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The right mindset for outsourcing

Outsourcing is not a new thing, it has been around for many years but the "gig economy" phenomenon has given rise to a significant increase in professionals setting up their own outsourced services, whether as a lifestyle choice or the beginnings of a bigger plan to grow a service based business.

I first set up my HR business in 2012 and the main demand from clients was to turn up and perform work at their premises to supplement their HR function struggling under the pressures of projects and business as usual or to simply assist a small business face-to-face to deal with a particular people problem.  

Whilst this hasn't changed significantly in terms of client needs from time-time, what I have noticed an increase in, is the opportunity and appetite for businesses to outsource more of the lower value HR activities such as managing HR administration tasks, keeping their HR systems up to date, creating HR-related documentation key for tracking staff development or performance.  All really important HR basics that when not done, can cause bigger headaches down the line, especially when the relationships turn sour.

In fact, our outsourced HR administration service came about because one client asked us if we would do it for them; we agreed to trial it and now they are in for a second year with us.  

His thinking was "I would rather pay you as HR experts to manage my HR data than than take the time out of my Operations Manager day doing mundane tasks that he won't do as well as you will.  He is more valuable to me actually managing the staff and the production of goods"

That client had the right outsourcing mindset.  

He saw the value of paying a fixed fee every month when he compared that fixed fee to what it would cost him to pay his Operations Manager to do it.  A simple calculation isn't it - time vs cost = value.

We offer that service now to all of our annual support package clients - and they love it too.

Recently I have been exploring how I can outsource some of our less strategic or valuable tasks and have taken on the services of an outsourced VA (virtual administrator) to act as our part-time HR assistant.  

Yes it takes some creative thinking and you will need to invest some time up-front training and getting them set up but once its done, thats a whole chunk of time that you or a member of your team can spend on doing more value-added work.

  • That outsourced VA isn't an employee.  
  • I'm not paying employers NI, holiday pay or workplace pension contributions for that person.  
  • I'm not paying them when they are too unwell to work.  
  • I am not supplying them with a computer, a desk, stationery, a phone line, broadband, a chair, heating and lighting.  

This service is provided remotely, from their home, it allows them to work around care commitments and the work they does for us can be performed at any time of day or night, to suit them and us within set service levels.

 

I was discussing the benefits of outsourcing very recently with another VA who has just set up her business and she was telling me about how difficult it was finding people in business with the right mindset for outsourcing.

I probed and she told me about how a tradesman who happened to be a plumber, was not able to get his head around how the work could possibly be done without her being physically with him, side-by-side.

By digging a little deeper it became apparent this was more about the plumbers ability to trust that the work was getting done and to his standard and it was clear the gentleman was time-starved already.  There was a suggestion that he was possibly concerned he would be paying for something he could not see/hear therefore in his eyes it might not get done.

Maybe he had an outdated view of administrative support or possibly he just couldn't imagine it being done any other way - so how can we help him to see it differently?

 

This tradesman had been losing on average 10 calls a week because he could not answer his phone when attending to other clients.  

  • What if 50% of those 10 calls were new enquiries?
  • And lets say each enquiry is worth an average of £350.
  • That is potentially £1,750 of lost business in one week.

How much business do you think he also loses because he doesn't turn quotes around quickly enough or follow up after the quotes he does get out in good time?

He may or may not have a system for tracking his quotes, but I'll make an educated guess that he does not.

And the VA is quoting him £125 a week to take his calls, draft his quotes, track them and follow up with those customers.

Lets say the VA's organised, systematic and timely customer service skills means his average conversion rate from quote to instruction increases to 50%.

Of those 10 calls that were once lost, 5 are now converting into £875 of revenue in 1 week gained from an investment of £125.  Net Value = £750.

Sorry this isn't supposed to be a maths lesson but it's a no brainer so far - isn't it?

 

Does he want to benefit from a weekly conversion rate of 50% of no quotes - or 50% of 10 quotes?

Think for a minute what that £125 per week investment could do to his turnover, profit and reputation in the course of one year?

Over 50 weeks it could mean an extra £43,750 of revenue for an investment of £6,250. Annual Net Value of outsourcing = £37,500

That is a very valuable return on investment by anyone's standards.

Does the VA need to be by the plumbers side?  No of course she doesn't.

Does she need to be told exactly what to put on his quotes?  Yes of course she does - handle that in the training at the very start.

Will it need an agreed system of communication between the VA and the plumber?  Absolutely and again they will agree that up front and if it needs tweaking as it develops they will need to  discuss it and change it.

What is the worst case scenario?  Most of these arrangements are on 30 days terms, so your biggest liability is going to be the outsource service costs for a 30 day notice period.  But come on, unless you have really chosen badly, not done your homework, not spent the time up-front on training and agreeing your processes, then the likelihood of this damaging your business is really not on a scale of any significance.  You have very little to lose and a lot to gain.

 

If you know someone who is time-starved and missing opportunities share this article with them and if that person is you, I really hope this story helps you to think more creatively about your most precious commodity - your time.

 

Time - the one precious currency of life that we all have in equal measure

 

If you know someone who would benefit from any introductions to outsourcing services, drop me a line and I will connect them to my network of business contacts - with pleasure.  Thank you for reading and sharing.

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Tracy Green
Tracey Murphy
Managing Director
01772 914085
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Published on: 19th January 2018
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