10 Outsourcing Mistakes Startups Make

The dynamic nature of most of the startups and SMEs and limited access to resources requires optimal utilization of outsourcing services including freelancing, subcontracting and virtual assistance. This can lead to rapid growth, save costs, foster productivity. However, a small mistake could drain all the money or put your survival at stake! Here we have jotted down potential outsourcing mistakes entrepreneurs can and do make, followed by suggestions on how they could and should be avoided.

1. Outsourcing means we won’t need managers: Contractors, freelancers and virtual assistants own their internal procedure to manage the work and can’t manage your business for you. Instead of expecting remote workers to manage your business, you should hire your own managers and train them how to deal with internal as well as external work projects.

1. Any worker could work from any corner of the world with a high-speed Internet facility: In some countries, labor rates are relatively lower. However, language and culture are the real keys to high productivity. All those countries falling in the same time zone may be good for easy communication but still they would lack certain skill sets. For example, in a real estate company every bit of work revolves around its location. Think through these aspects before outsourcing.

1. Outsourcing everything for the sake of cutting costs: There are some entrepreneurs who go happy with the notion of outsourcing everything for the sake of cost cutting which results in damaging consequences going forward. Ideally, you should outsource tasks that don’t involve your core competency and is easy to manage with quantified deliverables and checkpoints.

1. The only effective outsourcing model is fixed price bidding: A fixed price bid only works for well-defined short-term projects, like blogging or programming. But this approach doesn’t work effectively on call centers, affiliate marketing, or even data entry. You should do your research with peers, and check the alternatives on every project and then decide the pricing model.

1. Fair compensation is the lowest negotiable price: Procuring outsourcing services would be a bad idea if you wouldn’t keep the virtual team happy. Compensation based on lowest negotiable price could lead to lower productivity and might cause damaging effects. Therefore, an ideal compensation structure should be formulated as per the market standards, but should be lower than the cost you would incurred had you hired an in house team.

1. Expecting the outsourcing team to adopt your work culture: Adapting to work culture goes on both sides, and training is the key. Every outsourcing team would always try to adapt to your work culture. However, success depends on their working attributes viz. work ethics, culture, social status, language quirks, timeliness, and overall attitude. For example is you are availing of outsourcing services in India (a popular outsourcing destination) then you have to recognize the challenges inherent in Indian culture and language and embrace the differences. There is no single handed success.

1. Outsourcing activities could be managed by the existing employees: Virtual teams need a lot of stability and structure, standard protocols, contingency plans and extra communication. Therefore, do not assign the outsourced projects to someone who is insensitive to cultural differences, and/ or not flexible with timings, and/ or doesn’t hold experience in managing an external team.

1. Company’s IT budget would go down since the remote workers use their own tools: Don’t get caught up with this myth. When you assign projects to remote workers, you would have to start relying heavily on the collaborative tools, Internet bandwidth, and the new data security tools. You would need to invest more in training your own team, and increase your capital budget for new hardware and software procurement and installation.

1. Personal growth of the virtual team doesn’t impact the parent company: Remote workers should neither be treated as temps nor be hired solely on what they could do for the time being. Otherwise these unmotivated workers could lead to a threat to the overall productivity.

1. Outsourcing a job that requires certain knowledge & skills expertise is not a good option: Every entrepreneur needs to know all the components of their business at a management level, and/ or have a co-founder who does. Relying totally on a virtual team implies they are managing your company, not you. If you don’t know where you are going, you probably won’t get there.

To conclude, outsourcing should be seen as one among the important tools for building efficiency, and give you more time to focus on your strategic planning. No entrepreneur should approach outsourcing as an inexpensive and easy way to offload the responsibilities.