For many decades, several companies have used outsourcing as a production tool. It enables organizations to increase their prcanofit by delegating activities to specialized companies. The procedure takes place through an administrative-operational management.
The process of outsourcing is very common in industrialized and highly competitive countries. It originated in the United States shortly after World War II. As war industries needed to focus on armament production, they were doing some support activities for other companies. All this began to be done through a contract between legal societies.
Keep reading to learn more about outsourcing, the advantages and disadvantages of the process.
What is outsourcing and how does it work?
Outsourcing is done when a company hires a service provider to perform a particular activity in their production process. The partnership is established through a contract, which imposes a relationship between the worker and the company that provides the service. That is, the contracting company has no connection with the director of the workforce.
Basically, the function of a service provider is to intermediate the interest of the contractor of the activity with the interest of the worker. Due to the fact that the procedure serves to pass on activities to third parties, it takes the name of outsourcing.
Advantages of Outsourcing
The most obvious advantage is the focus that the contracting company can have on its core business. This increases business specialization, ensuring less effort in training and developing professionals. From these come the other advantages we address below.
The entrepreneur who adopts the outsourcing guarantees a simplified administrative structure, with the reduction of professional contracts and hierarchical levels. And the process wipes out the organization of the company in that it reduces the areas of responsibility of the professionals.
There is greater agility in business decisions, which helps to increase competitiveness and warm up the market economy. Organizations experience greater bargaining power with their customers and suppliers. Small and medium-sized businesses see their area of expansion grow without much investment.
The economy is achieved through the reduction of waste and the cost of inventories and the reduction of the company’s activities. Actions become more flexible and this enables product enhancement without any investment. The machinery has a reduced idle time, and the company only starts to spend on the materials useful in its specialty.
Productivity tends to increase because the whole organization will be focused on the completion of the end-activity. In addition to increasing the pace and volume of production, even the quality of work tends to improve.
The staff will stick together to deliver what the company promises. This is visible even in the participation of the organization’s leaders, who can focus on the company’s main demands.
Disadvantages of Outsourcing
Although the company’s employees increase the quality of the production, the contracted service will not always be up to par. Therefore, it is extremely important to know the quality of the company to be hired. It is vital to monitor the services to ensure that they comply with what has been requested.
Problems with legislation
There are outsourcers who provide services without being registered or in accordance with the rules of the legislation. Because of this, you and your company may be affected by labor lawsuits or assessed directly by the Ministry of Labor. It is essential to know the labor legislation well before hiring any service.
Difficulty finding good employees
In some outsourced activities there are many companies acting, which facilitates hiring. But it’s not always so. Often companies spend a lot of time looking for an ideal partner. And lack of care in choosing suppliers can guarantee a service less than your company’s.
Loss of contact with employee
If there are advantages in not hiring employees, there is the disadvantage of losing the bond with the worker who performs the service. Your business will not have the power to influence your work, and any move in that direction can bring you problems with labor justice.
Loss of originality
This tends to happen with some companies. Especially if it already has a structure and decides to outsource activities that directly influence the identity of the product. And in the long run, part of the employees may completely lose the cultural identity of the company as a whole.
It is possible that the company will go through layoffs in the early stages, which can cost quite a lot. For the employer, this creates a lot of headache, especially if it ends up coming into conflict with unions. And the risk of unemployment tends to increase when there is no absorption of labor in the same proportion.
Abrupt changes in the company
If not done with detailed planning, outsourcing can lead to internal problems. The first is related to costs, which will not have parameters for a long-term calculation. Changes in the power structure can put interests in conflicts, and this directly harms the company. It can also become dependent on third party services, and runs the risk of being “managed.” All this is added to the difficulty in taking advantage of employees who have already undergone training.
Outsourced activities for your company need to have the quality they would have if they were made by your team. Therefore, it is essential that the contractor has attention and supervises the progress of the work. This will only ensure that the service is in accordance with what was previously established in the contract.