How to Decide When to Outsource Specific Job Roles
Running a digital agency isn’t easy. Although web design is lucrative, competition abounds, and profit margins are sometimes razor-thin. That’s why the difference between a successful digital agency and an unsuccessful one often has nothing to do with talent. Rather, it’s all about efficiency. It’s a great race to see which agency can run the leanest without compromising on the quality of its work. Without a doubt, one of the most effective tools digital agencies have at their disposal to improve efficiency and contain costs is outsourcing. Some jobs and roles don’t justify hiring full-time staff. Sometimes, that’s because of the overhead involved. Other times, it’s because the job roles themselves fall outside of the agency’s core competencies. Regardless of the reason, knowing which roles to outsource can mean the difference between an agency firing on all cylinders and one that merely limps along.
The good news is that there’s a fairly simple process that a digital agency—or any other business—can follow to make smart outsourcing decisions. This article will explain that process in plain language. By its conclusion, you’ll have the tools and knowledge to decide which job roles to outsource and which to keep in-house. Let’s get started.
Assign a Score to Each Job Role
The first step in the outsourcing decision-making process is to create a list of every job role within the company. Then, you should assign a score to each listed role. Essentially, you should give each job role a single point based on the answers in the affirmative to the following questions:
- Is the job role unrelated to the day-to-day functioning of the business?
- Is the job role outside of the business’ core competencies?
- Does the job role require specific expertise?
- Is the job role’s function time-consuming?
- Could the job be done without extensive knowledge of the business?
Essentially, the higher the score assigned to the job role, the higher the likelihood it would be a good target for outsourcing. With the scores in hand, it should be possible to eliminate many—if not most—of the current job roles within the business. The eliminated roles are either too central to the business’s operations or involve work best performed in close collaboration with the rest of the business’s workforce.
Calculate the Overhead of High-scoring Job Roles
Since one of the major advantages of outsourcing is that it helps contain costs, the next step is to calculate the overhead associated with each high-scoring job role identified in the first step. That will provide a solid comparison base to the quotes from an outsourcing firm or a freelancer. To determine the overhead connected to an individual job role, it’s necessary to consider a few things.
First, it’s necessary to calculate the company’s total monthly overhead. This includes office costs, supplies, technology, and anything else the business provides each employee. Then, divide the total of those costs by the total number of people employed by the company. That will provide a reasonable estimate of the company’s raw per-employee overhead.
The next step is to calculate the direct overhead associated with the employee currently serving in each job role. This includes salaries, benefits, payroll taxes, and other associated costs. Then, add the result to the per-employee overhead figure, and you’ll end up with the total monthly cost of each job role. For better comparisons later on, you can divide those results by the total number of hours each employee worked (or how many hours they spent performing a given role). That will tell you how much each job role costs per hour.
Calculate the Costs of Employee Dismissal
The next thing to consider is how much it will cost to shed employees if the eventual outsourcing arrangement calls for it. Although these are typically one-time costs, the business needs to understand them before moving forward with an outsourcing plan. Where applicable, the primary things to consider are severance packages and extended benefits.
An employee offboarding checklist template can be a good starting point here. For example, how much will reclaiming company property and disabling access to IT infrastructure and company data cost? Those costs might vary considerably depending on the employee type and the service length. It’s also a good idea to keep a departing employee on the payroll, whenever possible, during the transition to an outsourcing arrangement. Since that might temporarily increase costs, the business must be ready to shoulder the added burden.
Determine an Acceptable Margin of Error
If an outsourcing arrangement were a true apples-to-apples comparison with having your employees perform a given job role, the previous step’s results would always decide which job roles to outsource. However, outsourced jobs aren’t equivalent to those done by in-house workers. There’s always going to be a certain margin of error involved due to the logistical and physical distance between the business and the workers now handling each job role. So, it’s important to account for that.
The idea is to figure out, for each job role you’re considering outsourcing, how many errors or delays in the performance of that work the business can tolerate. For example, if the business turns a job function over to an outsourcing firm or freelancer and makes a mistake—how long can the business afford to wait for a correction before it costs more money and reputational damage than the job’s worth?
The thing is, there’s no right or wrong answer to the question. It’s something that each business has to decide on its own, based on its relationships with customers and the quality standards it chooses to uphold. At this stage, it’s possible that some job roles—no matter how much the business might save through outsourcing—won’t be worth the potential risk involved.
Solicit Outsourcing Quotes
The next and final step in the outsourcing decision-making process is to solicit quotes for the needed work. That should begin with some due diligence regarding the potential outsourcing partners. It’s essential to find candidates with solid track records for success and verifiable experience doing the work the business requires. Then, you can prepare a quote request for candidates who pass muster. This is where all the information gathered in the previous steps comes in handy. You can use it to communicate several things to potential outsourcing partners, including:
- The specific nature and scope of the work required
- The acceptable margin for error
- The maximum the business would consider spending for the work
- When the outsourcing arrangement needs to commence
At this point, the decision comes down to which outsourcing partners will agree to meet the company’s requirements at the lowest price point. For those that do, moving forward with the appropriate arrangement should follow.
The Bottom Line – When to Outsource
By following the procedure above, a digital agency or any other type of business should be able to make smart outsourcing decisions. When followed, the procedure should minimize risk and improve the odds that the resulting outsourcing arrangements meet the business’s needs while lowering costs. Of course, it’s also possible that outsourcing won’t make sense for many of the digital agencies out there. There’s certainly nothing wrong with that. However, it’s always worth keeping outsourcing available as an option, as business and operating conditions can and do often change.
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