Every dollar is precious. Finding ways to get the same product or service at a lower price is all the rage — for our clients and for our businesses. Outsourcing (a.k.a. subcontracting) is a common path to achieving this utopia, but is it right for your business?
First, realize that a percentage of every dollar saved by outsourcing will need to be invested back into oversight and management; otherwise quality may suffer. It happened to a tile contractor we were using who figured he could grow quickly without the hassles of hiring his own team by subcontracting our jobs to others. Quality of craft and service dropped dramatically — so much so that we no longer use that tile contractor.
Second, evaluate your blend of outsourcing. Most companies outsource a higher percentage of non-core tasks, such as IT or marketing. Tasks that are core to your business require deeper consideration. For example, the table, below, lists factors, like job size and management model, that affect the decision to subcontract production work.
Finally, monitor outsourcing for core tasks (see graph, below). With production, each month we compare percentages between subcontracted labor and labor provided by our own craftspeople to ensure that we are staying balanced and to highlight any trends. For example, we want to increase our subcontractor blend in the summer months, but as work slows down in the winter months, we want to do more in-house to keep our craftspeople busy.
For most of us, outsourcing has been — and always will be — a critical element of our business. The key is to consistently evaluate the blend so you ensure that it aligns with your business strategy and tactics. Lack of alignment may lead to short-term gains, but in the long run it may lead to failure.
—Bruce Case is president of Case Design/Remodeling. email@example.com