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Have you tried Outsourcing or Offshoring previously and got a poor result? Here’s the ten most common mistakes

25
Jun

 

Establishing an offshore team to complement your Australian team can be an extremely effective way to produce a more efficient and more profitable business. Thousands of small and medium Australian businesses have already done exactly that, and are innovating and improving their businesses as a result.

The evolving nature of the offshoring industry has made it extremely easy and low cost for any sized business to get started with hiring staff offshore, without significant capital and without significant knowledge of the culture and industrial relations laws of other countries.

Still around half of the businesses who start offshore fail to get their expected result. This failure usually either takes the form of extremely low productivity, or an inability to integrate the offshore team successfully into the Australian business processes.

The failure rate is so high precisely because of the low barriers to getting started. Anyone can use Google to find 100 providers of staff in Philippines or India, and all of them have a glossy website and promise whatever you want to hear. So too, can any director or CEO use Odesk and hire one or one hundred skilled office staff willing to work for an appealing price. Those who begin their offshore journey in this optimistic but unstructured way almost always end up dissatisfied with the result.

Establishing a highly effective offshore team is not difficult, but like most things it requires a basis for understanding what is a good versus a poor decision. If you fail to prepare and arm yourself with the knowledge, then your decisions (and the end result) will often be poor.

Here are the top 10 (extremely common) reasons for offshoring failures.

1. Choosing the wrong business model for housing your team. There are currently eight different ways to employ staff outside of Australia. Only one or two of these will match your business needs.

2. Choosing the wrong providers for staff leasing, office provision, legal, accounting. Like any other aspect of business in Australia, there are good and bad providers – how do you tell the difference?

3. Inadequate recruitment processes, or relying on facilities that have inadequate processes.  Offshoring is, to a large extent, a recruitment game. There are specific things that need to be done differently with recruitment in order to reliably hire the best staff.

4. Poor salary packaging and/or lack of transparency as to what staff are actually getting paid. It’s not always obvious that some providers are underpaying their staff, or that the way you are structuring salary packages is missing the aspects that people value the most.

5. Paying too much (which wastes money and creates the wrong culture) or paying too little (which, like Australia, leads to staff retention problems).

6. Lack of cultural and local factor understanding with management practices. Being oblivious to cultural differences will lead to poor productivity and loss of key staff.

7. Failing to do the “internal sell” properly with the Australian team, causing key detractors, motivations to see the strategy fail, and fear of job losses affecting local productivity.

8. Having no plan for integrating another geographical office location. (This is the same challenge with setting up another branch location in a different Australian city – a basic logistical and communications strategy is required to make sure information is shared effectively.)

9. Going too fast with execution, for example, hiring 10 staff offshore immediately without proper process. In most cases, the SME businesses that get offshoring right the first time start with only one or two full-time staff, and build the team gradually.

10. Insufficient team communication, or having a “set and forget” attitude. Your offshore team players are just normal people exactly like Australian workers, and they need leadership and communication in order to be effective.

Watching other businesses make all of these common mistakes (and making quite a few of them myself in the early years) became the basis for the training that I now provide to directors and CEOs. None of these are difficult to solve; in fact, all it takes is a three-hour briefing and a written guide, but they all MUST be solved in order to succeed with your offshore team.


Scott Linden Jones has built several businesses in the IT industry since 2002. He is the founding advisor at Easy Offshore, providing offshore educational and implementation services to Australian businesses.