As you evaluate your choice to outsource various components of your operations, you will need to consider the advantages of outsourcing. Outsourcing actually helps your company to grow and save money. There are other advantages of outsourcing that go beyond money though.
Here are the top seven advantages of outsourcing.
1. Focus on Core Activities – In periods of rapid growth, the back-office operations of a company expand. This expansion starts to consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing those activities will allow everyone to focus on those business activities which are important, without sacrificing the quality or the service of the back-office staff.
Example: A company lands a large contract that will significantly increase the volume of claims in a very short period of time; Outsource the management of these claims to ensure the large contract client is satisfied with the customer satisfaction they are receiving.
2. Cost and Efficiency Savings – Some back-office functions are complicated in nature, and sometimes the size of your company prevents you from performing those duties at a consistent and reasonable cost. Outsourcing allows you to utilizes third parties that are more focused on those complicated tasks.
Example: A small office that wants to accept a variety of insurance plans. A single part-time person cannot keep up with all the different rules and providers. Outsource to a firm specializing in various insurance niches.
3. Reduced Overhead – Overhead costs of performing a particular job function may be extremely high. Contemplate outsourcing those functions which can be easily moved.
Example: Internal growth is the primary reason for an increased need for more office space. The present location may already be very costly and there is no space in the budget to expand. Outsourcing some of the simple operations will reduce the need for office expansion. For example, outbound telemarketing or data entry.
4. Operational Control – Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company what would otherwise be unavailable.
Example: A department that has too many projects, with insufficient people and a budget exceeding their contribution to the organization. An outsourcing agreement will force the management to prioritize their requests and bring that area back to control.
5. Staffing Flexibility – Outsourcing will allow operations that have recurring demands to get additional resources when you need them and release them when you’re done.
Example: Claims often come in more frequently during months with reoccurring bad weather. Outsourcing some of the claim’s functions can provide the additional resources for a fixed period of time at a consistent cost.
6. Continuity & Risk Management – Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company.
Example: The account manager is on an extended medical leave and the two administrative assistants leave for new jobs in a very short period of time. Outsourcing the human resource function would reduce the risk and allow the company to keep operating.
7. Develop Internal Staff – A large project that is undertaken may require expertise that your staff does not have. On-site outsourcing of the project will bring people with skills that your company requires. Your people can work alongside them to acquire the new skill set.
Example: A company does not know all the legal implications in regards to new claim litigation. Outsourcing to a reputable claims manager, they will know the ins and outs of an organization’s various claims as the third party firm dedicates it’s time to continually brushing up on claim management best practices.
Have a topic you would like us to cover? Enter it here:
Girija Shaffer , CEO & Founder of Auspice Risk, has developed a full suite of customized risk management services offered nationally to Risk Managers, Insurance Program Managers, Brokers & Agents. Recognized for her ability to increase customer retention rates, increasing business development opportunities and providing outstanding customer service.