Small Business

Outsourcing: Bring in the Pros

When to call on others to help your growing business

Written by Suzanne Bowness

When human resources questions began diverting Marcello Marcantonio’s attention away from his core business, he knew he needed to act. “As we were growing, we were spending more time with employee issues,” says the vice-president of Richmond Hill, Ont.-based kitchen cabinet and accessory-maker Irpinia Kitchens. Although he needed help, he still wanted to avoid the salary and office space expenses of a full-time HR hire.

So, he hired Woodbridge, Ont.-based Capital Outsourcing Solutions to create an employee manual and handle HR duties on an as-needed basis for his 100-person staff. The firm’s monthly $900 fee is, by his estimate, about a quarter of the cost of hiring an internal HR specialist.

Outsourcing functions such as human resources, public relations or IT offers business owners savings on labour costs, frees up their employees’ time to handle matters related to the success of the business and gives the firm access to specialized talent. Colleen Gordon, associate partner, outsourcing advisory services, in Deloitte‘s Toronto office, explains that, on average, businesses can expect cost savings of between 20% and 25% through outsourcing—attractive figures for recession-weary CEOs. “There is a renewed interest in outsourcing as a cost-reduction mechanism and a tool to hedge against risk in an uncertain economy,” Gordon says.

But Canadian firms may be lagging when it comes to realizing fully those cost and productivity benefits. According to a 2008 Deloitte study, 60% of Canadian companies surveyed said they were satisfied with their outsourcing arrangements; the global average was 70%. Canadian businesses also reported an outsourcing ROI that on average was 10% less than their foreign counterparts.

Why? Gordon says Canadian managers tend to be more reluctant to hire outsourcing partners to handle important business functions and are less likely to replace their service providers. But those who take care in determining which aspects of their business are best outsourced and selecting the right supplier are often rewarded handsomely. Here are five ways to do it:

Define your needs

When Elton Pereira needed to outsource the production of thousands of pages of website content for his Victoria, B.C.-based online-security company, ParetoLogic, his management team first met to discuss their requirements and generate samples of the desired materials. These samples became the basis of the style guide given to the outsourced supplier. By communicating ParetoLogic’s requirements clearly, Pereira got the pages he needed on short notice and avoided the cost of hiring extra staff.

Don’t skimp on experience

Hiring a firm that brings existing processes to the table rather than one that figures the job out from scratch could save you time and headaches.

Collect several opinions

When Pereira hires an outsourced provider, he first looks to local professional associations and industry colleagues for referrals before conducting interviews, checking references and scrutinizing the portfolios of his top candidates. Capital Outsourcing Solutions vice-president Frank Buonpensiero also suggests asking for a full client list so the company doesn’t give you only its best reference.

Define your terms

Once you’ve chosen a service provider, present them with a contract that defines the services to be delivered, the terms and conditions of the deal, and the penalties for not meeting those terms, advises Charu Murti, research coordinator with the Toronto-based Centre for Outsourcing Research and Education. Intellectual property, legal and patent rules should also be outlined in the contract.

Make sure your cultures mesh

Finding an outsourced provider that has experience with your systems and industry is crucial. Marcantonio notes that he found Capital Outsourcing Solutions through a referral from a client, and felt more comfortable hiring them knowing the firm already had experience in the wood industry. “That makes them more in tune with the issues in our business,” he says. And, as Murti recommends, examine their project-management style and pay close attention to the compatibility of your work cultures. After all, they need to suit your style—not the other way around.

Originally appeared on PROFITguide.com