3 Key Business Functions You Should Never Outsource

Outsourcing companies have a long list of BPO services to offer but you should be careful what you‘re signing up for.  Not all business functions can be entrusted to vendors. What you have thought of as a clever way to save resources and money might be the cause of your corporation’s collapse.

Although delegation is a way to efficiently run your business, you must sort out which services are best handled by outsourcing companies and which stays in-house.  According to Gregg Landers of CBIZ MHM on Entrepreneur, the “types of services that can be outsourced fall into three general categories: tasks who need highly-skilled employees or in executive positions; highly repetitive tasks; and jobs that require specialized knowledge” while Planet Marketing says to retain the task if it is highly confidential, too expensive to outsource and may cause loss of control.

You may use the decision tree below to help you out:

We’ve discussed before the business functions you can outsource. Despite how advantageous outsourcing is, there are the services you shouldn’t let go of your grasp:

Never outsource your Core Competency

This is the most popular advice/warning in the world of outsourcing, but what exactly is a core competency? Based on Tech Target’s definition it “is a company’s unique characteristic or capability that provides a competitive advantage in the marketplace, delivers value to customers, and contributes to continued organizational growth.”

If a core competency is an indispensible element in a business, how can you identify what is yours so you can’t inadvertently giveaway a classified company information? In the paper entitled “The Core Competence of the Corporation” by C.K. Prahalad and Gary Hamel, they’ve provided a three-point checklist to identify core competencies in a company as follows:

• It should provide access to a wide variety of markets.
• It should provide the value behind end-product benefits.
• It should be difficult for competitors to imitate.

A core competency is the rare gem of a business and outsourcing it to another company is surely a gamble. This is the greatest mistake Netflix made when they partnered with Amazon.

Netflix’ core competency is its on-demand streaming. In order to deliver content to their customers, Netflix relied on Amazon Web Services for more of its streaming services, tells Online File Storage. However, Amazon is a direct competitor of Netflix because of Amazon Prime, which offers unlimited streaming of movies and TV episodes for a price. This situation clearly contradicts item no.3 of the checklist above as well.

We don’t know if it was a coincidence or not when Netflix experienced major downtimes during Christmas Eve and New Year’s Eve last 2012 while still with Amazon at the time. Something’s fishy, right? Both companies have severed ties with each other because of this.

Never outsource (some) of your HR Services

The Human Resources department is the “blood bank” of the company and it is not wise to hire an entire team thousands of miles away from you. It is considered a blood bank because it provides and manages the most valuable asset of a company—its employees.  According to BBC, it is responsible of “recruiting suitable candidates for the organization.” Furthermore, it has the role of ensuring the employee’s welfare, fostering positive employee relations and maintaining a safe working environment for employees. You cannot do these overseas. Simply put, HR is best run locally or on-site.

The Huffington Post reiterates this and according to them “good HR people are embedded, with at least one ear to the ground all the time.” The site also cited sample scenarios of why having an in-house HR is irreplaceable, such as:

•  Two managers have a jurisdictional dispute and need some help sorting out where the lines fall.
• The CEO is concerned that his Marketing VP may not be right for the job.
• Your New Employee Orientation program is so outdated; you’re embarrassed to deliver it.

…and the list goes on.

In addition, Ere Media states four reasons outsourcing HR  services HR is bad for business:

• The company may lose control over who’s doing what and the details.
• It is risky to be fully dependent on a third-party HR. You may suffer from the poor quality of work they deliver, sudden change of management, or worse, if it goes out of business.
• A conflict of interest between the vendor and the client might arise when developing integrated talent management plans.
• It could lead to knowledge deficit because the HR is not directly involved in the process.

However, as we stated above, there is an exception to the rule. You can safely outsource employee benefits processing; employee assistance program processes; HR information systems data-crunching and reporting; payroll; and compensation analysis and reporting, the Huffington Post states.

Never outsource your Sales

Sales generate income, so it is important to have an effective sales process.  In developing a sales process, consider how long you should respond to a lead and formulate ways to nurture that lead. Based on an infographic by Kissmetrics, 35-50% of sales go to the vendor that responds first and 79% of marketing leads never convert into sales because of lack of lead nurturing.

Of course, without a top caliber sales team, your sales process is worthless. In a blog article on Inside Sales, it says that in a typical organization, 13% of sales reps bring in 87% of the revenue. This result would be possible if your sales team possess these seven personality traits, according to Steve Martin of USC Marshall School of Business:

1. Has modesty and humility.
2. Has strong sense of duty and is responsible and reliable.
3. Is goal-oriented and continuously measures their performance.
4.  Has a strong curiosity to acquire knowledge and information.
5.  Lacks gregariousness.
6.   Lacks self-consciousness.
7.   Lacks discouragement and is not frequently overwhelmed by sadness.

When you outsource sales, the power to choose who’s going to be in your team is under the HR department of your chosen outsourcing company and not yours. Unfortunately, there is a possibility that you won’t be able to form your own dream team completely. 

      It is not only you who will be disappointed but your customers as well. Below are the 10 factors customers find in an ace sales rep:

Remember that when sales contribute to the overall company strategy, a 15% increase in revenue is seen, as stated by salesforce.com. Better keep your sales under your roof to have full control of the management of your sales team.

Wisely choose which services you want to outsource because as we have read, some business functions should stay in-house. While you identify which services to outsource, keep in mind your company’s corporate strategy, objectives, strengths, weaknesses and it should be aligned with your future plans. Outsourcing is not a panacea. Never stray away from the fact that it is only a part of your overall business strategy. In this way, you’re going to reap the benefits of a sound and well-thought-out outsourcing plan.