by Shannon Penrod
Outsource- a popular word in today’s business culture. The Harvard Law School Web Library defines outsourcing as: the practice of contracting with an outside company in order to provide a service or product that otherwise might be too expensive, complicated, or time-consuming for the institution to do internally. A common example of outsourcing is that of copy machines, which are usually rented and/or maintained by an outside agency.
We all outsource work on a regular basis and we have for years. When you take all of your tax papers over to your accountant so she can prepare your taxes, you are outsourcing. You could have done it yourself, but at what cost? You made a decision to pay a professional to do it properly. It was a smart choice. Outsourcing is such a smart choice that millions of companies around the world have decided to outsource huge chunks of their companies to the far corners of the earth. Some of these companies have outsourced smart, some not so smart.
The first rule of outsourcing is that is has to be cost effective, which is not the same thing as cheap. I could take all of my tax papers to the 14 year old girl who lives across the street; because she is smart she could probably figure out how to submit my taxes. I am quite sure she wouldn’t charge what my CPA charges – but would she be cost effective? NO! Clearly the money I saved in paying her reduced wage would be lost in paying fines or just not receiving the maximum deduction because as 14 year old she isn’t an expert. Some companies have confused cost effective for cheap.
I spent 4 hours on the phone with GMAC the other day because I couldn’t find a single person who understood what I was saying. Please don’t misunderstand me – everyone on the phone spoke better English than I can speak any other language, and I respect all of them for their ability to learn a second and a third language, but the fact is their command of the language was not good enough to conduct business in English. It was a tremendous waste of my time; but a great example of bad outsourcing! I know GMAC thinks it is saving money but what could have been handled in 2 minutes took 4 hours! Too bad GMAC doesn’t outsource to American Moms who have made the decision to be home with their little ones. Imagine what great publicity that would be for them. Not to mention how cost effective it would be.
Outsourcing is a great business tool when done correctly. It’s about time that CEO’s learned the difference between cheap and cost effective!