The Five Risks of Outsourcing – How to Manage Them Effectively

Outsourcing presents a couple of risks just like any other business undertaking. Now these risks shouldn’t deter you from using outsourcing, especially if your business calls for it. What you can do is understand these risks and learn how to manage them effectively so that you’ll enjoy the benefits of outsourcing.

Risk of Poor Cost-to-Benefit Ratio

Most if not all small businesses like single proprietorships and partnerships require outsourcing to fill in staffing needs. Due to limited resources, small business owners tap outsourced personnel because it is cost-effective, helping entrepreneurs to get tasks done without paying for fulltime, in-house employees.


However, some outsourcing companies impose unreasonable charges, sometimes hidden fees, which make outsourcing more costly than recruiting and hiring regular employees. To avoid this risk, read contract carefully and always look out for hidden or secret charges.

Risk of Miscommunication

With outsourcing, workers are remotely located and communicating with clients through email, chat, phone and/or Voice-over Internet Protocol (VoIP). Now some outsourced staff are located in the other side of the planet, and may not be native English speakers. Also, bugs with technology can get in the way of a perfect communication.

Manage miscommunication risk of outsourcing by speaking clearly and slowly if it’s an oral communication, and make the staff repeat what you said. When communicating through email and chat, use bullet points or numbering, and emphasize special instructions. Require outsourcer to submit report everyday to know their progress.

Risk of Knowledge Transfer

There are company secrets, which should remain as such. However, when you do need to spill confidential information in order for a task to be completed, have the outsourcing company and the outsourced staff sign a confidentiality agreement. Also, hire outsourcers with proven record of accomplishment, whom you can trust and depend.


Risk of Non- or Underperformance

Outsourcing firms ought to have topnotch recruitment and training processes, assuring clients of output with the highest quality. However, humans are bound to err. Some outsourced personnel do falter, but it shouldn’t be habitual or have costly consequences on your part.

Outsourcing firms provide remedies for jobs that do not meet client specifications. Make sure this provision is in the contract. You shouldn’t be made to pay for something that doesn’t meet your expectations.

Risk of Curtailed Relationship

An outsourcing partnership shouldn’t be cut short, because it’s detrimental to both the provider and the client. As a client, make sure that you nurture your relationship with the outsourcer as you would any supplier or employee. Reward them for a job well done. It may not be monetary, but simple and sincere note of thanks go a long way.