Issue #68 -- January 20, 2003
In today's lesson, you will learn how to trim the fat by outsourcing useful but non-competency specific tasks to reduce your costs. In "Ways to Reduce Costs by Outsourcing Non-Competency Areas," you will see partnerships in action. Utilizing strong partners that free your most essential people's time is good business and a great way to use business relationships to your advantage.
It is important to take last weeks lesson to heart, because if you start replacing them with lower cost partners, or even add new staff during a salary freeze, you better have a good reason. Take the core of last weeks message to build employee morale before you start reducing costs, it will leave your company better for the change.
I am interested in learning more about your challenges in business relationships. Take a moment to write me to share your opinion on this topic, and help me tailor lessons around your own needs. What is your biggest business relationship problem right now? Write feedback-strategic-relations -- your advice is also welcome.
Stay tuned to learn about more strategies for key account management in recessionary times. Discover how to keep key customers when the fears of bad news cloud their judgment. This lesson is one you cannot afford to miss. Until then, I am wishing you all the best.
Consultant, Author & Speaker
By Justin Hitt, Strategic Relations Consultant, https://iunctura.com/
What can you do with those routine areas of your business that do not contribute to your competitive advantage? Often the overhead burdens of a company are the only things keeping them from profitability. Outsourcing can be a way to enhance your core competencies and create more time to spend with customers.
Some say you should out source everything that is not 100% essential to your core business. In actuality, it is not necessary that you out source everything as much as what you do out source those things that do not contribute to income. There are many reasons to out source all nonessentials, including:
Other reasons to out source are more industry specific, but these reasons serve as a good foundation to understanding. Let someone else take care of those things not specifically benefiting your competitive advantage. The key is to spend more time with customers doing what you do best.
When deciding what to out source look at parts of your business which are generic and common to all other businesses regardless of industry. Look first at overhead activities that do not interface directly with customers, and require little industry specific knowledge. The best areas for outsourcing are those that increase the productivity of those who generate income for the company.
You will find some areas more easily outsourced than others are.commonly outsourced non-core functions are:
These areas are commonly outsourced because they require very little specialized knowledge about your business. They represent lower wage jobs that can free up the time of higher waged employees. Proficiency in these areas also reduces the amount of time necessary to do these tasks, which speeds up your implementation.
A skilled secretary can free up 10 hours a week per executive supported (up to 4) in "paperwork time" with little or no extra effort on the executives part. Do you think at least half those hours could be put back into other tasks that no one but the executive can perform? In most businesses, the answer is resounding "yes."
While virtually anything can be outsourced, start in areas that free up the time of money earners. This reduces your costs while increasing your income. This strategy becomes a double win for your business with little or no investment.
Outsourcing does increase your managerial burden and does not always have a positive effect on your bottom line. You will have to manage the outsourcing service contracts, as well as interface with the resources they provide. Ideally, the benefits gained in time and reductions in labor costs; outweigh the small effort required on the part of managers. When properly implemented the cost of outsourcing is most often less than having your own employees when assessed over an extended period.
Depending on those things that make your business unique, you can out source various activities. Here are a few real life examples:
An information technologies service company has a claims agent who uses specialized software to produce expense and travel claims for all field consultants. Each consultant brings together a field report of services provided, all receipts, and a small expense journal. The agent puts these materials together for the accounting department in a simple form. The agent even tracks down receipts for direct materials from other parts of the company.
This example of internal outsourcing produces a 5-hour time saving per week and an additional three billable hours per consultant. In addition, this produces travel claims in a more timely fashion. This improves turn around on customer billing.
A government contractor who produces engineered materials for a branch of the military uses software provided by Federal Express, United Parcel Service, and a freight carrier to deliver products worldwide. Before outsourcing, several employees would arrange export of sometimes-large materials to military bases worldwide. They would also create bills of laden using in-house forms, only to have to recopy the information depending on a particular carrier used.
The software not only provided all laden materials, it also interfaced with existing databases that contained shipping addresses. Now one employee can select the destination address, desired carrier based on availability, then print labels and schedule the shipment in a few clicks. This saved 45-minutes per shipment with an average number of shipments per day at over 100, and they gain the ability to track all packages through a common interface.
This example is common among architectural, engineering, or consulting firms. A land survey firm with offices in three states hired an office manager at each location who was responsible for obtaining accounting, secretarial, and other overhead support for that office. They compile all the billing and expenses for that particular office and forward it to the main office, which then produces invoices and pays bills.
Previously each office had a small staff that spent most of its time answering the phone. The office manager and a receptionist are the only full time employees at each location; the remaining services come in only 3 days per week. This saves the firm 2 days per three positions at each office, and they can bring in additional accounting staff during audits without keeping an auditor on staff year around.
Not every part of your company can be outsourced. Most companies would not want to out source their sales force or customer service center, unless those providers were highly specialized in your industry and extremely knowledgeable about your company. Even relatively small companies can provide big results for their customers with standing outsourcing arrangements with strategic partners.
Even though outside people are performing these internal tasks, you do not lose control of the results produced. A well-structured contract should outline expectations and measures of performance. You may even benefit when you hire minority companies depending on programs your government has available.
With outsourcing your non-core areas, you can take advantage of highly specialized people without investing in their continual training, healthcare costs, insurance coverage, and other issues common with having your own employees. By freeing up your highly skilled billable staff, you can earn more income and spend more time with your customers.
Where can you free up resources to spend more time your customers?
© 2003 Justin Hitt, All rights reserved.
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>> Easy Come, Easy Go. Pre-scheduling Discount No Longer Available. Thank you to all those who responded to the beginning of the year, pre-scheduling promotion announced in the last issue of Inside Strategic Relations. I will not have to do as much marketing this year, and hope to pass those savings along to you. You can still pre-schedule consulting time or take advantage of my retainer programs, but you will not get additional discounts beyond the coupon in the subscribers’ area.
>> Today's newsletter is a bit late today, If only I started earlier. A client called at today about being in town tomorrow. They wanted to meet with key defense contracting players around the Patuxent River (MD) area. With less than 24 hours notice, I need to arrange some heavy hitters for this clients visit a success. Do you ever get client requests that seem impossible to fill?
The client had to be in the area anyway and wanted to add a few extra stops to fill out the rest of the day. I was amazed how quickly I was able to get people together. It took about 15 minutes to go through my customer relationship management (CRM) software to identify those most likely to benefit from a visit, their relevance to my clients’ services, and local availability. For another 20-minutes I sent email inquiries to see who was available, and made a few phone calls.
With today being a Federal holiday (in the
When clients expect something “next day,” which usually takes weeks to arrange, be sure to do your best, but let them know they could get better results if they provided more notice. Also, when you leverage relationships, make sure it is of benefit to all involved; otherwise, the last minute arrangement could backfire. Seek win-win, deliver for both parties and they will invite you back.
If you have a strategic relations request, please give me at least two weeks and I can put you in touch with virtually anyone. I had always wanted to meet Donald Trump and used the same methods to arrange a 5-minute conversation in
The conversation was not anything more than more about his business ventures when he was my age. I did not have any business objectives, but I wanted to meet the man who could lift him self up from business failure to overcome adversity. Through the process, I did establish several contacts with several of his close associates who I still communicate with today.
Through my network, I put a client together with Madeline Albright while she was
I put out a challenge to you. I can arrange at least a 5-minute introduction with any business leader on Mid-Atlantic coast of the
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