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Business Brainstorm

Warning – Do Not Believe Everything You Read About Outsourcing
Most articles about outsourcing will outline the fundamentals reasons why businesses (not just professional services) are turning to outsourcing.

smartAR Australasian based Outsourced Ledger Management solutions can save your business time, money and hassle.

They’ll say outsourcing is

  1. more cost effective.
  2. more time efficient.
  3. a way to access expert resources.
  4. a way to access scarce resources.
  5. scaling up or scaling back is easy.

These are true, and a psychologist might refer to them as task motivations.

However, these are not the real reasons why firms decide to outsource.

It’s always people (not firms) who ultimately make a ‘let’s outsource it’ business decision.  People are often driven by personal motives rather than objective, practical & task motives.  For instance, if I buy a new BMW 7 series for my short commute to work, I’m expressing my personal motives (ego) but will possibly justify the decision with suggestions of: needing to look the part; appear discerning; being stable & reliable etc.

So, what are personal motivations driving outsourcing commitments? Looking at something we know a lot about (outsourcing an accounts receivable role) the personal motives we see are generally:

Businessman working

A 'Power' Motivation - Improve or Else!

Accounts receivable has often been an internal challenge for years.  Over time various people have probably been delegated the role (to speed debtor collections) and most will have failed to make any long-term impact. Business owners are frustrated by lack of outcomes but constrained by HR rules preventing floggings and hangings. So, the owner decides: ‘let’s outsource it.’  This decision immediately gives the owner power to hold the third party to account in a much more robust manner than a delegated employee.

Shaking hands on a business deal

A 'Recognition' Motivation - Look at us: Top Quartile Again

Who enjoys seeing their firm at the top of an industry leader board? Best Revenue Growth or Best Income per Director. These same owners adopt outsourcing in pursuit of kudos resulting from either measurable results improvement (e.g. Debtor Days under 20) or because they perceived as leaders implementing new & more efficient business improvement strategies.

Fist Bump colleague collaboration

A 'Follower' Motivation - Yes, we do outsourcing too!

Some of our clients commit primarily because other firms (that they know and admire) are already outsourcing to us.  These ‘followers’ certainly don’t lack core leadership or drive – indeed they are often larger firms.  They do take time to develop the ‘consensus’ to make decisions. The good news – with accounts receivable outsourcing the benefits don’t accrue only to the early adopters.  While there is an opportunity cost to being ‘late to the party’ there is still plenty to eat, drink and the band continues to play!

Business performance chart visualisation

A 'Respect' Motivation - We did the research and this makes sense!

An advantage of working with professional service businesses is that they are full of smart, conscientious and analytical people. These owners bother to test assertions, check references and calculate benefits. Accountants are respected as ‘the most trusted advisors’ because of these very attributes.  These ‘experts’ are in fact quickly gravitating towards an outsourcing solution for accounts receivable because they know the measurable outcomes (cost, time, expertise etc) are tangible and proven.

Phew, this is beginning read like a Psychology 101 lecture. Rest assured though, it is natural to reflect your personal motives as you consider outsourcing options.  That said, also consider the fundamentals.  If an outsourced solution promises to save your business money, time & hassles – it’s probably worth a closer look.