Say Know' to Small Business Outsourcing

By Mark Cioni

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I was compelled to focus this month’s column on outsourcing opportunities for small businesses given the myriad needs and options facing these organizations.

Too often, I see otherwise savvy entrepreneurs make flawed choices on outsourcing their processes and infrastructure. It reminds me of a recent statistic on nail-gun injuries: While the total number of these injuries has remained stable, the ratio of do-it-yourselfers to construction professionals suffering serious injuries has skyrocketed.

Access to powerful tools can be a potential boon to small business, but I advise small business clients considering outsourcing to “nail down” what they should know first.

Know Your Destination – As a consultant, I have fundamental questions I always ask my clients: What are you trying to accomplish and why? How will you determine success? How important are these outcomes?

The answers should focus on results rather than inputs and should be the equivalent of “true North” on the compass. For smaller businesses, getting at these desired outcomes can be an interesting dynamic as they can be difficult to identify and even trickier to quantify.

A common situation is a small business that has grown via merger or acquisition to increase their competitive advantage. Whereas larger M&A scenarios commonly involve consolidation, many small business mergers find the new company lacking established processes and infrastructure.

One of my clients, facing this situation, was focused on acquiring technology infrastructure to run their expanded business because they were spending too much time “running things” and not enough time with customers, expanding their marketing, and with their family.

However, after considering the fundamental questions above, the better approach was to outsource common processes such accounting and logistics to a local provider, and to use technology and applications delivered and supported as a service, and customized for their unique business model.

A very straightforward and logical choice, but one that probably would not have been made had the client not focused on the results they wanted to achieve.

Know What You Need – Assuming you’re focused on the “what and why” first, then at some point you must define the “how” of achieving those results. With the wide array of options for outsourcing processes, and even more dizzying range of choices for outsourcing infrastructure, it’s often a challenge to separate wants from needs. Wants favor the sizzle over the steak, but needs are the enablers for valuable results.

Here’s a simple example I encountered recently: A small business client thought they wanted an online calendar to manage their people and logistical commitments. As you might expect, there was literally over 50 choices with varying levels of functionality and nifty Web 2.0 interfaces—and these were just the free ones.

When we really examined how to enable the results we wanted, the approach we chose was an online event management application costing $50/month. The functional capabilities of scheduling, sophisticated notifications and response management has saved the business over $1000/month in burdened employee costs, and freed their time for other activities that drive revenue. It’s not free, but it is a very good return on investment.Know What It Will Take – A common expression of relief I hear with smaller businesses usually rears its cute little head right about now. “Wow, all we need now is some quick training for the staff and we’re off and running ... this is gonna be great!”

Yep, best thing since the UNDO command, but let’s try not to undo all our good work up to this point. We might assume that change leadership only applies to larger organizations, but we’d be wrong. In many cases, the impact of change is felt even more keenly in smaller organizations and people often have much more multi-functional roles, less time and fewer resources.

This only underscores the need for identifying exemplars to champion the change and structuring training effectively. Don’t forget other essential elements inherent in effective change efforts such as orchestrating functional and technical support, administration for business processes and infrastructure, and the ability to instrument the infrastructure.

Know That You’re Making Progress – The beauty of outsourcing in smaller business environments is that we can usually understand fairly quickly whether we’re moving in the right direction. Obviously that means that we can measure progress toward the results we’ve identified as important.

If our key indicators of progress are positive, that’s great. We should be looking at how to optimize our progress. If we’re not headed in the right direction, do we have enough information to understand why? Do we know, for example, whether we have a broken business process, or the wrong infrastructure, or even a training issue?

The key is to ensure that we understand how to measure success, many times in both quantifiable and subjective terms, for the organization. This can be a bit of a paradigm shift for smaller businesses who might not be accustomed to the equivalent of Performance Management, but it’s a critical success factor.

Yes, in many ways outsourcing can be incredibly valuable to the smaller business. Using the same core decision process and principles as larger organizations gives entrepreneurs a much better chance of getting it right for their small business, and shows why a small business should always say “know” before saying “yes” to outsourcing.

Mark Cioni is president of MV Cioni Associates. He has been helping global businesses to improve their decisions, operations and performance for over 25 years and can be reached at mark@mvcioni.com.