3 Big Outsourcing Mistakes That Drive Entrepreneurs Crazy

How often do you hear advice like “outsource as much as you can?” You probably hear it a lot. Outsourcing can be a great tool. It will allow you to tap into specific types of expertise that you simply don’t have (nor want to gain). But while working in the outsourcing industry, I’ve also seen it misused. Outsourcing is not the catch-all solution many seem to think.

Outsourcing has a clear, distinct place in building your business. Used strategically, it can be a valuable tool. But used irresponsibly, you could end up losing control over key parts of your company.

Those looking to outsource — especially startups and fast-growth businesses — need to think carefully about the benefits they are truly pursuing, then determine how to get those benefits while retaining as much control and quality as possible.

Here’s a look at three primary outsourcing mistakes entrepreneurs often make:

1. Outsourcing Too Much

   I had an interesting conversation with well-known UK-based business guru, author and speaker Geoff Burch. He told me a story of two British bicycle makers who manufactured their products in China. One completely outsourced manufacturing and end-to-end management to another company. The other company managed, supervised and controlled the entire process themselves.

   Both built their bikes in China, but the completely outsourced bike — the one where British management washed their hands off the process — ended up with a poor-quality product. The other bike company — where processes were managed, quality controls were in place and the company truly owned the work — created higher quality bikes; better than what could have been made back home.

   The company that completely outsourced their bike’s manufacturing concluded that the quality was poor because they had it made in China. But what about the other company? They ended up with a high-quality, competitively made product.

2. You Might Be the Problem

   It’s much easier to blame an entire foreign country for poor quality than consider that perhaps the way you did things was wrong. That’s an example from off-shored manufacturing.

   Now, take another example from off-shored services: India and its ubiquitous call centers. How often have you heard arguments that attribute bad service to the fact that they were outsourcing to India? Often, bad service is a result of bad processes and bad policies.

   Blaming a nation for poor service is way too simplistic an explanation for a poor result. Businesses are after cost savings, talent or capabilities. But just like with anything worth having, you should examine in detail the model that you’re after.

3. It’s How, Not Where, You Leverage Talent

   The world is changing. There are skilled and talented people all around the globe; the best talent is not only found in developed markets. But bringing talent into your company from a different country is not as easy as bringing on locals. You need to consider cultural differences, geographic differences and different working norms.

   We’ve found that the most effective leverage global talent by being very involved in the hiring and management of that talent. These companies have discovered that outsourcing management to third parties doesn’t solve fundamental problems. This is true especially in areas where they don’t require outside expertise; areas where they should be managing functions and people themselves.

   Burch told me of managers who outsource simply to get a problem off their hands. But as in the bike story above, there are different ways to do things internationally, and not all include completely outsourcing to another business.

Remember: as a business owner, you can’t afford to simply outsource your problems.

Patrick Linton is the co-founder of Bolton Remote, where he helps fast growing businesses reliably tap into large, dynamic and cost-competitive international talent markets. He is also a member of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. A version of this post originally appeared on the author’s blog.

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