You should regularly review your outsourcing arrangements, advises Bob Young, managing director of Capital Home Loans
Control is so vitally important for any business owner – it often occurs to me that it is when owners and managers feel they have lost control within a business that inevitably problems will appear. When damaging events hit businesses you will often hear the phrase, ‘the right hand didn’t know what the left was doing’, and the fundamental point here is that a loss of control almost inevitably leads to some form of undesirable action or costly mistake.
Having a real grip and control over a business is not the same as attempting to micro-manage everyone and everything – this is impossible and again will often lead to foul-ups. The point is to delegate effectively however still be aware of what is going on in each department and be fully on top of the direction that group of people are heading in and the results they need to achieve.
It is for these reasons that I’m a great believer in having as many aspects of a business ‘within house’. Look back over many business scandals or disasters and you will often see that fundamental errors occurred because of an outsourced process – those offending were outside the loop effectively the owner lost control of those he or she was outsourcing to.
Of course, it makes perfect business sense to outsource in areas where the owner does not have the necessary expertise or where it is probably not cost-effective to have someone dedicated to the task on a permanent, full-time basis plus we have some excellent ‘outsource’ businesses in the mortgage industry. This is why smaller companies often outsource their IT requirements, for example, however where the choice is available I would always suggest bringing that resource and expertise in-house so they are available at all times.
This has certainly been the case with CHL where almost all of our departments and functions are in-house. For example, in terms of our collections department, there is always the option to outsource this, however would we have the same buy-in to what we want to achieve, would we achieve the same results and focus, would we be able to monitor our process and team as effectively as we would wish to? The answer to all three for us is probably no, and therefore it makes no sense for us to look outside our own operation – plus if you know you have an effective process for such work then it works to recruit people who would best be able to carry out this process giving their complete focus to it.
I fully appreciate why owners do outsource in certain areas for example designing and building a processing system can be an extremely costly business and it may not seem worth it when you can take one off the shelf which can do the job and is ready to go immediately. However, in other areas the firm has to consider their own position and how they will be viewed by the outsourced business. It is highly unlikely – unless the contract is significant – that they will be the only business being looked after and some owners worry about where they feature in a perceived pecking order? Where do they figure in the food chain as it were and are they as much as a priority as they should be?
The fact is that an in-house department only has one priority and that is the business they work for. There are no other outside agents who may require everyone to work on their account at the drop of a hat, to the huge disadvantage of all others. Plus, for an owner or manager that resource can be accessed at all times, they can be monitored at any given time and ultimately their priorities should never waver from what has been set.
In-house arrangements also allow you to bring in good, quality people I’ve lost count of the number of times at CHL we brought in someone for one specific role only to see them reveal talents in other areas and, with our support, develop and blossom to fulfil roles that we would not have expected them to when they first started. Having employees who are multi-disciplined and multi-skilled means that you have people working for you who can provide value in any number of different areas. An outsourced arrangement in most cases just doesn’t give you the ability or the flexibility to achieve this.
In that sense it is always useful to look at your current outsourced arrangements – could they be brought within the business and, at the same time, might you be able to employ people who can offer much more than you are currently accessing from your outsourcer? It is always worth reviewing such policies and it is one way of maintaining ongoing control.
