The Two Most Important Outsourcing Metrics
By Sam Miller
For decades, outsourcing has been around and yet it was not really a part of the daily business vocabulary. However, nowadays, it is already safe to say that outsourcing has become a household terminology. But what is outsourcing and what are the outsourcing metrics that companies should know before working with outsourcers?
Outsourcing is more of a business strategy or approach. This is not like a partnership because this involves two separate organizations. One is the client and one is the outsourcer. The client's role is to give business to the outsourcer. On the other hand, the outsourcer is a specialist on a particular service that the client needs.
For example, suppose a large company does not have its own payroll and accounting system or department. What it will do is contact a firm that will do its payroll and accounting job. The company pays this payroll organization for these services. To the employee's mind, it was the company that processed his payroll. Little does he know that it was a third party organization. Outsourcing is also very common in manufacturing. The most common example would be the industry of shoes and apparel. Many people believe that the shoes they buy, let us say Brand Y, are really manufactured by Brand Y. Consumers do not know that the Brandy Y shoes they are buying are not even made in the United States, but in another country. The actual manufacturer of the shoes is another company, but the manufacturing standards are based on Brand Y's quality standards.
Outsourcing is a good business strategy so a company can spend more time managing its actual strengths. For example, some companies, like shampoo brands, need to focus on research instead of manufacturing. Others, like electronics companies, also have to do the same. Some corporate organizations also find it a hassle to maintain its own payroll and hiring departments so they contract others to do it for them.
The Process Metric
One of the key metrics in outsourcing is the Process Metric. There has to be a clear and definite process as to how the work needs to be done. The process should also include methodologies on the work that is specified, tools needed, and other things that will impact production. In essence, the process metric should also have several breakdowns, like training and quality. This is a way to ensure that the employees hired are equipped with the necessary tools they need — not only physically, but also mentally— to perform the job at their best form.
The People Metric
Another metric that that should always be included is the People Metric. This metric deals with the development of people and this starts from the hiring process. Any organization that decides to outsource part of its department or task should clearly indicate to the outsourcer what the needs are. The skill set of the employees needed to perform the job should be well defined. The experience needed should also be clear. In general, the employee should be profiled to fit the needs of the job. There may be more outsourcing metrics, but these two are the most important.
If you are interested in outsourcing metrics, check strategy2act.com to learn more about outsourcing kpi.
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