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Outsourcing Pitfalls You Need to Avoid

by Travis Foster 3 months ago in business

Let's checkout the few outsourcing pitfalls you need to avoid

Outsourcing Pitfalls You Need to Avoid
Photo by Austin Distel on Unsplash

In today’s age of modern technology, outsourcing is becoming a trend, and for a good reason. It allows entrepreneurs to delegate important business functions, making the turnaround of tasks faster and cheaper. While it is true that outsourcing can give the entrepreneur a chance at securing reasonably priced labour to get the business on its feet, if you do not keep your eye closely on the work being produced, you can quickly lose control. Failing to keep a hawk-eye view over essential roles could mean more costs and failure for your business in the long run.

There are pitfalls with any business venture, but outsourcing staff can work if you do it right and keep your eyes on workloads. In today’s technologically advanced world, you can work with remotely located staff from around the world and have constant communication as if they are right next to you.

Here are a few outsourcing pitfalls you need to avoid:

1. Not Having Managers

While freelancers and outsourcing companies can execute the functions you delegate to them, you should not expect them to manage your business as a whole. Their expertise is more or less confined to the tasks and responsibilities you give them, so it is always wise to have managers oversee progress and efficiency. You also need to see that they are not micromanaged too much, so exercise the right amount of supervision.

2. Outsourcing All Functions

Just because it is cheaper to outsource some of the business functions, some entrepreneurs get all hyped and outsource everything to save costs. As a rule of thumb, you only seek virtual help for responsibilities that either you can’t handle due to quantity or are unskilled in doing. All those within your scope should remain with you, so you remain in control of an important portion of the business.

3. Fixed Price Bidding (or per project staff)as the Only Model

Putting up short term projects on sites such as Upwork for fixed-price bids may be ideal sometimes, but the situation won’t be the same when thinking about long-term workers. Staff working on a per-project basis are different from those who seek full-time employment. Taking on project staff as dedicated employees is not always ideal as they may already have employment and complete projects to supplement their income.

That said, it can be possible. There may be negotiations along the way or changes that must be implemented, so don’t limit yourself to one type of outsourcing model only. This way, you can look at your actual expenses and still be profitable.

4. Providing Unsatisfactory Compensation

Your outsourced team are working for a living, so paying them the bare minimum usually doesn’t work. Staff may accept your low proposal, but you can expect them to jump ship when given a chance. Moreover, unsatisfactory compensation leads to substandard output, so keep that in mind. Outsourced staff can be a lower-cost option, but you have to be sensible and fair about the compensation you offer. The best way to calculate their pay will be somewhere higher than that of the market but lesser than how much you would pay someone in your location.

5. Not Providing Growth for Virtual Team

Unfortunately, there are those entrepreneurs who view their outsourced professionals as more temporary employees. Most virtual workers now seek professional growth, and they love doing so as they gain more skills with you. Don’t hire them based on what they can do now, rather have some growth plan. When they get bored, their output may be compromised, and that affects your business as a whole.

6. Failing to Anticipate Other Costs

This is something that you need to pay extra attention to. The contract that both parties will be signing only talks about the cost you pay for their services. This does not take into consideration other fees that you will be paying outside of it. For example, are you hiring an attorney to check your contract? Are you outsourcing through a platform that charges you for getting professionals from their site? Those are just a few things you need to think of.

7. Overlooking Confidentiality and Security

Last but definitely not least, if you will be transmitting essential information to an outsourcing company, like payroll, medical records, or other extremely confidential details, know that there is a huge risk involved. This is where some outsourcing companies rip off entrepreneurs, unfortunately. You need to be vigilant in this department and do your research in ensuring you are dealing with a trustworthy company or individual. Indicate a penalty clause as added insurance on your end.

8. Outsourcing Companies with Hidden Costs

There are some unscrupulous outsourcing companies in many countries who are sharks waiting to gobble up your business. These companies claim to have highly skilled staff at a fraction of the cost of a local recruit, and they usually advertise in google search. Some of these companies have hidden costs that they add to the hourly rate and will suck you dry with no remorse. Another trick they have is charging you for extra hours, which they will claim your staff worked, and they will charge you for it. Beware these companies who offer the world and deliver less than nothing.

These are some of the most common mistakes entrepreneurs make, but make sure to steer clear of them, and you should be fine. It’s a hit and miss process, but at the least, you will gain some excellent HR skills during the process. Outsourcing is the thing of the future, but you have to be wise because, after all, it is a tool that can go both ways.

Travis Foster
Travis Foster
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Travis Foster

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