The proliferation of the internet and the cost-effectiveness of overseas labor have made outsourcing an indispensable tool for entrepreneurs seeking rapid growth. While plenty of commercial establishments have enjoyed great success with this strategy, not all businesses equally benefit from it.
If you have finally decided that outsourcing is the right approach for your company, you need to be aware of the common outsourcing mistakes that business owners make. Here are the top 10 blunders for you to remember and avoid:
1. Lacking Clarity of What to Outsource
There are many entrepreneurs who jump on the bandwagon of outsourcing without fully understanding its potential impacts on their company. While it has many benefits — such as improved flexibility, lower labor costs, and expanded capacity — outsourcing also brings some operational challenges if inefficiently used.
There are crucial questions that you need to think through:
- Which areas of my business do I want to outsource?
- How will my internal stakeholders be affected by this move?
- How long should I outsource a part of my business before I evaluate its success?
It is important to plan ahead and look at how outsourcing will impact all the other aspects of your business. Remember, managing external resources requires a different skill set than handling the same assets internally. Therefore, you should be as careful and as thorough as possible during the decision-making stage.
2. Creating Vague Contract Clauses
An outsourcing contract is an important legal document when entering into a partnership with an outsourcing provider. One common outsourcing mistake to avoid is writing vague (or overly complex) contract clauses, as they can cause conflicts of interest between you and the outsourcing firm. Essentially, the point of a contract is clarity and mutual agreement.
When crafting clauses, use clear and simple language. If possible, consult a legal professional. Likewise, don’t hesitate to ask for clarifications if any of the clauses outlined in the service provider’s contract are unclear to you.
3. Neglecting Financial Planning and Preparation
Outsourcing helps organizations save between 15% to 30% of costs, according to the International Association of Outsourcing Professionals (IAOP), cited by MyOutDesk. Most outsourcing providers even claim that their services can reduce your labor costs by 70%.
However, don’t let the appeal of cost savings blind you from the real (and hidden) costs of outsourcing. Without a realistic budget or a clear financial plan, outsourcing can become an expense-heavy investment.
If you’re outsourcing accounting services to a Philippine-based accounting outsourcing provider, research the average salary of a Filipino accountant so you have an estimated benchmark of their labor costs. Implementation fees, service costs, management fees, pricing model, and technology may also influence outsourcing costs.
By preparing financially, you can anticipate expenses and choose an outsourcing service provider that aligns with your budget and outsourcing needs.
4. Working With the Cheapest Outsourcing Company
One of the biggest outsourcing mistakes you can make is settling for the cheapest outsourcing company and overlooking its service quality and expertise. Rather than saving on costs and maximizing your outsourcing ROI, you’ll end up becoming frustrated and spending more on early termination fees due to unmet expectations, mismatched goals and values, and poor output quality.
According to Computer Economics, cited by Auxis, distance (3.7), data residency (3.2), and language (3.0) are the top factors to consider when selecting a service provider to work with. However, time zone overlap and low outsourcing costs are only ranked 2.9 and 2.2, respectively.
The trick? Widen your options and always prioritize best-fit outsourcing providers. Evaluate potential outsourcing partners based on their ability to secure your data, scale your business, deliver high-quality services, and meet your goals and expectations.
5. Overlooking Cultural Differences
Outsourcing is a great opportunity to work with people of different nationalities and promote DEI (diversity, equity, and inclusivity). However, cultural differences become a problem if you do not do your research or neglect them as a deciding factor when vetting outsourcing providers.
If you’re outsourcing work to the Philippines, you might know the country for its colonial history, hospitality, resilience, and affinity with Western culture. However, there are still distinct cultural differences between the Philippines and the West.
For example, Filipino culture is more hierarchical. Rather than addressing their superiors by their first names, Filipino employees use “ma’am” or “sir” followed by the person’s name. They’re also non-confrontational and conflict-averse, so Filipinos may choose to keep the peace rather than engage in disagreements.
By reading up on Filipino culture (or any culture of your chosen outsourcing country), you already have an idea of your outsourced team’s behavior towards conflict, disagreements, and even feedback. We also recommend creating a safe space for your outsourced team to contribute their ideas and assert themselves during meetings.
6. Minimizing the Power of Regular Communication
For many outsourced businesses, it is easy to make small mistakes that might result in problems that will snowball into something more serious if left unchecked. Sometimes, such issues come about because of miscommunication.
If you are sharing a project brief with your outsourcing partner, do not make the mistake of omitting pieces of information because you assume that they are obvious. It may be challenging to discuss each small detail of a project; that is why constant communication and cross-checking with people involved is crucial.
Make sure the project scope is properly understood, and that everyone knows what they are supposed to do. The rule of thumb is to regularly communicate with your outsourced staff to avoid missing seemingly obvious but important details.
7. Failing to Set the Right Expectations
After going through the list of qualified outsourcing companies, you must identify key outcomes that you are targeting from a specific project. The expectations should be clear, and milestones have to be identified in advance to ensure smooth operation.
During the planning phase, you can then involve your chosen outsourced company to set proper expectations.
8. Ignoring the Trial Period
Not requesting a trial period (or project) is risky, as you won’t be able to assess your outsourced team’s output and responsiveness and detect red flags early on. This period helps you avoid entering into a lock-in contract or paying a termination fee with the wrong or ill-fit outsourcing service provider.
Before signing a contract, request a trial period from the provider, so you can sign the contract with full confidence once the trial ends.
9. Taking Data Security and Privacy for Granted
With 600 million cyber attacks occurring on a daily basis, data protection should always be a priority when outsourcing. Outsourcing providers may have the most enterprise-grade IT facilities, but here’s the million-dollar question: How well do they protect your data from cyber threats?
If you’re engaging in finance, healthcare, or human resources outsourcing, having your data fall into the wrong hands can lead to a breach of customer trust and reputational loss.
One of the most common outsourcing mistakes clients make is failing to assess the service provider’s cybersecurity capabilities. Ask questions about the company’s cybersecurity program, data encryption and storage solutions, and risk management strategies. These questions will help gain insights into its commitment to data privacy and confidentiality.
While outsourcing involves a degree of security risk, choosing the right service provider will give you peace of mind.
10 . Mistreating Your Outsourced Team
One aspect of outsourcing that clients should never ignore is employee treatment. Your outsourced staff members may be from another country with a culture different from yours, but they’re also real humans with feelings and emotions. Outsourcing is inherently collaborative, and outsourced teams are extensions of your internal team —and thus — should be treated like your own.
How do you treat your outsourced employees? Cultivate a culture of mutual trust and respect. Avoid making racist remarks or discriminating against your outsourced team against your internal staff during cross-team meetings. Take note: cultural awareness and sensitivity go a long way in ensuring a successful partnership.
Outsource Your Business Services to KDCI Outsourcing
As a premier outsourcing company with over 10 years of experience in the business process outsourcing (BPO) industry, KDCI Outsourcing offers next-generation offshore staffing solutions for creative production, content creation, marketing, retail and e-commerce, and many more.
Choose KDCI Outsourcing
At KDCI Outsourcing, we pride ourselves on our ability to seamlessly integrate our offshore outsourcing teams with our clients’ in-house teams and provide top-notch services for businesses of all sizes.
Let us start building your team of experts to help streamline your workflow and send your business into hypergrowth. Contact us today and start outsourcing to the Philippines!
