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The benefits of outsourcing

Paula Parfitt, senior vice president of Cielo

Historically, the outsourcing business has been portrayed quite negatively by the media, businesses and employees. It is often associated with cost-cutting and redundancies as companies shift processes – and associated jobs – to low-cost markets overseas. To many, “outsourcing” is a dirty word.

Yet by definition, outsourcing is simply the practice of using independent contractors or external businesses to complete work that previously would have been performed by employees of the company, often when a specialist’s skill set is required. For businesses that can’t afford to pay full-time staff for certain duties, are not receiving the desired outcomes from their internal teams or struggle to predict the scale of the work, outsourcing means having access to the highest-quality expertise they need, when they need it and in the right volumes. It also allows them to set in place Key Performance Indicators (KPIs) to assess the quality of the service - and all of this is typically at a much lower cost.

Business leaders often resist change because they fear the unknown and a perceived loss of control. For example, if an organisation equates the number of direct reports to the level of seniority of a manager rather than placing value on business outcomes, then a senior team member could fear losing some status. This point of view can often be seen at an executive level by individuals who don’t have experience managing an outsourcing partner, which is why training in outsourced relationships is necessary in many companies.

Previously, recruitment process outsourcing (RPO) was perceived as a way of offloading certain non-core, high-cost, and time-consuming tasks of the human resource department to a service provider. These days, however, RPO activities are considered by many as a necessity for the effective management of efficient talent acquisition, and it’s understood that these partnerships are not just about reducing costs but about creating a strategic partnership that brings long-term value into the organisation. The benefits of outsourcing a business’ recruitment activity is leading to the increased adoption of RPO services. The global RPO market was valued at US$ 5.01 Bn in 2017 and is estimated to expand with a CAGR of 14.4% from 2017-2025. Organisations are not buying resource but are working in partnership to create a bespoke level of service. In other words, they are buying the end result.

There is also a lack of understanding within purchasing as to the level of transparency, influence and control that these offerings deliver. In fact, many organisations are surprised to find that RPO allows them to increase control because they have a contractual relationship that captures those KPIs and puts pressure on partners to deliver and continuously improve.

To establish a successful outsourcing partnership, companies should explore techniques for managing a strategic partner. It’s a mutual relationship that needs to be nurtured. If carried out effectively, outsourcing to business partners can help achieve sustained innovation and continuous competitive differentiation. When companies outsource, they achieve a reduced time-to-market, which keeps competition on their toes and saves on investment, allowing more time for higher-level strategic planning.  

While outsourcing agreements can fail to achieve intended results, this is not because the goals were ill-conceived but rather due to poor planning and execution. The gains come through the successful introduction and sustainment of change – a continuous commitment rather than a one-time event. A major advantage is that it offers businesses a way to beat competition to the market by engaging a partner with the expertise and capacity to bring new innovations. Secondly, experienced partners can also provide the catalyst for firms to enter new markets, while enabling businesses to focus on core competencies and build those skills that directly add value to customers while reducing their overall operational costs – all the while still benefitting from having a professional workforce with years of experience. There’s nothing dirty about that.  

About Paula Parfitt

Paula Parfitt is senior vice president at Cielo, the world’s leading recruitment processing outsourcer (RPO), with ten major offices around the globe. Its 2,000 plus employees serve more than 143 clients across 91 countries in 33 languages and its footprint includes the largest executive search firm in the Middle East.

Picture courtesy of Pixabay

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