Outsourcing is leveraged by many types of companies and organizations from small businesses to huge multinational organizations. It’s easy to see why. Companies of all sizes can benefit from hiring a flexible and agile workforce to take on some of their projects.
This article will cover all the aspects of outsourcing, including:
- What is outsourcing and how it’s different from off-shoring?
- Why outsource and what are the benefits?
- Outsourcing to increase business profitability
- Outsourcing step-by-step guide
- Common mistakes when outsourcing and how to avoid them
Difference between outsourcing and off-shoring
Many people confuse off-shoring with outsourcing. Outsourcing is not about getting a cheap workforce to do as much work as possible at a cheap rate in a developing economy.
You can outsource your social media management to Chicago if you want. The point is to get work off your desk or to get specialist skills that you don’t have yourself or within the team.
Off-shoring, on the other hand, is purely about lowering costs by transferring some business processes abroad to increase corporate profitability.
Traditionally, only big companies are associated with off-shoring, but with the age of the internet, this is also accessible to smaller businesses.
For small businesses, the two certainly overlap, but it’s important to distinguish the difference to better identify your motives for outsourcing and therefore apply the best strategies.
Often, you’ll find that the growth of your business outpaces the growth of your team. It’s not a horrible problem to have, but it can leave you with a long to-do list. While it’s tempting to try and tackle everything, this can often stunt your business’s growth.
“At a certain point, if you’re working one hundred hours a week, you become counterproductive. So that might be a sign that you’re ready to do some outsourcing, as well.”
If you’ve reached this point, the first thing you should do is assess your skill set and figure out what new tasks you can take on.
This will make it easier to decide what to keep and what to hand off.
The second reason why many people decide to outsource is to gain specialist skills. At the end of the day, your business is only as strong as its weakest component.
If you’re an amazing real estate agent but could use some help on online marketing, don’t be afraid to go and find it!
The above is a good situation where you should be outsourcing. Just remember that the reason why you are outsourcing in such a scenario is to parachute in an expert who contribute meaningfully to your team. So going for the cheapest professional makes no sense. You can even consider hiring a local specialist if you wish to support the local economy.
Outsourcing to increase profitability
Sometimes, outsourcing specific tasks makes a lot of sense from a financial point of view. This can help optimize the business’s profitability or decrease the number of hours a business owner needs to work.
It’s not uncommon for consultants or freelancers to make as much as $150,000 per year offering their services. In a scenario where such professional works 250 days a year for 8 hours a day, it comes down to a daily rate of $600, or an hourly rate of $75.
It is almost certain that some of the work involved in this will not be related to the main service that the business offers. Rather, administrative tasks such as accounting, bookkeeping, social media updates, Adwords PPC campaigns and so on can be outsourced for less than $75 per hour.
In fact, some tasks, such as Adwords PPC, can be outsourced for as little as $10 per hour. It’s a no brainer to outsource it in such situations unless you enjoy the task.
1. Identify the best approach to outsourcing by understanding your motives
Before you begin looking into outsourcing, it’s important to identify your approach. Are you looking to get simple work off your hands, save on costs or hire a specialist to sort out a specific area of your business?
While you can jump right into searching for talent, it helps if you know what your goals are and how much would make sense to invest. The last thing you want to do is waste money simply because you had undefined expectations.
Next, decide on an hourly rate or a set project rate. Setting a fixed price for a project ensures you won’t have to worry about going over budget your first time outsourcing.
If you’re having trouble finding a round number, try breaking down your task into hours and then setting an hourly price that you can then add up.
While fixed project prices are good, don’t fear hourly rates!
Hourly rates can be great for outsourced teams working in customer service or for an individual who helps with the books a few hours a week.
Just make sure to monitor the hours worked using trusted time tracking software like Hubstaff to ensure that you’re only paying freelancers when they’re working.
2. Clarify project specifications and expectations
Once you know why you’re outsourcing and what your approach will be, it’s time to make that into project specifications and defined expectations.
One of the first things that you likely already have an insight into from step one is the length of the project. If you’re looking to outsource bookkeeping, for instance, it’s likely to be a long-term contract.
However, if it’s a one-time project, such as web design, it’s a good idea to have a deadline by when you’d like the project completed. Maybe you’re attending an event and would like your website up by then. Be sure to clarify these deadlines, and the importance of them, to any contractors.
