The Great Recession of 2008 left U.S. businesses reeling, creating a change in the way companies operated. To combat shrinking margins and protect profitability, wave after wave of personnel, positions and entire departments were outsourced or off-shored.
However, now that we’re looking back on the recession in the rear-view mirror, the tide appears to be turning once again. Companies are starting to bring their teams back in house, and the role of outsourcing – once so very prevalent – is being debated by business leaders around the United States.
Before deciding on insourcing vs. outsourcing
Before your company makes the decision on insourcing vs. outsourcing, ask yourself a few questions:
- What will it cost to fix substandard work conducted by third parties?
- What’s the value of corporate citizenship?
- Which roles are transitory, and which are a permanent part of your operational structure?
Outsourcing in Accounting & Finance
The push towards outsourcing typically comes from the top of the organization, with CEOs issuing broad strategic initiatives in order to reduce costs in certain departments. One of the most frequently outsourced functions was and still is accounting and finance.
Parker + Lynch New York Managing Director, Rick Frankovits, says he’s noticed a large push by financial institutions to outsource accounting areas.
“I think the recession drove a widespread initiative to reduce costs as one way to realize savings to the bottom line. With companies already saying, ‘focus on our core competence, and outsource the rest t o people who can do it faster cheaper, better and more effectively’ it created a perfect storm,” says Frankovits.
When should companies turn to outsourcing?
When deciding whether to outsource or not, it’s important to keep a clear eye on your staffing objectives, according to Parker + Lynch Practice Director, Omri Avdi. Avdi believes that certain seasonal tasks – such as FAS 109 provision work for income taxes – make prime targets for outsourcing.
“If a headcount-related item isn’t a seasonal need, you want to insource it rather than outsource it. Keeping staff on the payroll for those tasks provides you with economies of scale and a team that has an emotional an cultural investment in the company,” says Advi.
A fast growing company may realize that its accounts-payable function isn’t working as well as it should be. In these instances, management can bring in a consultant who is an expert in process re-engineering to make recommendations. An outside observer with specialized analytical skills can look objectively at problems within the operation and make concrete recommendations.
Overcoming regulations through outsourcing
In heavily regulated industries such as banking, finance and healthcare, outsourcing is a great way to add instant expertise to your internal team. Consultants can help organizations ensure compliance with existing legislation, including Dodd-Frank, the Consumer Protection Act, as well as stay a step ahead of looming changes.
However, while these outsourced resources bring expertise, they do not bring with them institutional knowledge and relationships with other key members of your organization.
Insourcing is IN
While cost savings and regulatory changes have fueled outsourcing, a host of other factors are fueling a new phenomenon – insourcing.
Insourcing is the process of bringing outsourced positions, teams and departments back in house.
“We’ve worked with organizations that have outsourced entire functions, then brought entire functions, then brought entire facilities back in house because the level of quality did not meet hteir standards and didn’t justify the savings,” Frankovits states.
According to Frankovits, the most powerful champions for insourcing tend ot be department leaders. For example, CFOs are driving accounts payable back under their room, while CTOs are trying to overcome outsourcing failures from IT departments.
In other cases, the decision to insource isn’t made by a person, but it’s actually made by a cultural shift. When entire organizations begin to champion insourcing, it’s extremely difficult to defy or ignore that push.
No matter where the spark to insource comes from, it’s not an easy path to pursue. That’s because insourcing involves a complete reversal of course and requires a proven approach to bring to life.
So how do I begin to insource my team?
If you do choose to insource and bring a defunct team in house, the best first step is to attempt to bring back key former employees who really understand your company’s history and the type of people who excel in your company.
Unfortunately, however, these employees may have moved on to different opportunities. If you find yourself in this circumstance, focus on bringing in strong leaders to steer the rebirth of your insourced functions. Bringing these big operations back online is a major part of what staffing firms do best.
“Quite often, when there’s a push and an entire department needs to be staffed, a company simply won’t have the horsepower to staff everything at once,” Frankovits observed. “Staffing firms have their finger on the pulse of that market and that skill set can access qualified talent under tight deadlines.”
How long does building an insourced team take?
In total, insourcing can take anywhere from 30-60 days. However, when taking on-boarding training and equipping new hires into account, 90-180 days may be a more realistic timeframe for you and your company. Have patience, and you will ultimately be successful.
Insourcing vs. Outsourcing: Still undecided?
For additional insourcing insights, or if you’re weighing the options between insourcing and outsourcing, Parker + Lynch is happy to offer our insight, support and talented staff you need to achieve your goals. Request your free copy of our “Should outsourcing be in your hiring plans?” white paper to read up on additional strategies for building a workforce in the new economy.