How Do You Evaluate Outsourcing Suppliers?

As a business owner, you need others to make your business succeed. You need relationships with employees, customers and suppliers. Much is written about the relationships with customers and employees. It is commonly stated about these relationship that, “the customer is always right” and “our people are our most valuable asset”. I’m not going to debate the relative strength or weakness of these statements. Rather, I want to focus on the relationship you have with suppliers, specifically outsourced service providers.

Recently, I had the unexpected experience of being fired by one of my outsourcing service providers. I had engaged this supplier to outsource some of my marketing activities. We had set up a meeting to discuss my feedback on the services provided. Before I could even provide my feedback, the outsourced service provider abruptly informed me that she was handing back the marketing services to me. Huh? I was so shocked that I had to clarify that what she meant to say was: “You’re fired. I no longer want to work with you”.

This experience confirmed what I already believed to be the most critical thing to evaluate before outsourcing any services.

As a business owner, you’re very busy and need to be selective how you spend your time. Even, when outsourcing might seem like a lot of cost, you have to evaluate if it will free up time that you can spend on revenue generating activities. Typical activities outsourced include, accounting, payroll and HR, legal services and marketing. Many service providers are subject to stringent regulations, which should give you some limited assurance about the quality of the services you can expect to receive.

For example, professional accountants in Canada must be registered with CPA Canada and provincial accounting bodies. Similar accounting regulators exist in most countries in the world. Regulatory bodies also exist for lawyers and HR professionals. Some services have no specific designation or controlling bodies. It goes without saying, that for such services providers you will need to do more vetting to ensure you will be getting quality services. Ensuring that your outsourced provider delivers quality services is obviously where you should start evaluating.

Other considerations before outsourcing services might include:

  • How much will the outsourced service cost?
  • How will you communicate with the outsourcing service provider?
  • Will the outsourcing relationship be temporary or longer term?
  • Do you have a basic understanding of the outsourced services, or is it completely foreign to you?
However, none of these are the most critical evaluation before engaging an outsourced service provider. Just as with employees and customers, the most critical evaluation is cultural fit. Culture, or put differently, the character of your brand should be at the core of everything you do. Employing for culture is now widely practiced, with companies like Zappos being well known for this. Harvard Business Review have also written about this. To my knowledge though, I haven’t seen any articles written on engaging outsourced service providers who fits your culture.

Let’s look at some example situations to illuminate this.

Accountant

You are conservative in your accounting and don’t like to take risks that will put you on the radar of the tax authorities. Your accountant however is pushing you to implement aggressive tax planning strategies. Your accountant becomes frustrated when he has to explain the strategy over-and-over again, while you become increasingly concerned with the approach suggested. The lack in cultural fit will likely continue to grow until the relationship breaks down. The same would apply if you are aggressive and your accountant is conservative.

Marketing

Your a professional man, but some know that you are really a geek at heart. You are active on LindedIn, the primary social network for professionals. You decide to outsource you marketing efforts and settle on a marketing agency that can be classified as quirky and only has women working for it. The marketing agency pushes you to post on Instagram, because it is “the place” to be. As a female dominated platform, you find “selfie crazed” women “liking” your posts. The agency “likes” their accounts back to build your reach. Tension start to build, because you don’t like this. You also realize the agency doesn’t know the difference between a Light Saber and a Bat’leth. The same would happen if you’re into cosmetic treatments and ask me to help with your marketing. I wouldn’t have the first idea where to start marketing your brand.

So, I have learned that culture is everything. Not only when you chose employees or customers, but also when selecting outsourcing service providers. Culture, or character, should be at the core of your brand. Outsourced service providers function like an extension to your brand, which is why cultural fit is the number one consideration before signing on the dotted line.
Cultural fit is the most critical consideration before outsourcing any services - Bernard GrobbelaarClick To Tweet

Have you had any bad experiences with outsourced service providers? If you don’t agree that cultural fit is the most critical consideration, what do you think is most important?

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