Why outsourcing is a top winning business strategy
What you need to know:
- If we are to agree that outsourcing makes business sense, especially when it comes to cost cutting and dealing with less employee relations headaches, why then do so many shun it?
- This was the case when Magezi took on a CEO job of one failing organisation that was deep in debt.
“Why don’t we outsource office messengers?” Mpewo asked his boss, Banji, who was often complaining of high overhead costs arising from a huge payroll.
Banji often wondered if the bank needed all the staff. In fact, he was always pointing out how idle most of them were during the day. Banji would never think of doing away with these idle staff, even as the bank struggled to meet its payroll.
Mpewo who had just enrolled in an Executive MBA programme happened to have a different opinion though. In one strategic management class, a professor had said: “A 21st century organisation should only have those on payroll who are doing its core business. The rest of staff should be outsourced. ”
Enlightened with this revelation Mpewo was now on a mission to convert his boss. “We can outsource everything,” he argued. “Drivers and cars should be outsourced. So goes with housekeeping from a cleaning company! This will allow us focus on our core business of serving customers.”
Although outsourcing has been around for some time many organisations have not embraced it preferring to run business the old way. For example a school should outsource almost everything: Catering, security, printing, accounts; and remain with the core duty of teaching.
Most schools are run the old conventional way. The kitchen staff belongs to the school, and all other functions. Boarding sections must belong to the school and matrons. But which school was ever remembered for having good matrons? If anything, schools always lose reputation because of bad matrons. Schools are remembered for teaching well and making good grades.
If we are to agree that outsourcing makes business sense, especially when it comes to cost cutting and dealing with less employee relations headaches, why then do so many shun it? Could it be out of lack of knowledge? Or the old belief that a great organisation must control as many people as possible.
Don’t we after all, still equate numbers with a growing organisation? Although what makes a hospital known is treating patients, the old school believes that aside from doctors and nurses, a large hospital, should manage workers who do cleaning, cooking, washing and even providing funeral homes. This is inevitably very complex and expensive to run.
The good news is that organisations in the 21st century are becoming leaner, and today, many managers are concentrating on core stuff and outsourcing all the rest.
This was the case when Magezi took on a CEO job of one failing organisation that was deep in debt. He outsourced most services and now had more time to deal with the core business of the organisation and spend more time on strategic issues. Although the organisation had certainly far less people to manage it is now far more productive and profitable than was the case before.
Martin M. Lwanga is a dean Faculty of Business and Adminstration, UCU, Mukono. E-mail: [email protected]