Could my organisation benefit from outsourcing?
Many organisations are facing this, sometimes controversial, question right now.
For example, the Federal Department of Human Services is, very publicly, trying to grapple with this question in testing opportunities for outsourcing some or all of its back-of-house processing and payment functions.
Making the decision to entertain outsourcing is a difficult one, and one that a regulatory authority recently engaged Grosvenor to assist with. The organisation has a requirement for specialist medical staff to deliver its services and was facing difficulties in recruiting and retaining these highly qualified staff within its firmly established remuneration framework. The organisation sought to identify alternative approaches to service delivery, including outsourcing the services. It also recognised the need to properly justify its current approach and any decision for change.
Assessing whether an organisation might benefit from outsourcing can be aided by utilising a criteria-based approach. For this particular engagement, Grosvenor used the following criteria and scoring approach to determine the relative suitability of externalising service delivery:
Are there no strategic reasons why the services should be kept in house?
ie. is it of strategic importance to the outcomes sought by the organisation that knowledge is retained in-house?
Could an external provider deliver the services to the same or a higher level of effectiveness?
ie. could the same tasks be done to the same or higher level of quality?
Could an external provider deliver the services to the same or a higher level of efficiency?
ie. could the services be delivered quicker or at a reduced cost?
Can the services be thoroughly and adequately described in a specification for an external provider to understand and be held accountable to?
ie. could the organisation develop a written specification clearly describing the services to be delivered?
Is there a competitive market of service providers?
ie. if the organisation approached the market, there would be at least three capable providers?
Does the organisation have, or could it acquire, the skills, knowledge and experience necessary to properly manage an external provider?
ie. is the organisation experienced at managing external service providers or could it acquire these skills?
Grosvenor calculated a final score by awarding the following scores for each answer:
Yes = 20
Maybe = 10
No = 5.
The scale below was then used to determine whether or not the services were a suitable candidate for outsourcing.
This assessment was the starting point for a more detailed consideration of alternative models for service delivery.
While this approach should not be considered a conclusive determination of the suitability for outsourcing, it does provide a solid basis for starting the conversation and further consideration of an outsourcing strategy.