I’m in the process of remodeling a home. It was built in 1963 by an architect who my wife and I have always admired and we bought it about 3 months ago. At the time we recognized it was a true fixer-upper.
Since then we have done nearly everything which you can do to a house – new roof, new walls, new floors, new electrical, new plumbing, new yard front and back, new fences, sidewalks and driveways, new bathrooms and new kitchen. To get this done required that I “outsource”. I went the outsourcing route because was obvious that the time needed for me to do it all by myself would result in us living at the local Marriot Hotel for about 5 years. So I hired contractors.
I went this route, just like many companies and other organizations.
Outsourcing, or using contract labor, is becoming a bigger deal for most executives with each passing year.
Based on what my clients tell me, the 2 key reasons for this increase seem to be:
1. For either the company’s financial reporting or simply for “optics”. More and more, there is a perceived need actually or at least make it appear that they are shaving headcounts and reduce fixed expenses. So, using an outsider who can do the work of a previous employee is often the only way to maintain momentum.
2. As part of its overall growth strategy. Because they lack the in-house skills or brainpower the company has determined the best way to move ahead quickly is by using 3rd party experts.
If you’re in either of these situations, it probably makes a lot of sense to go with the flow and not fight the concept too strenuously. It’s hard to buck a company policy. And it may not do your career any good despite how altruistic your reasons.
That said, I believe it’s important that you, as a manager, know that when executed the concept of using outside “experts” often fails to deliver the expected results or stay within the agreed upon budget.
There are 3 principal reasons behind this lack of performance:
1. The contracting / outsourcing company which was engaged doesn’t have the wherewithal to do what was promised. The upshot is that your results are not what the company wants, but you can’t do much about it in the short term.
This is not a great place to be for anyone who is looking for upward movement in their career.
2. The contractor was really looking for a bigger deal than for what he or she was contracted. The gang at McKinsey had a term at one called “scope creep”. In a nutshell, it was basically this: “get inside the client’s organization with a lowball quote. Once there start pointing out all the other things which need to be done or redone. And rack up the billings.
So you end up spending over budget, the boss and or the finance guys want you to act like a manager – but you can no longer control it.
3. Someone is seeking to get a fulltime job at your expense. This is more prevalent than you might anticipate. There are a lot of contractors/consultants in the market who’d really prefer to be employees. So they come into an organization, figure out who the power players are, and start communicating directly to them with the goal of showing that they know more than the contracting manager and they can do your job much more effectively.
They often succeed. And you’re out.
The key to successful outsourcing is all in the upfront negotiation:
-Never use the outsourcing company’s contract. I recommend you don’t even look at it because it will skew your perspective.
-Before you ever meet with a contractor or outsourcer, detail what outcomes are required in the same way you would if you were hiring the ideal employee. Using your knowledge of your company’s financial goals, determine beforehand how much you’d like to spend to get the task(s) done ontime, and then deduct 10% off the top as a safety net.
-And finally, use some of the new online services such as Guru.com, or Elance to get multiple bids for you project from providers around the universe. If they don’t satisfy your needs, then go the “obvious” consulting or contracting companies who dominate in your sector.
Using this approach, at worst, you’ll be well prepared to negotiate. In all probability, you’ll get a better and smarter deal than otherwise would be the case.