The Case Against Outsourcing

Outsourcing can save money and tap into expertise of talent in other locations, but there are some cases where it does more harm than good.

The Case Against Outsourcing
[Photo: Flickr user Simon & His Camera]

Web design. Content creation. Seasonal sales. Outsourcing certain tasks makes sense when a company lacks expertise or is time constrained.


But when it comes to making big changes in your business, outsourcing may not be the best strategy. In fact, it may even backfire, says Gregg LeStage, executive vice president for the leadership-development consultant Kotter International.

“IT brought the practice of outsourcing to the forefront, and for that, it’s a good use of hiring outside help,” says LeStage. “But when companies want to increase revenue or maximize efficiency, and they bring in management consultants that claim expertise in change, they could be putting their organizations at risk. In this role, outsourcing has a huge failure rate; 70% of the ideas don’t get implemented.”

Instead, LeStage says companies should consider “insourcing”–thinking of employees as internal consultants and creating teams that can brainstorm ideas. He offers five reasons why insourcing works better than outsourcing:

Keeping Things In-House Sends A Message Of Trust

You hired your employees because you believed in them, but when you bring in an outsider to give your company new direction, you’re telling your employees something different.

“The use of outside consultants for initiatives of strategic significance inadvertently sends the message that the change belongs not to the workforce, but to the ‘hired guns,’” says LeStage. “You send the message that you don’t think your employees are up to the task, and messaging is very important when it comes to loyalty.”

When you insource, you tell your employees that you value their ideas and their work.


The Best Solutions Come From The Front Line

Consultants tend to interact almost exclusively with senior leadership. Solutions to problems, however, tend to come from frontline employees.

“Sheer numbers in large companies don’t allow consulting firms to get down deep in an organization,” says LeStage. “That means information is limited in size and access, and you don’t get diversity of thought and input.”

Instead, tap the people who are closest to your customer. “Get into the wheels and cogs and supply chain of your business,” he says. “When you tap these employees, they will often bring the most relevant ideas forward.”

Solving Problems In-House Gives Power To Those With Ownership

When an outside expert provides a recommendation, he or she draws on decades of proprietary knowledge. But it has its limits, says LeStage.

“Companies are willing to pay for that acumen pedigree to come and tell them what to do based on data gathered from outside,” he says. “The problem is that the recommendations that cascade down into the organization can be hard to understand. If the person who has to implement the change can’t see themselves in the report, it becomes simply an intellectual exercise.”

When you don’t own the change, it’s extremely difficult to succeed with it, says LeStage. Insourcing, on the other hand, engages the hearts, heads, and hands of people who will be directly affected.


You Will Build Problem-Solving Skills

When change is outsourced, employees don’t learn how to tackle the next problem, and companies become dependent on consultants, says LeStage.

“The root of outsourcing’s flaws is that it often permits an executive team to entrust significant aspects of the thinking and doing to outside management-consultant firms,” he says. “Doing the real work builds the capability to do it again. You get muscle memory in terms of action, as well as in attitude and memory. When the next problem comes up, employees think, ‘I can do this. We have been entrusted to do this before.’ Then they’re ready to go.”

You Create An Opportunity For Engagement

Consultants rely on data and reports as their means for exciting employees, and employees who are forced to implement that change often disengage.

“Flip that over and invite people to volunteer for a large-scale effort, and you appeal to their minds,” says LeStage. “Research shows there is a great deal of discretionary energy at work that doesn’t get tapped. Employees may be disengaged at work, but most have the desire to become engaged. When you invite your workforce to take part in something, you tap that.”