A property management company wanted to expand, but also wished to minimize disruption and stay in the same offices. Through our discovery phase, we identified that by outsourcing some of the chore—rent collection, invoicing, accounting—not only could they do that and save money, but they could release their experienced staff to address higher-value business opportunities. These included, for example, identifying additional properties, working more closely with their clients, and increasing the range of services.
We achieved these major aims—and reduced the cost per property managed. Over a relatively short period, what was outsourced expanded to include insurance policy processing, legal secretarial work, and, as the property development side of the business came into the picture, land development applications. From the company’s retail interests, the back-office processing of accounts receivable and accounts payable was brought into the contract.
The key was the relationship between the property company and the outsourcer—and the trust that was built up—so that either side could suggest further areas for outsourcing.
Finally—and this might be an interesting challenge for CFOs—the company’s CFO realized that his function, as currently understood, had almost entirely been taken over. He was faced with a dilemma. His alternative, however, was to take a more strategic role, which was what the company wanted, and he was persuaded to view the role differently and become the strategic planner rather than a deliverer of information.
As Is or Reengineer First?
Consider next the major stumbling block to decisions on outsourcing. Most internal debates, once you are persuaded that outsourcing will achieve cost savings and efficiency gains, focus on whether you should outsource your processes as is, or whether you should reengineer them first. There is no absolutely right answer, but in practice allowing a fresh pair of eyes to reengineer your processes usually produces immediate benefits. Just ensure that the contract allows you to share in your outsourcing partner’s gains! The real message is that you shouldn’t allow such debates to delay any decisions on outsourcing. So the best course usually is to outsource as is. You didn’t reengineer your cleaning or your security before you outsourced them, and yet your outsourcing partner will have done so and provided a better service.
Choosing a company with which to outsource your processes is clearly a major decision. You should be looking for a partner. While you may think that outsourcing your cleaning will not require a solid partnership, devoting time to working with your outsourcer—in HR processes, in accounts payable and receivable, in expenses administration, in property management—is essential. If there is one rule about outsourcing, it is that you should not outsource and forget. Outsource and review; outsource and monitor; outsource and work with your outsource provider as a partner, exploring what should be outsourced next, what should come back in house, and what is needed to be even more successful.
If you do that, it becomes obvious that you need to select a company to take on your processes that you can work with as a partner, taking formal time to meet and review regularly. Selecting such a company relies on matching your company’s culture, sharing an explicit set of values, and relying on their integrity and honesty. You need a company that you can say no to and one that you can discuss your exit requirements with when there is no intention of doing anything but signing the contract.
This is a challenge to your procurement department—but one that will pay real dividends. The short-term lowest price is always the most expensive route in outsourcing, because a low-price provider will usually be one that hasn’t built in the time required to continually partner with you or find new and better ways to serve you more efficiently.