July 2000


By Kevin Grauman

Outsourcing is as old as business itself. From the earliest times, business owners have acknowledged and identified that they do certain tasks very well, namely those directly related to their core business. Other tasks--the necessary evils--are nonetheless critical to the ongoing success of their businesses.

It is impossible today to read a newspaper or business publication without encountering the word "outsourcing." Whether it be the safekeeping of bank-notes, transportation of products to customers, or off-site management of human resources, it stands to reason that outsourcing usually provides tangible and measurable "hard dollar" benefits to businesses. Conceptually, its merits fall along the following lines:

Lean and mean machines.Outsourcers are usually their own profit centers. Consequently, their resources tend to be dedicated to the task and functionally efficient. Specialists bring a high degree of practical experience and competence.

Duplication of efforts. Often a business's lack of internal expertise or dedication to non-core tasks results in poor attitudes and ultimately poor performance. This can lead to overlap and duplication of internal efforts. An effectively designed and ongoing communication process emanating from one or more outsourcers can greatly reduce or eliminate these duplications. The communication requires an awareness of the processes involved, associated responsibilities, and anticipated deliverables. This will reduce frustration and provide a clear path to resolution of operational malfunctions that may occur between the company and its outsourcers.

Reliability and consistency. It is usually a good idea to design, implement, and maintain an information exchange system that is consistently applied to expected situations and not sensitive to transaction volume. This way, individual expectations are well managed and information is easy to locate and decipher. Outsourcers have a vested interest in implementing a consistently applied series of processes that are scalable, reliable, revisable, and freely transferable.

Concise record-keeping and redundancy. Efficiency is the name of the game in today's business climate because it enhances an ongoing ability to compete. Additionally, in these litigious times nothing is more frustrating than losing an information trail during an investigation. Through coordinated joint efforts, outsourcers can retain backup information of the business's efforts and systems, thereby providing an additional source of assurance for the business.

Partnership message. Treating an outsourcer as a business partner makes a statement to employees, clients, and competitors that the business's efforts are dedicated, focused, and nimble, and it affirms that the outsourcer is an integral part of the business.

Accountability, recourse, and insurance. Paying for a business service creates the expectation of performance. Outsourcers are well aware that this accountability is both practical and legal, with fiscal implications. The same cannot be said for internally provided functions.

Cost savings. It is reasonable to assume that an outsourcer, by virtue of sheer transaction volume and repetition, will be able to deliver a lower-cost service than one provided in-house. Although cost savings may not be the ultimate goal, at the very least an outsourcing arrangement should produce a significantly greater number of service offerings or measurable efficiencies, both of which should be viewed in the context of the overall cost structure.

A Long-term Partnership

As with any business relationship, outsourcing should be viewed from the long-term perspective. The quality of the experience will depend upon investment and attitude. To succeed with outsourcing, there must be a clear understanding of the services bought and the core competencies and experience of the outsourcer's staff.

A successful outsourcing experience is dependent upon a partnership between the two organizations. The resultant whole will be significantly greater than the sum of its parts. *

Kevin Grauman is CEO and president of The Outsource Group LLC, a San Francisco­based professional employer organization that provides human resource management services. He can be contacted at

James L. Craig, Jr., CPA
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