest benefits of outsourcing is access to talent at a national or even global level, allowing businesses to hire individuals or companies with vital skills or knowledge.
● Reduced hiring costs. Outsourced tasks are usually awarded to contractors, saving companies the cost of training or paying benefits. Should outsourced contractors not provide needed results, contracts can be cancelled without the costs associated with labor disputes.
● More focused management time. With routine, administrative, and specialized tasks outsourced to contractors, managers have more time to focus on their company’s core functions and goal management.
● Increased business operating time. If the contracted company is in a different time zone, business operations can continue even when the home office is closed.
● Lower labor costs. Outsourcing can often produce the same quality at a substantially lower cost.
● A higher return on investment. Cheaper labor costs allow companies to pass on savings to the consumer, which can result in higher sales and faster revenue growth.
Cons of Outsourcing
The benefits of outsourcing must outweigh the potential pitfalls of hiring contractors. Possible problems your company might encounter will outsourcing include:
● A lack of oversight. Outsourcing necessitates the surrender of control over tasks. Contractors rarely work onside, so there’s no guarantee of quality until you start seeing deliverables.
● Delays. Miscommunication, time zone differences, and implementation problems can delay deliverables. Such problems can delay results significantly.
● Communication issues. Different time zones can interfere with rapid communication with contractors. Poor quality internet in some nations can also delay communication.
● Privacy and intellectual property vulnerabilities. Sensitive data and intellectual property may not enjoy the same legal protections in your country and that of your contractor. If the rules governing intellectual property differ, you may have no recourse if trade secrets or customer data are stolen. Outsourced contractors may also lack the technology necessary to meet SOC 2 compliance requirements.
● Quality concerns. Some nations have a reputation for lax quality control laws. Consumers may lose faith in your product if they know you outsource to certain countries.
● Public relations problems. The loss of US jobs to outsourcing can result in a media or consumer backlash against a company.
Corporate Culture and Outsourcing
The pros and cons of outsourcing can have profound effects on corporate culture, and a resulting effect on productivity and morale.
Perhaps the most serious consequence outsourcing has on corporate culture is fear. In-house employees may become concerned that contracting tasks outside of the company puts their own position in danger. Employees who think they could be replaced by future outsourcing have lower morale, lower productivity, and are more likely to seek other employment. Outsourcing can also lead to confusion over which which tasks remain in-house and which are the responsibility of contractors.
It’s notable that employees with the greatest sense of security are least worried about outsourcing. Employers can prevent outsourcing from negatively affecting corporate culture by clearly communicating why tasks are outsourced, and how doing so improves in-house employee work, either by removing deadlines or freeing them up from busy work so they can concentrate on mission-critical tasks.
Keep employees in the loop concerning the benefits of outsourcing, and you should be able to outsource tasks without sabotaging your existing company culture.
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