Why Smes Must Outsource to Survive
The unions will go after me and try to discredit what I’m saying, but I’m going to say what SMEs are thinking (or should be thinking).
If you’re a growing small business owner, your only chance to compete is to outsource (or offshore) jobs and tasks within your business.
Cue the howls of protest from those who think jobs should be kept in Australia. Pickets, catchy chants and offensive rhetoric about why I’m an evil, morally corrupt business coach. But I want to see SMEs succeed and that’s why I’m prepared to speak the truth.
As an SME, chances are you have entered an industry dominated by a select few big players because you saw an opportunity to do it better than the current standard. And I bet you do, but that doesn’t make you profitable (yet the fat cats continue to guzzle champaign).
So, do you keep trying to complete on an uneven playing field (and risk losing your business) or do you look at ways to be more nimble?
Finding the correct help
First, let’s dispel the argument that keeping jobs in Australia is the way forward for this country.
In a global world, why does somebody in one country (Australia) deserve a job over somebody else? It could be suggested that this viewpoint is in fact racist.
The concept of keeping a job in Australia simply for an Australian worker is a lazy defence and a death sentence for an SME because even the big end of town are outsourcing certain roles and tasks to become more cost-effective. To win the game you have to be smarter.
I hear from small business owners on a regular basis that they just can’t find good staff anymore. They describe the annoyance of onboarding a new staff member.
“In the interview, these people say the right things. But when they get the job their attitude changes. It’s an entitlement issue. When you ask them to complete a task that they deem is beneath them or not fun they have a real resistance to do it”.
It’s not fair to divulge who made this statement to me, but it’s not uncommon. To me, the issue is not where an employee is located but what they can offer and the value they add. And if somebody overseas can offer more value, the job should rightfully be theirs.
Australia v the Philippines
If you’re not convinced that offshoring work is an advantage to you, then let’s look at the state of two countries.
Aside from a few roles, I’ll argue until I’m blue in the face that overseas workers are just as competent and reliable (if not more so) than Australian workers.
While salaries will vary depending on many factors, here’s a cost comparison for jobs open to outsourcing:
- Australian salary per year – AUS $71,230
- Filipino salary per year AUS $12,638
- Cost saving of 82.5%
Finance and Accounting
- Australian salary per year – AUS $73,425
- Filipino salary per year – AUS $21,666
- Cost saving of 70.5%
HR Team Leader
- Australian salary per year – AUS $78,456
- Filipino salary per year – AU $28,888
- Cost saving of 63.2%
- Australian salary per year – AUS $65,193
- Filipino salary per year – AUS $25,277
- Cost saving of 61.2%
*Source: Penbrothers recruitment agency
Clearly there’s a cost benefit to outsourcing and in industries that are tough, outsourcing becomes a winning strategy to keep costs down while still delivering the work required.
How to outsource correctly
I know what you’re going to say, “outsourced workers have a huge fail rate and they just don’t understand the work”. Am I right?
If I am, here’s my counter argument, did you actually explain the work, your expectations and the result wanted to the person you outsourced to?
Relying on an unstructured confusing email brief won’t work. Offshore staff can’t learn by observation, like we do in Australia. The effort you put in up front will deliver the results ten-fold later.
To outsource efficiently there are two considerations; how to manage it within your business and how to onboard an outsourced team member.
If you’re encouraged to consider outsourcing, the worst thing you can do right now is swing the axe over your current workforce. That approach will ruin culture and have every employee thinking they will be next. Morale will be gone and it will show in the work produced and the results delivered.
Staff will naturally leave a job and seek employment elsewhere. And others, due to things like underperformance, will have to be moved on. Both scenarios are common for SME owners to deal with.
But instead of looking at it as a problem to overcome, turn it into an opportunity to outsource the role if you believe that’s the correct thing to do. Over time, your workforce will turn into a more globalised unit. This approach will mean that current staff will feel safe in their role and will continue to perform.
When onboarding an offshore staff member cultural differences will need to be understood. When I was working as an Engineer, the language and tough-personality of some within that industry would be intimidating for many Filipinos who are generally quieter in their approach to work.
The reality is, any onboarding process (whether overseas or local) can only be efficient if you communicate your values, vision and mission to any new employee and they buy into what you’re trying to achieve.
In previous blogs, I’ve written about your values, vision and mission. It will always remain the best way to onboarding staff.
I practice what I preach
Outsourcing is popular for SMEs across the Western world. Before it was a trend, I dipped my toe in the water with my first business, Seight Custom Cycling Wear.
Believe me, it was much more difficult back then to find staff and get them working to the standard I needed. But through trial and error, I got there and my outsourced staff proved valuable to me and my business.
Before selling Seight Custom Cycling Wear, I had a team of nine staff and six were offshore. They were an integral part of our success and a major reason a buyer was willing to purchase my business.
Having six outsourced staff meant I could employ three staff members full time locally. Trust me, we had workload for 10 staff (including me) but it wouldn’t have worked if all staff were Australian-based.
Just do the maths, nine Australian-based staff members would have cost Seight Custom Cycling Wear between $500,000 – $600,000 in salaries per year. That’s game over for a business making $300,000 in profit each year.
Salaries were significantly reduced due to my willingness to go offshore. And that’s how I know it works.
It was a no-brainer to do the exact same thing when I started Evolve to Grow. Apart from myself, the entire workforce of 4 is outsourced.
And just like Seight Custom Cycling, it’s working.
I believe the high turnover rate of failed SMEs (approx. 80%) could be massively reduced if owners were to look at offshore options.
Reducing overheads in this way yet still employing talented career-focused staff who are very grateful for the opportunity is the way forward for SMEs. In a competitive market, it’s the best way to scale.
I regularly go to Manila to onboard and train my staff and on the last two occasions I’ve taken some of my clients over to experience what outsourced staffing is like.
Almost all of them have engaged a staff member this way and have since been happy with their employee.
Here’s my challenge to you. If you don’t see the value in outsourcing, let me prove you wrong.
Like I have with others, I’m prepared to take you with me on my next trip.
I’ll work with you to identify roles that could be outsourced and handle dealing with a recruitment agency. And if you do employ an offshore team member, I’ll even help you onboard them.
Let’s chat and see why outsourcing is an option for you.