Accessing Talents and Capabilities Away From Home

Ten tips for outsourcing the right way.

Despite today's gloomy economic environment, small and mid-size companies continue to cross borders in search of new markets. While global expansion provides many exciting opportunities, the process of setting up overseas entities can be a protracted, expensive and painful process. Too often, the process diverts attention and resources from a company's core mission. When handled improperly, the consequences can be dire.

While most businesses have a firm grasp on the product or service they offer the market, they usually don't have the expertise or staff to deal with the maze of laws and regulations that apply in different countries and parts of the world. Companies must contend with various compliance regulations, tax laws, stock options and a myriad of HR matters.

Expanding into Europe is a useful example. This is far from the straightforward exercise that many would assume. Setting up employees and operations differs from country to country, which can be an administrative nightmare. And this is Europe -- a region familiar to many U.S. organizations. The business and cultural issues that surface when American companies enter markets in Central Asia, the Middle East, South America and Africa can be much more complex. It's no easier for foreign companies looking to open shop in the United States.

In addition to the administrative challenges involved with overseas operations, businesses are often in need of skills and expertise related to their market. Finding the right talent and managing far-flung operations, often a world away, is an enormous challenge. Large, well-heeled companies have the resources to simply bring in one of the Big Four firms to handle these issues. Small and mid-sized companies, however, don't have that luxury -- yet they can't afford to miss out on emerging global opportunities. For these organizations, outsourcing provides the most cost-effective way to access talents and capabilities as they are needed -- but, in order to do it right, there are many issues to consider.

Have a Wide Range of Resources on Tap

Companies that hire staff to manage overseas affairs often do one of two things -- they pinch pennies and hire someone with a sub-par skill set who can complete about 70% of the job, or they pay top dollar for an experienced talent who can take care of the higher level functions, but who has no interest in doing the necessary support work. In either case, tasks are left undone, leading to headaches at HQ.

A third option is outsourcing these responsibilities to a professional services firm, an alternative that gives your company access to a variety of resources, including senior partners, principals, associates, and analysts. Much of the work is done with lower priced resources, but you also have access to the higher priced, more technical and senior resources when needed. Ideally, these resources are available on a 24x7 basis. Most small and mid-size businesses are not in a position to hire a pool of people large enough to support their business around the clock. Outsourcing alone makes this possible.

Ten Tips for Outsourcing the Right Way

  1. Find the Right Match -- you must be culturally similar (in both the corporate and geographic senses.) If possible, prior to the engagement, meet with the people you are going to work with on a daily basis. There's a big difference between the business development person selling the firm's services and the account manager that will be responsible for your affairs in the future. Make sure these people will be working on the project from start to finish, especially on the major projects.
  2. Up-front Specs -- the success of your engagement will depend on how clearly you define precisely what you want and how the vendor is going to be measured. Performance targets and details must be crystal clear. When specifications aren't tightly identified in the beginning, the results can be more than just a nuisance -- they can have a significant impact on the business. Confusion over objectives usually leads to missed deadlines and higher costs and, in some cases, missed market opportunities.
  3. Good Project Management -- insist on a thorough project plan at the outset of the engagement, and make sure it includes an up front risk management plan. It's vital that you understand what risks are possible and how the outsourcer mitigates against those risks.
  4. Diversify Talent -- make sure your firm isn't reliant on one or two key people. You don't want your account to fall apart because one person leaves. Your firm should have policies and procedures in place so people can be easily replaced. If your outsourced firm is reliant on one or two people then you may as well sign a full-time employee yourself.
  5. Maintain Control -- companies can be "held hostage" by a support services firm. That firm may know your business so well that eventually you can't work without them. In order to prevent this from happening, make sure you have access and availability to all documentation for all work your firm is doing. No work papers should be kept proprietary on a firm's system. An online portal is an excellent way of ensuring that your business always has access to work done on its behalf.
  6. Consolidate Resources -- having multiple independent firms makes it difficult to implement consistent policies and procedures. Even worse, many times no one in the company seems to know what others have done, or were supposed to be doing. In order to avoid this chaos, make sure that you have one firm coordinating services. This will ensure that all your providers are working together under one set of rules, processes and procedures.
  7. Communicate -- your service provider will only be as good as the information you provide. For example, if you forget to tell your service firm that you hired a person in Korea then it's easy for problems to develop.
  8. Butt Out -- as enticing as it may be, try not to interfere too much. You are hiring firms because they are experts in their field. You should be most concerned with the final product. Establish specific milestones and make sure your provider is hitting those targets.
  9. Spread the Wealth -- don't pay for everything up front, spread it throughout the life of the deal. If possible, incentivize performance so that both sides can see the upsides. This may include bonuses and, in some cases, even equity deals.
  10. Global Reach -- priorities are different everywhere and how you solve problems must be treated on a country by country basis. The word "tomorrow" means something different in Singapore than it does in Mexico; an issue that is critical in France may not be critical in another country. If you want to be a global company, make sure your services firm has global capabilities.

Businesses need to generate value all of the time. It's not always about the lowest cost; it's about the value your firm provides. Be diligent in your search for suppliers that can help your organization generate measurable business value.

Larry Harding is President of High Street Partners. High Street Partners is an international advisory firm that provides finance, accounting, compliance and human resource assistance to more than 170 U.S. companies operating overseas. www.hsp.com

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