subject: Replace or Outsource: What Makes the Most Sense? [print this page] Replace or Outsource: What Makes the Most Sense?
You've managed to survive employee turn-over and have used it as an opportunity to really evaluate your work flow and operation. Now it's time to determine what makes the most sense: Replacing or outsourcing.
Cost Comparison
It's not simply a matter of comparing the base salary (at which you can bring on a new employee) to the vendor invoice (if you choose to outsource). Keep in mind that the cost of benefits, taxes and training must be factored in to any new hire's base salary. The learning curve productivity gap is another expense that must also be calculated.*
One of the soft-cost benefits to using professional services for departmental activities includes the elimination of hiring and training costs as well as eliminating the fears and concerns about the cost of future turn-over. How long is the new employee really going to stay with you? How often have you kept an average performer because you've already fully invested in his or her training?
Many companies have opted to outsource their payroll function and the reason is simple: It's an operationally expensive cost center requiring dedicated staff, and outsourcing it is a much more cost-effective, streamlined and profitable approach. Why limit your thinking only to payroll when it comes to using professional services for specific tasks? What makes outsourcing payroll a good business decision but not other tasks? The best approach is to at least gather all the needed information, so that you can make an informed decision rather than relying on "that's how we've always done it" thinking.
Training
Turn-over leads to a loss of institutional knowledge, including your software programs. Consider this realistic scenario: Your original employee is professionally trained and uses 80% of the software functionality. He trains a replacement and typically shares about 75% of what he knows. When the second employee departs, she trains her replacement on about 75% of what she knows. Employee #3 starts knowing less than half of the software's functionality. If he leaves and only trains 75% of what he knows well, you can see how quickly knowledge is lost, and your company is losing productivity and functionality. You may find it most cost-effective to rely on outside professionals for your in-house training.
In addition to the high cost of turn-over, there's also a huge value difference between average and great performances. You can use outside professionals to convert average performers to outstanding ones, thus helping you meet goals and improve your bottom line. Take the time needed to investigate which solution makes the most sense for your organization. Failure to do so means you'll end up repeating the same mistakes that probably led to turn-overs in the first place.
