The New Rush to Outsource.

The New Rush to Outsource.

Companies are scaling back their workforces in a drastic effort to cut costs in a market with exceptionally weak demand. In order to accomplish that result while maintaining the flexibility to handle orders as they come in, companies are returning to outsourced workforces and temporary/term staffing sources.

With the available talent pool of recently unemployed specialists filling the ranks of the companies in this space, the opportunity to pay for executive or specialty talent that ordinarily wouldn’t be available is a temptation most managers are far from trying to resist.

But this process has not had a great history of working as a general rule for a variety of reasons. For starters, although costs associated with specific production or customer call volumes seem to be substantially reduced, substantial information is available that demonstrates the phenomenal impact on customer dissatisfaction and drastic changes in consumer spending trends that result from this kind of management decision.

In fact it can fairly easily be demonstrated that the outsource model usually has a value in a fairly short term to help balance some crisis financials, but its’ long term damage usually far outstrips the short term gains if this decision extends beyond a few months to a year.

The costs of hiring, training, supervising and developing human resources in your company almost always far outstrips the costs of outsourced employees but the loss of internal experience is a cost that can be measured in terms of crucified morale, high employee turnover rates, low customer satisfaction, high complaint ratios, lower profit margins, lower productivity, lower quality services and products, less innovation, lower consumer and employee loyalty, and in many other areas as well, basically leading to reduced capacity to compete and survive.

Now I can already hear my phone ringing with the calls from the executives at outsource call centers saying my article is flawed or unfair – hang on. I’m not done yet.

Outsourcing is a great opportunity to bridge dynamic growth and contraction in industries that either have highly seasonal or strongly periodic workflows, and also works extraordinarily well when used in layered productivity organizations where between each layer of outsourced experts is another layer of internal players who mesh the parts together and can maintain the quality control equation necessary for success. One example is using creative outsource teams in different time zones to have continuous creative flow on time-sensitive projects.

Where this differs from what is being done today is that today’s drive to outsource is coming not from routine cyclical expansion or contraction within a specific industrial or sales cycle, but from response global economic contraction as a silver bullet to cut costs. The consequences and differences in application should be obvious. Should be, but companies haven’t slowed down the rush to outsource, and the future financial impact extends our projected recession ever further into the future.

Outsource, by all means. But do it for the right reasons in the right way or suffer the consequences.