5 Reasons Not to Outsource Jobs

As your small business grows, you may find yourself playing more and more roles in its operation — marketer, sales rep, receptionist, bookkeeper, and even janitor. When you reach a point that you decide you need help, you will have to choose between hiring employees and contracting outside service providers.

The pros and cons of each choice will vary based on the type of company you own. But there are at least five reasons why you may not want to outsource certain tasks.

1. Quality Control

No matter whom you hire for a given position, you are still responsible for the quality of their work. It is often more difficult to control quality when a job isn’t being done in your office. In some cases, it’s even more time-consuming to check the work of a outside contractor than it is to have an employee handle the tasks in-house.

If sub-par output reaches clients or customers, it’s your reputation that suffers. For example, let’s say you hire a marketing firm to run a social media promotion for you and the company breaks the rules it set out in the contest’s details. Customers will blame you for the breach, and you may lose their business.

2. Confidentiality

If your business depends on closely guarded trade secrets or client confidentiality, any outsourced work must meet the same standards.

For example, if you’re a psychologist and hire an outside firm to bill your clients and manage files, you must ensure that its employees will not release their names or personal information under any circumstances. While a non-disclosure agreement can help give you more certainty that the information will be safe, you would need to understand how the other company’s employees are trained and monitored. There is also the potential for information stored electronically at an offsite location to be hacked, if the company does not have a solid IT security strategy. Some firms may not be used to meeting such a standard.

3. Flexibility

An important advantage that a small business has over a large company is its ability to make changes to its strategic plan or operating procedures quickly, in order to reflect shifts in market demand or sales environment. Outsourcing some of the company’s operations, such as manufacturing, to external providers can slow down these changes, as their staff will need to be retrained or new providers found. For example, if you’re a clothing manufacturer and outsource the garment production, the external company may not move as fast towards retooling and retraining its staff if you change designs. In-house changes are often faster because you control your own company’s priorities.

4. Branding

Your brand, like that of any business, needs to stand out in order to succeed. When potential customers think about your company and brand, they should immediately be able to identify what your business is all about.

Your brand message develops over time through consistent customer contact and experiences. Outsourcing tasks, especially those involving customer interactions, such as call centers or social media, can muddy your message. For example, many large and small companies, including Dell, have had to bring their call centers back in-house after customer satisfaction declined. Call center operators overseas were unable to provide the level of technical help needed and left customers frustrated.

5. Liability

Not only can outsourcing affect your operations and reputation, it can impact you legally. If an outside provider makes errors or produces work that harms your customers financially or physically, you may be held legally liable.

For example, if you outsource your bookkeeping and financial statement preparation, the IRS can charge you penalties and interest on top of any further taxes you owe due to errors. Or, if you hire a manufacturer to build parts of your product and that product injures a customer, you may be legally responsible for the accident. Keeping key parts of your business in-house helps you be able to watch over these processes more easily.

Although outsourcing some of your business processes may make sense from a financial perspective, consider the potential impact on your business growth. Compare the benefits and risks of hiring staff with contracting an outside company before you make a final decision.

About Angie Mohr

Angie Mohr is a Chartered Accountant, Certified Management Accountant, and financial consultant. She has worked with thousands of clients over the years from mom and pop startups to rock bands and celebrity chefs. She is the author of the best-selling Numbers 101 for Small Business series of books and writes for Forbes, MSNBC, the Globe & Mail, Yahoo! Finance, Investopedia, and Motley Fool, among other financial publications. Her new book, Piggy Banks to Paychecks, helps parents teach their children how to be money smart. She splits her time between Canada and the United States and currently lives by the ocean with her husband and two children, who have finally learned that money doesn’t grow on trees. For more, go to www.piggybanks2paychecks.com.
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2 comments
nmk2014
nmk2014

As a small business owner, who recently has had very frustrating conversations with Inuit Payroll support, I find this post on outsourcing incredibly ironic.  

Intuit Payroll has outsourced all of its payroll support services to a call center in the Phillipines.  These agents read from a script, have no in-depth experience or understanding of the US tax system and forms.  If I am paying a company to handle my US taxes, you would expect that this company would have US staff on hand for support services.  It is very disapppointing.  

I will be making a change, but Intuit should seriously practice what they are preaching via their blog!


smithfred412
smithfred412

Outsourcing your business operations can is a great idea. I will have to disagree with what Angie has to say. Employees of a third party company are equally efficient and and they can manage business operations like outsourced payroll service, technical support and other customer support operations to companies like www.ayers.com.au/solutions/corporation/outsourced-payroll etc.