Glossary: HR & Recruiting Definitions
Outsourcing is the business practice of hiring third parties to conduct a service, process, or create goods typically performed by the business beforehand. This decision affects various jobs and workers, from customer support to manufacturing to the back office.
Outsourcing is an excellent opportunity to concentrate on your goals and trust essential tasks and processes to professionals without hiring a full-time or temporary worker. Some specialised business functions and duties are especially well suited to outsourcing. Here are some of the most popular outsourcing categories:
There are a lot of benefits to outsourcing in your business. Below we have listed the top 5 benefits so you can decide if outsourcing is right for you and your business.
Outsourcing's most significant advantage is cost savings. It is a great way to cut operating, labour, and onboarding costs. For example, a company can cut labour costs by hiring freelancers since they don't get benefits or need office space. Furthermore, freelancers might be slightly cheaper; according to Huffspot, new employers have additional costs beyond their salary (e.g., recruiting cost, training cost, vacations and benefits, etc.), while freelancers have an exact hourly rate.
Outsourcing allows businesses to expand temporarily when demand is high while allowing their employees to focus on the crucial goals and aspects that made the company successful in the first place. This is essential for small businesses and startups, which often operate on a smaller scale.
Some operations might have high overhead costs, but your business might want to offer them to satisfy the customers or compete in the marketplace. If this is the case, outsourcing would be a great option to decrease those operation costs without creating inefficiencies in your business model.
Your business might have departments or teams that have evolved into uncontrolled and poorly managed areas. If that is the case, an outsourcing company is an ideal solution. They often bring better management skills to your business than what would otherwise be available without significant restructuring.
You might only have access to a small, local candidate pool when candidate sourcing. This often means you have to compromise. Many companies have found that outsourcing gives them access to a broader talent pool. If you need a specific job position, it makes sense to expand your search.
Outsourcing might seem like the perfect solution for your business now, but it is crucial to compare the pros and cons of outsourcing before making a decision. We have selected the top 5 biggest issues your business might encounter when outsourcing so you can decide whether outsourcing is for you.
Adding an outsider service provider to your business operations can create new communication and logistic issues. This might happen, especially if your business and the outsourcing company have different company cultures, business practices, or project management styles. It is essential to oversee these problems in the early stages since they can be harder to fix as time goes on. This is especially relevant when working across time zones.
Giving access to company information to third parties may create security vulnerabilities. It will be essential for your business to keep track of which contractors have access to which systems, which will be very time-consuming.
Hiring an outside company might lead to uncertainty and instability, whether the level of control and quality might not be reached by the company providing the service or the possibility of them going out of business. It can be an expense since it would cost your business time, money, and possibly consumers.
Although outsourcing has a lot of benefits, it can negatively impact the company culture. Outsourcing can potentially upset employees since they may feel they are being replaced, confuse employees as to why the business is outsourcing particular tasks, and add challenges to your company's daily workflow. Protecting your company culture before taking a step into outsourcing is essential, which means discussing your decisions with employees who might get affected.
Do you think outsourcing tasks might be a good solution for your business? Then check out our article on how to find (and hire) good freelancers.
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