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In our final installment on the virtues of the outsourcing model, we examine the third factor you should consider when evaluating whether outsourcing could improve the productivity and financial climate of your company. Robert Ryan’s position paper on the topic of outsourcing posited that restructuring how companies utilize their human capital, or, in other words, their workforce in-house and elsewhere, will affect how profitable they will be in the future. Ryan suggests that by increasing a company’s agility, or the speed at which they are able to adapt, it will be more likely to weather the many changes to come in the business world.

We have already examined how capacity and capability can affect a company’s decision to outsource. Culture ranks as the third factor that should be considered before making the leap to outsourcing. As Ryan asks, “Do the current organizational norms and values support the development and implementation of the strategy?”

While culture can also refer to the acceptability of this practice in a certain office, it also relates to the acceptability of outsourcing in a particular industry. Ryan points to technology as an industry particularly well-suited to outsourcing. “Competition for specialized technological expertise is found on the world market,” he writes. “With the rise of efficient collaboration capabilities, services can be found in many emerging countries of the world…. Because of technology improvements, work groups can all be brought into our living rooms.”

The health care industry also offers a culture that allows for ad hoc collaboration to fill any gaps in capacity and capability that may exist in one company. Here at EHM we not only serve as the link to connecting health care suppliers with the group purchasing organizations (GPOs), accountable care organizations (ACOs) and integrated delivery networks (IDNs), but we can also handle all of your marketing, advertising and selling needs for you. If you need help determining if these options are right for you, contact us, and we can talk you through the entire process and answer any questions that you have.

Over the past two weeks, we have begun to examine the outsourcing model and how to determine if it is right for your company. Over the past decade, outsourcing has become more of a reality than ever before thanks to technological advances that allow people to work together no matter where their office is.

Last week, diminished staff capacity in light of the economic downturn was discussed. Capability serves as the counterpart to capacity. Without the optimal staff capacity a company has become accustomed to, its capability surely will be diminished as well. And from there, performance may begin to decline as a result. This is what all companies hope to avoid in the face of layoffs. As fewer employees take on more work, quality begins to suffer, and previously handled tasks begin to fall down the cracks.

The leading causes of a decline in capability will be the loss of institutional experience, knowledge, special skills and historical competencies. In addition to layoffs because of economic constraints, the generational shift in the workforce likely will also contribute to diminished capability. Because younger workers are likely to work at five to six times as many companies as their older counterparts, their own general business acumen is likely to suffer as well. Instead, these workers will only have the time to learn the one aspect of the company they are involved in as opposed to receiving the institutional, years-long education of how an organization runs that their parents did. As Robert Ryan states in his position paper on outsourcing, “The generational trend is toward specialization, further diluting the general business cognition.”

With layoffs and the generational shift of the workforce, companies will begin to see gaps in their capabilities. That is where outsourcing comes in. How have you used outsourcing to fill capability gaps?

 

As discussed in last week’s post, economic difficulties and technological advances have combined to make outsourcing more of a compelling and intriguing option for companies than ever before. By allowing companies to maximize limited financial resources, the outsourcing model may be exactly what your company needs.

In Robert Ryan’s recent position paper on the topic, he repeatedly refers to a need to make companies agile, which better allows for course corrections in times of rapid change, like now. When it comes to agility, size will always be a factor, no matter if it is comparing the way a sports car whips around corners in comparison to the much larger minivan or in seeing how small companies can make changes much more simply than larger ones. In fact, the workforce itself is becoming more agile, with the average Baby Boomer expected to work for only two to three companies throughout his or her career, while members of generations X and millennium will likely average 15-18 tenures at different companies.

When capacity shrinks, a company may no longer have the size of the workforce necessary to handle all tasks and strategies. With a smaller capacity, organizations begin to struggle with completing the functions they completed prior to the downsizing, much less be able to actually keep up with technological advances and changes in the industry. Once a company reaches a point where it can no longer keep pace with its competitors, then it is no longer agile.

Also, as the number of employees of many businesses has dwindled down to a core staff as a result of the economic downswing, many people are now doing multiple jobs, and with more people changing jobs at different companies than ever before, it makes sense that workers are no longer perfectly suited and trained for every aspect of their positions. Rather than allow quality and service to deteriorate in the wake of this situation, it makes more and more sense for companies to carefully examine the capacity of their workforce in terms of not only numbers but also capabilities, which we will discuss in more depth next week.

As Ryan states, “Too expensive to hire and train, most organizations acquire expertise episodically for strategic initiatives. This includes increasing capability and capacity over a short, definable period of business or technical transition.” How have you seen capacity make a difference when a company is considering outsourcing? How do you determine which functions your team can handle in-house and which can be outsourced? How do you determine when a company should take on added capacity to achieve a goal?

With fuel costs rising almost daily, the purse strings on company travel budgets continue to be drawn tighter and tighter. In fact, some companies have eliminated travel entirely in favor of outsourcing the sales, advertising and marketing work that once required separate departments.

The outsourcing model offers a way for company’s to maximize limited resources in a time of economic constraint. As a cost-saving tool, outsourcing allows the same work to be done by a strategic partner for a fraction of the price that it would cost to be done in-house.

Robert Ryan, Co-founder and Vice President of TrustedCare, Inc. in Austin, TX, recently delved into the outsourcing model in a position paper. In it, he referred to ways to make your company more “agile” - and agility is actually what all companies should be striving for. Ryan states, “Because change is constant, the agile enterprise is able to adroitly adjust to and take advantage of rising opportunities…. It is apparent in studies that the agile organization shows significant profit growth…”

EHM has built a business based on connecting medical suppliers to the healthcare organizations with purchasing power, but the company also offers its clients much more in the form of outsourced sales, advertising and marketing support. As an EHM client, we can use our resources and connections to sell your products directly to the Integrated Delivery Networks (IDNs), Group Purchasing Organizations (GPOs) and Accountable Care Organizations (ACOs) who most need access to them.

Over the next few weeks, we’ll be examining some questions that will you help you determine if the outsourcing model, and a partnership with EHM, is right for you, so stay tuned to the EHM Catalyst Blog each week.

In the meantime, please tell us whether you have examined if outsourcing is right for your organization. There are pros and cons to both models, and we are interested to hear your end result.