Every article you read about outsourcing will reinforce the fundamental reasons why more and more businesses are turning to outsourcing:
They go something like this:
- It’s more cost effective
- It’s more time efficient
- It’s a way to access expert or scarce resources
- It’s a more flexible solution: scaling up or scaling back is easy
These are all truisms and what a psychologist might call “task motivations”.
However, these are not the real reasons we find firms decide to outsource.
Remember, it’s ultimately people (not firms) that make the “Let’s outsource it” business decision.
As we know people are more 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 likely to be giving expression to my personal motives (ego) but will possibly justify the decision with suggestions of: needing to look the part; appearing discerning; desiring stable & reliable German engineering etc.
So what are personal motivations that drive outsourcing commitments?
Looking at something we know a lot about (outsourcing accounts receivable) the “personal motives” we most often see are:
1) "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 at outcomes but constrained by internal HR rules preventing floggings and hangings.
So the owner or manager might decide: “Let’s outsource it.” This decision immediately gives the owner the power to hold the third party to account in a much more robust manner than a delegated employee.
2) "Recognition" Motivation - Look at us: Top Quartile Again!
Who enjoys seeing their business at the top of an industry leader board or benchmark report? For example: Best Revenue Growth, Highest Profit per Partner, Best Customer Service etc.
These Owners/Directors/Partners often look adopt outsourcing in pursuit of the kudos that comes from either the measurable improvement in results (eg Debtor Days under 20) or because they are seen as leaders implementing new & more efficient business improvement strategies.
3) "Respect" Motivation - We did the research and this makes sense!
An advantage of working with a large number of professional service businesses is that they are full of smart, conscientious and analytical people. These owners actually bother to test the assertions, check the references and calculate benefits offered with outsourcing.
What we know is that in many industries the experts are gravitating towards an outsourced solution for accounts receivable. Why – because they know the promised outcomes (lower cost, quicker collections, expertise and scalability) are tangible and proven.
4) "Follower" Motivation - Yes, we outsource too!
We also have clients that committed to outsourcing 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 the larger businesses which take time to develop the ‘consensus’ required to make decisions.
The good news is that with accounts receivable outsourcing the benefits don’t accrue only to the early adopters. So while there is a small opportunity cost to being “late to the party” there is still plenty to eat, drink and the band will continue to play!
Phew, this is beginning read like a Psychology 101 lecture.
Rest assured, it is natural for anyone to reflect one or more of these personal motivations as they consider outsourcing options. Indeed, why wouldn’t you want to be in control, an industry leader, well researched and who wants to be left behind?
Finally, notwithstanding the psychology it is important to consider the fundamentals. If an outsourced solution promises to save your business money, time & hassles – it’s probably worth a closer look.