8 Outsourcing Misconceptions with Arnold San Miguel

Hi and welcome back to another episode of the Outsource Accelerator Podcast. My name is Derek Gallimore and I’m excited to be joined by Arnold San Miguel again today. And today, we are talking about common misconceptions about outsourcing. Okay, so we cover 8 of the most common misconceptions in the world of outsourcing. So, I hope you enjoy this, this is episode 25 and if you want any of the show notes, transcripts or anything, go to our website and that’s outsourceaccelerator.com/podcast/episode25. Enjoy!

Derek: Welcome back everyone to another episode of Outsource Accelerator Podcast I’m joined again by Arnold San Miguel. Hi.

Arnold: Hi guys, Hi Derek.

Derek: And we are talking today, we’re going to discuss 8 common misconceptions about outsourcing. Okay. The world is full of them and there’s quite a big knowledge gap I find with a lot of people with outsourcing. So we want to attend to a few of these common misconceptions with you today.

So, we’re going to go one each and I’m gonna start with the first misconception which is; the same outsourcing project can deliver all desired objectives and throughout these misconceptions, I’m actually gonna reiterate a number of times that outsourcing is really no different to either project management or employment in your home town. It’s very difficult to get a one size fits all solution to anything. And it’s also very difficult to get one person one employee to be able to do everything within a project as well. So, there’s a common misconception within outsourcing that you can hire an outsourcing solution and sort of point them in the direction of a project and will all get done that isn’t really the case you know. And again, it’s no different to your hometown. Projects have required a lot of early specification, a lot of oversight, a lot of involvement and a lot of course correction along the way and very much so, you know one project is very different to another.

So, if you start a customer service outsourcing project then that’s going to be very different than if you start moving into your backend accounts operation. Okay, they’re very different projects, they’re very different objectives. You’re going to have to get different staffing for that. And so, you know there’s a tendency just to treat every outsourcing person in every outsourcing situation saying. But really, it’s just like when you’re sitting in your hometown and it takes a lot of detailed control for best results that’s all I have to say. Do you have anything to add to that one, Arnold?

Arnold: Yeah I think that’s pretty much it. Moving on to the second misconception is that outsourcing services is like buying commodities. Now people tend to consider outsourcing as a one stop shop. That’s often like a frictionless market that they can leave on and move on to other areas of their business which isn’t really true because for instance there are cases wherein you would have to send some of your key people to your outsourcing partner’s site overseas for the first few months just to make sure that the processes are well executed. Just to make sure that the agreement that you guys have is in place and is being catered to you.

Derek: Yeah that’s great. And, yeah, again outsourcing can be perceived as a bit of a faceless service but actually you know because you can rent seats and you can rent functions. But actually, there’s people there. And so, like every other aspect of your business it’s about the people and it’s about clarity. And similarly, you know just sort of rising above the individual team member level. That also applies to the outsourcing service provider that you match up with. So, there’s a lot of detail and nuances. It’s not necessarily difficult but it’s also important to realize that it’s not you know as simple as just hiring a function or a desk or an outsourced employee.

Great, okay. So, the next one moving right along number three is a complex and ironclad contract is a must. So, this might raise a few eyebrows but I would suggest just getting in there and doing it. Okay, you want to make sure that your contract and there are always are contracts with service providers. And certainly, if you want to get about into scale then both sides require a contract. But you know a lot of it is very organic and it will evolve. So, make sure that your protections are there and you know you can even have some basic KPIs and SLAs which is service level agreements. But you know don’t go too crazy on the contract because it’s a very organic and evolving process. Certainly, if you’ve just started on this and you’re feeling your way through outsourcing you need to make sure that you have obviously kind of easy and exit opportunities and you’re not tied into anything too heavy, but other than that do sort of acknowledge and accept that sort of the beginning of an outsourcing process will be very organic and will evolve. Great.

And so, the next one, Arnold’s going to cover this and it’s kind of looking at the other side of the coin.

Arnold: Yeah. On the other spectrum is that outsourcing can be done without a contract. So, very different from what Derek discussed earlier. But for this one again we’re not really requiring people to create a binder type of contract that people can sign into page by page. What’s really important nowadays is understanding the service level agreement that you’re going into with your outsourcing partner. If you outsource your customer service and you expect a thousand calls to be done on a monthly basis then make sure that your contract, even as simple as outlining how many calls needs to be answered is there or written so that both parties understand the operational risk and reward of your business to their business.

Derek: Yeah. Exactly. And so again it’s like you know the contract serves as a contract but also, it’s about clearly identifying, describing the project at hand so there’s clarity for everyone involved. That’s really important.