In some situations, you’re doing things without any time pressures. However, it’s still a good idea to come up with some sort of deadline to avoid the project dragging along for a long time.
Once you have your deadlines and timelines set, you will need to clarify the exact expectations from the freelancer or company you will work with.
If you’re looking for a bookkeeper because you don’t want to do anything whatsoever with bookkeeping, it might mean going for a person that has done work in your industry before. That way, they don’t bother you asking how to classify types of expenses.
This also means clarifying and explaining to the bookkeeper that you won’t be inputting any bills or invoices in any sort of software, but rather forward them to an email address or similar.
You should try to be as specific as you can be to ensure onboarding is seamless and effective.
On the other hand, sometimes you will want to be involved in the project. Say you’re looking for a graphic designer to design a logo and want to be involved in the process as much as you can.
It would be important then to specify that you will want revisions of the work and there will be back and forth between you and the contractor.
Many freelancers include a number of revisions in the estimate, so make sure you discuss this upfront.
Lastly, be sure to specify exact deliverables. This is especially important for fixed cost projects. Specify what exactly you’re paying for and what the contractor will have to deliver to conclude the project.
3. Where to find outsourced talent
Once you know what you need and why you need it and have the details specified, you’re ready for finding the person or company you will work with.
As you’d expect, there is no shortage of places to find outsourced talent. Below are just a few of the many options available:
- Hubstaff Talent: A completely free talent platform for job seekers and prospective employers. Find hourly talent from a range of industries as well as full-time remote staff. There are no fees for posting jobs, hiring talent, or sending payments. Just thousands of talented professionals with clearly stated expertise and rates for you to browse.
- Upwork (formerly oDesk): Upwork (formerly oDesk), which merged with Elance at the end of 2013, is another resource to find all manner of freelancers. Here you can hire individuals or teams and pay on an hourly or per project basis. Vetting candidates is made easy as each applicant’s profile has a star rating (candidates with a rating of 4.5 or above are highly recommended) along with information on total Upwork (formerly oDesk) hours worked, and profile history.
- Outsourcely: Outsourcely is also another platform to easily find and connect with talent. It’s easy to find, hire, and work with reliable, vetted remote workers from over 130 countries. This is great for employers who are looking to build sustainable working relationships and dedicated remote teams. How does Outsourcely work? Search remote workers by skill or by posting a job and contact candidates immediately using real-time private chat, browser to browser video and voice calling, video and voice messaging or just regular email. This makes hiring fast and easy.
- Fiverr: Fiverr is the perfect place for those looking to outsource on a budget. As its name suggests, jobs start at just $5. You can browse from jobs offered or post your own. Before you head over to Fiverr with a wallet full of $5 bills, check out this handy guide detailing 11 Things You Should Outsource on Fiverr.
- If you want a local service because the person will need to travel to your office for some parts of the work, or because you want to support the local economy, you can still use any of the internet platforms and just specify the location of the freelancer. Alternatively, a Google search might do it and there’s always the option of a local online jobs board or big classifieds sites like Craigslist.
There are many sites and services out there, so take your time and select the one that’s right for you.
4. Write a good job or project description
The job description is an opportunity to not just describe the job details and set expectations, but also weed out unqualified candidates by showing high expectations from the start.
Let’s imagine that you need someone to write blog posts, and you decide to look for them on popular freelance websites or job boards. We will compare two job posts so that you can see the difference between an effective and ineffective job post.
An ineffective job post
“I am looking for someone to write blog posts for my fitness blog at least twice a week. The blog posts need to be informative and your English needs to be good.”
An effective job post
“I am looking for a professional writer who will write at least two blog posts weekly for my fitness blog. I will only accept native English speakers. You must have a portfolio so that I can check out your previous work.
This is going to be a long-term job, so applicants will be tested for competence. The client will expect discipline, organization, and courtesy. Please do not apply for this job if you don’t think you can meet these standards. Thank you!”
Guess which job post is going to attract highly qualified article writers? The ineffective job post will attract too many low-skilled contractors that hope to land any kind of job.
This is important, as manually screening all the applications to weed out low-skilled applicants from the developing nations can cost you a lot of time.
5. Interview and test your candidates
Once you’ve shortlisted some potential candidates, don’t skip the process of checking their references, portfolios, giving test projects, and interviewing them.
The interview doesn’t have to be as formal as for a job interview, the goal here is for you to ask any questions or doubts you might have with outsourcing to this specific person.
