Scared to Outsource Your Business? 5 Outsourcing Risks and How to Manage Them

So you’re interested in outsourcing some of your business’s non-core functions, like customer service, admin tasks, or marketing.

You know it will save you money and time. Plus, you don’t have to pay for the equipment and desk space.

But there’s a part of you that’s hesitant to outsource…

You’re worried about losing control of operations and not being able to monitor your team.  

And let’s not even get started on potential data leaks! Who knows what could happen to your data—or your client’s data if you give someone else access to them. 

It’s true. Despite the cost-saving benefits, outsourcing business operations isn’t without risks.

However, like everything in life, these risks can be mitigated with awareness and proper planning.

This article will cover the different risks of outsourcing, and how you can prevent them from happening.

Hidden and Unexpected Costs

Outsourcing helps businesses save money and become more competitive. But unexpected costs can wipe out any savings or even cost you more.

Examples of hidden or unexpected costs:‍

• ‍Management costs: Fees for managing the contract, monitoring the performance of the outsourced staff, and resolving any issues that arise.‍
• Communication costs: Travel expenses, phone calls, and video conferencing‍
• Training costs: For training personnel on how to use your systems and processes.‍
• Integration costs: The cost of integrating the outsourcing vendor’s systems and processes with your own systems and processes.‍
• Quality control costs: Extra charges for testing and inspecting the project so it meets quality standards. This cost is often charged in IT and software development projects.‍
• Risk mitigation costs: Fees for insurance and other contingency plans.

Additionally, some outsourcing providers may offer low initial quotes to attract clients but later introduce hidden fees for specific services, upgrades, or maintenance.

How to Prevent this:

• Clear scope of work:  Identify all the tasks, functions, or processes that will be outsourced, and the level of service you expect.
• Get everything in writing: Your contract should include all important details of your agreement, such as the scope of work, price, and terms of payment. It should also include all the instances an unexpected charge could occur, and how it should be sent to you for approval first.

How we Avoid this at Easy-Outsource

There are no such things as unexpected costs when working with us. First off, there’s a small upfront payment for recruitment and other setup expenses and then our monthly pricing structure is composed of only two things – the staff salary and our fixed service fee.

Second, the people you hire will be on an hourly or fixed monthly salary. We don’t mark-up staff salaries.

Our monthly fees for outsourcing cover:

•  Employee management
• Payroll
• HR duties
• Remote outsourcing technologies

Except the monitoring software, you’ll be the one to provide the apps and software stack your outsourced staff will use for work. That won’t be covered in our contract.

Lack of Control and Productivity Issues

You’re not in the same office as your team, so you can’t 100% control their productivity, let alone the quality of their work.

Who knows, your outsourcing vendor may have other clients or priorities.

This lack of control can lead to increased costs because you’re paying for time that’s not spent productively. Worse, the subpar work can reflect badly on your business or client relationships.

How to Avoid Productivity and Work Quality Problems when Outsourcing?

Monitor the performance of your outsourced team to make sure they’re working on your projects during your agreed upon schedule.

• ‍Set clear metrics: These metrics should be specific, relevant, and deadline oriented. For example, instead of saying "I want you to provide good customer service for my dental clinic," you could set a specific metric of answering patient inquiries no later than 2hours after they come in, during business hours.
• Track progress: Track progress on an ongoing basis. This can be done through regular monthly reports and weekly check-in calls.
• Provide regular feedback: Give your outsourced team regular specific and constructive feedback on their performance. For example, instead of saying "I'm not happy with the quality of work," you could say "I noticed that there were 3unanswered inquiries in the last month. Please double-check your work more carefully in the future."

How we Handle this at Easy-Outsource

We use a real-time monitoring tool to track employee productivity. Our clients have full visibility of this data and can even receive screenshots of their employees' work. This tool measures productivity and keeps staff aware that all their activities during agreed work hours are logged.

Our account managers also check-in with clients and their outsourced staff on a regular basis to get feedback.

Communication Issues and Cultural Differences

Communication challenges are common in teams spread across different locations, but the location and time differences aren’t the root cause here.

Differences in national and organizational cultures, as well as language barriers, play a huge part in misunderstandings. It can make it difficult to communicate complex ideas. Plus, in some cultures employees are used to direct feedback while others are a bit more sensitive.

Outsourced talent might also hesitate to voice concerns or question unrealistic requests to please the client.

How to Avoid Miscommunication and Handle Cultural Differences

• Select vendors with excellent cross-cultural management skills. Ask them to check for understanding and ensure that everyone is aligned.
• Do video calls often, especially when discussing complex tasks, as non-verbal cues play a crucial role in communication.
• Agree on working patterns across time zones.

How We Handle Communications at Easy-Outsource

Even though we’ll outsource your tasks to the Philippines, our leadership team is based in North America, which means we hold the same values and work ethics as most of our clients.

Before we dive into any project, we sit down with our clients and work out a comprehensive communication and project agreement with our clients.

We figure out the best ways to talk, who's responsible for what, and how often we need to meet or show our progress. This way, our clients know exactly what to expect from us and when. It helps them plan their work without any confusion, making things easier for everyone involved.

Privacy and Security Concerns

Outsourcing involves divulging sensitive information to a third-party, including business SOPs, client data and employee details. It’s natural to worry about that data’s protection.

Outsourcing providers are aware of these risks and have created counter measures to protect your sensitive information, such as:

• Non-Disclosure agreements (NDA)
• Service Level agreements
• Privacy and security clauses
• Employee tracking software
• Non-Compete agreements

How We Prevent Data Leaks and Protect Your Security at Easy-Outsource

Every project agreement we have with our client comes with privacy and security clauses written to ensure everyone – the management and your outsourced staff –agree to treat your data in the strictest confidentiality. It will only be used for carrying out the work you hire us to do.

Optionally, your outsourced staff can sign NDA and non-compete agreements to ensure they can’t use your information outside of their work. We take data protection seriously, and as such termination and even penalties are imposed in the unlikely event of a breach.

While contracts are nice, we know it’s just a deterrent. So we also use employee tracking software that screenshots an employee’s activity. This way, you’ll always know what your team is doing even if you’re not there to physically supervise them.

You’ll provide the software your team will use. Yes, that means you’ll pay for it out of pocket but that also means our management team will have no access or control to it. Your outsourced team will do the work just like your office employees would.

Risks are Preventable

So don’t let it stop you from saving money and tripling your team’s productivity.

Even hiring local workers carry similar risks of data leaks and subpar productivity.You have to pay attention to your team, both when outsourcing and employing in-person staff.

Use the tips mentioned here to create a risk management strategy to avoid these situations. If you still have questions, get in touch so we can talk them over.

‍

‍