Do what you do best and outsource the rest?

�You�ve probably learned your own lessons, but with the benefit of hindsight, here are some myths about the �magic� of outsourcing.�
Issue date: 07 March 2008

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“There’s lots of fashion in farming,” I said and there were guffaws all `round the dinner table. could see our city slicker friends visualising khaki shirts and shorts, the favoured style of many of our fraternity. “I’m not talking about clothes…” said, but the conversation was back to the someone, somewhere’s latest crime experience.

I’m always amazed how managers, myself included, become mesmerised by new techniques or processes – new fashions – which so often come to nothing. got into sugarcane farming when mechanical harvesting was a hot topic. There were going to be huge cost reductions and problems with cane cutters would be a thing of the past. Visit the industry today and see how many you can find. We got caught up in the “fashion” and forgot the fundamentals. Yields went to hell because harvesters were compaction machines. Heavy soils reduced 1cm-thick cutter blades to razor-thin shards of metal. Downtime went up, pushing costs in the same direction, and within a few years we were back to hand cutting. n the 1990s we got fired up about “outsourcing”. While this also generated a lot of hot air, must concede the concept changing our thinking. For the first time we realised that it wasn’t necessary to do everything ourselves. Management guru Tom Peters’ words “do what you do best and outsource the rest” galvanised us.

You’ve probably learned your own lessons, but with the benefit of hindsight, here are some well-worn myths about the “magic” of outsourcing:

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M yth # 1: It’s not our headache any more.

Our first outsourced job on the farm was refuse removal. It was so simple. One of our tractor drivers was set up with a tractor/trailer combination and a few workers, and off he went, until the first major breakdown. Cash resources meant to have been saved for such an event weren’t there, and within months we were back doing our own refuse removal.

Myth # 2: We can have it all.

If you think outsourcing will be both more efficient and less costly, you’re living in dream land. Remember, you were doing the job at cost. Contractors have to make a profit, and unless they’re hugely more efficient, there’ll never be enough margin for both their profit and your expected cost reduction.

Myth # 3: Outsourcing is like buying stationery.

It takes specialist skills to identify, select and brief a contractor and finalise a contract. That’s one job you can’t outsource and you’d better do it well.

Myth # 4: We need an ironclad contract.

Outsourcing isn’t a one-time transaction, but an exchange that evolves over time. While the contract needs to be quite clear about each party’s roles, a contract that places all the risk on the contractor and is heavily punitive in the event of failure, is itself a recipe for failure.

Myth # 5: Contractors are our insurers.

While it’s reasonable to expect a contractor to take more risk than an inhouse employee, remember it comes at a price. It simply isn’t possible to outsource risk entirely. While managing contracts is usually much more efficient than managing employees, outsourcing is no panacea when it comes to getting top performance. Do it, but take care. – E-mail [email protected] or call (013) 745 7303.