For them, it’s a chance to ask any questions on the project. A good specialist in their field will almost certainly have some.
A good approach is to issue a test to all candidates before you hire them. This can be as simple as writing a few lines of code or a paragraph describing your website.
It may sound unnecessary, but a simple test can help weed out bad candidates or ones who won’t be a good fit. Just make sure to compensate applicants for their time so that you’re not requesting free work.
Lastly, if you offer low rates don’t expect amazing work. While the lowest offer may not always be the worst, don’t just pick a freelancer or company solely because they’re the cheapest.
6. Manage and operate your outsourced team members
Once you have found your outsourced employee, set up regular chats with them over Skype or have weekly email check-ins to ensure that everything is running smoothly and on schedule.
If you don’t want to be managing your outsourced team members, that’s fine. Just be sure that you specify that in the second step of this list, and look for clear signs of reliability in the interviewing process.
A good and reliable outsourced employee will find it instinctive to regularly update you on the work done and any setbacks and generally keep you in the loop on everything. Just don’t expect this from the cheapest option.
When outsourcing, it’s always a good idea to implement a time tracking solution of some sort to keep an eye on the costs and how freelancers are spending the time.
Hubstaff’s time tracking solution provides you with a detailed overview of the time spent, how much projects end up costing you and you can also opt to take screenshots of your employee.
Hubstaff also makes it easy for employees to send you a detailed invoice and for you to make the payments. If your outsourced employees are going to be working with you long-term, the built-in project management and task tracking tool will come in super handy. It lets you add a task, assign it to a team member, and track progress as well as time spent on the task.
Other than Hubstaff, don’t hesitate to implement and use online tools to manage the people you outsource the work to.
Common mistakes when outsourcing and how to avoid them
1. Assuming that once you outsource, you won’t need managers
Outsourced workers manage their own internal processes, but they can’t manage your business. It’s a good idea not to micromanage remote workers, and assume they won’t do the same. Hire managers to take care of your business.
2. Don’t go on an outsourcing binge
As mentioned earlier in this article, you need to first establish if the task needs to be outsourced. If there is no value derived from outsourcing, then undertake the task using in-house expertise.
3. Assuming fixed price bidding is the best route to outsourcing
Fixed price bidding that’s popular at online marketplaces is appropriate for short-term tasks such as graphic design or blog writing. But trying to use it on more complex projects such as online marketing or SEO is ineffective. Be flexible and explore hourly rates.
4. Assuming fair compensation is the lowest price negotiable
Cheap is never a good deal regardless of the country you are hiring from.
You have to keep your remote workers happy in order for them to do a good job. Fair compensation is usually slightly higher than the market rate in the outsourcing location, but lower in your area.
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5. Expecting all workers to adapt to your culture
The reality is that virtual workers will always try to adapt to keep you, the client, happy.
However, there are some issues to consider when working with cultures different from yours. For example, you may not understand why someone is not available at certain times during the day because of religious requirements.
Further, success depends to a great extent on your overall attitude toward outsourced team members. Adaptation also goes both ways. You must also understand their culture and embrace their differences.
6. Assuming the existing staff will manage the outsourcing process
Don’t bring on or promote a manager who is resistant to change, doesn’t want the job, is unavailable to work during unusual hours or is insensitive to foreign cultures.
To be successful with outsourcing, you need a real champion to manage the process. Look for someone with excellent communication skills and an in-depth understanding of outsourcing.
7. Assuming your IT budget will reduce
The reality is that when you hire virtual workers, you’ll begin to rely heavily on collaborative tools like Hubstaff time tracking, data bandwidth, and new security tools.
You will need to increase your training budget for your existing in-house team, and commit funds to purchase new hardware and software.
8. Thinking that the personal growth of virtual employees is none of your concern
Don’t view virtual workers as temps, or as an inexpensive way to staff a startup.
Never hire people based purely on what they can do now.
Bored and unmotivated people are rarely ever cost-effective hires or positive influences on your company culture.
9. Outsourcing only the stuff you don’t understand
You or a co-founder must understand every aspect of your business at the management level. Relying completely on a virtual team means they are in charge, not you. If you have no idea where you are going, you will never get there.
These are just a few tips to help you succeed in outsourcing. If you’d like more information check out other blog posts on how to outsource, where you can find information on everything from outsourcing software development to working with virtual assistants.
This post was originally published March 2, 2015, and updated April 2019.