Okay. Moving on, we have the next one vendors have a greater liability for failure than in-house employees. Okay, so this is the kind of often debated argument of do contractors care more than employees. Do employees live for the culture more than a contractor or an outsourced function. I would suggest that the devil is in the detail there. And vendors you know it is their business to successfully outsource. Okay and people aren’t going to be in business if they are not serving the needs of their clients. So, you will find that outsourcing service providers take their roles very seriously. And as I always say the Philippines is actually, you know a world expert in terms of business process outsourcing that been doing it almost the longest in the world now for nearly 20 years. And they are experts in this and they will actually be to add a lot of value to the process and help guide you in your processing needs. So, there’s a lot of value at that so vendors or outsourcing service providers can absolutely provide you as good a result as a very dedicated and loyal in-house employee.

Arnold: Yeah. The next one is that another misconception is your outsourced process is not your headache anymore. So, people often have this tendency to believe that once they have passed on or outsourced a specific function of their business then technically they don’t, they get hands off in terms of management which is entirely false because the outsource aspect of your business is very important for you to manage. In that regard, you also need to have a good healthy relationship with your vendor. Make sure you spend time reaching out or having informal talks with your outsourced employees just to get a sense of how up to par they are with your company mission and vision because that’s the only way for them to be able to fulfill you know the service function that they are doing for you.

Derek: Yeah, absolutely. Again, it comes back to just treating them like a normal employee and it comes back to clarity in terms of project management. So, it’s very important to set that foundational groundwork so you get good results.

Okay, so the next one. Number seven is a bit of a political hot potato. It is the misconception that outsourcing internationally can harm domestic businesses. Okay, and this is a controversial topic and I’m sure people will disagree with me but I truly believe that outsourcing is a win-win for everyone involved. It’s a win for the business owner. It’s a win for the community that that business comes from and it’s a win for the outsourcing nation that the work is being sent to i.e. the Philippines. And the reason why it’s a win for everyone is because it’s an economical imperative that things are done for the most cost-efficient way. Okay, and outsourcing inevitably is more cost efficient. But that doesn’t mean that it starves the home country or the domestic situation. Businesses if they are able to get work done efficiently and effectively and cost effectively and make more profits they’re able then to reinvest in innovation and growth and the money and the profits and the taxes are then still paid within the domestic market. And that of course benefits the business the business owners all of the employees within the business. And of course, the community around the business. So, I am a super supporter of outsourcing because it does benefit everyone involved.

Arnold: Yeah, so the 8th common misconception with outsourcing is that your first failure should be your last attempt in outsourcing. Now this actually applies even to your in-house partner or department. Normally when you hire people you’re not always going to hit it right or hit the home run with the people you get. There are instances wherein you might have to fire someone due to bad performance or anything else. But the same applies with outsourcing. There are gonna be instances wherein the service is not up to par with what you envisioned originally but that’s just a hurdle that you need to overcome. If it means hiring another outsourcing vendor then that could be a possibility. But another aspect to that is really just improving the understanding and the communication between what you want to achieve and what the vendor understood.

Derek: Yeah exactly. This one’s a big one actually. I see a lot of instances where people try some outsourcing they might try someone on Upwork and they don’t get a great result. So, as a result they say I’ve tried outsourcing and that person was useless. Therefore, everything in the Philippines is useless. And it’s really a very kind of shallow assessment. And you know as an analogy it’s like hiring a plumber in your hometown. He doesn’t do a good job. And then saying all plumbers in all plumbing is a waste of time. Now there are there are good operators, there are bad operators there are good employees, bad employees you know. And this because the world over.

So, I really try to emphasize that you know no it doesn’t work out all the time. But persist and then you know you have pretty good processes and you maybe choose better people and then you know the results really do start to show. Fantastic, so that’s the eight. Should we recap., Arnold, want to goes through the first four and we can round off.

Arnold: Sure. The first one is the same outsourcing project can deliver all desired objectives. Second, outsourcing services is like buying commodities. Third, a complex and iron clad contract is a must for it. Fourth, outsourcing can be done without a contract.

Derek: Okay and number five is vendors have a greater liability for failure than in-house employees. Number six, an outsourcing process meaning that it’s not your problem anymore. Number seven, outsourcing internationally harms domestic businesses. And number eight, your first failure should be your last attempt in outsourcing. They are all misconceptions, okay and I hope that that shed a little bit of light on outsourcing. So that’s it from us. We’ll see you next time.

Okay, I hope you enjoyed that and got some good insight in to outsourcing best practices. It really is a bit of an art form, like any aspect of business and like any other aspect of business it takes a little bit of refining and improving but it really is a fantastic journey and can yield incredible results. So, I hope you enjoyed that, if you do want any of the show notes, go to our website and that is at outsourceaccelerator.com/podcast/episode25. See you next time.