Herman Blog

Validating Outsourcing With a Data Driven Approach

Written 2015-10-22 by Chris Bianchet
whiteboard-graph.jpg

Here’s a sobering statistic: Did you know that it has been estimated that the costs incurred due to the turnover of one employee are somewhere between 16 percent (low paying jobs) to 213 percent (for highly educated or specialized jobs) of their annual salary? While the disparity is great, the underlying meaning here is that businesses cannot ignore or underestimate the high costs involved in losing any staff members.

In the integration business, we want to keep all of our high producing staff happy, and for many integrators some of their most important staff are their most highly trained: installers, engineers, and programmers. These are the folks that perform billable work, and often times their success and efficiency are the difference between profitable jobs and the alternative.

The challenge is this type of talent is not always easy to acquire. In the integration business, with RFPs and the like, work is not always steady. So, when projects finally start going from RFP to full production, many integrators first response is to rush out, and hire staff. This however may not always be the best idea. Not only is it tough to find great folks to fill these roles on demand, it is also quite costly to source, and then train those that require training – all in the hopes that this bump in workload will continue.

Today, the best thing we can do is turn to data, coupled with experience, to help determine the best approach for handling increased sourcing demands for our businesses. I also believe taking a more data driven approach is a good way to look at how integration companies handle times of growth overall, because in the end our businesses need to be profitable and customer centric.

Let’s look at a couple of examples.

Scenario A – Seasonality: When integrators deal with seasonality they often seek to hire resources to fill for that growth period. However, it is not only hard to find great installation or programming talent for part-time or seasonal work, but such hiring requires an investment in onboarding, training, and then off-ramping when things slow down. This turn style approach to personnel and talent is hard on a company both financially and from an employee morale perspective.

With Outsourcing Labor: An outsourced partner approach is far more predictable and scalable. A business can work side by side with its outsource partners to create a resource plan and secure pricing as seasonal work approaches. With costs being directly allocated to those resources the company knows the bottom line impact as they utilize seasonal help. This eliminates costly recruiting and onboarding, and creates a more transparent transition when work slows down; no hiring just to later let them go.

Savings = Recruiting Costs + Training + Onboarding

Scenario B – Labor Spike: Although seasonality has its challenges, sometimes the hardest thing for an integrator to deal with is an unpredicted labor spike, for instance a project that pops up over the Thanksgiving or Christmas holidays. Finding help at this time would be darn near impossible so your options are to try and hire (as said, near impossible), bill over-inflated overtime hours, and/or leverage outsourced resources.

With Outsourcing Labor: Unlike the seasonality issue, often labor spikes come with little to no warning. When this happens you want to jump on these projects quickly, but, you also don’t want to eat up any potential profit by having to exhaust your workforce, pay overtime, and have projects done sloppily, as employees rush and you struggle to meet deadlines. Outsourcing can provide on demand resources with the exact expertise you need, and can often be obtained with little to no notice, resulting in more work done than typical capacity would otherwise allow.

Improved Profit = Traditional Overtime Cost – Outsource Labor Cost

These are just a couple of fairly common scenarios by which to compare and contrast your current methods for acquiring resources, whether on demand or with some advanced planning time. Within the integration business, there are similar circumstances for acquiring engineering labor, programming labor, as well as other technical roles like service technicians or even project management.

After two decades in the integration space and thousands of successfully completed projects, I feel confident saying that hired growth needs to be based upon the most predictable set of circumstances possible. Elastic growth is best managed through outsourced labor partners until that growth becomes steady enough to warrant a direct, full-time hire.

With so much time and money going into educating technical employees in the integration space, each hiring decision needs to be made deliberately. This is where outsourced partners not only help, but are able to provide you with a improved bottom line, through measurable savings in both hiring costs and project efficiency.

What has your bottom line experience been like with outsourcing labor? Have you been able to drive savings or improve project delivery? We would love to hear your stories.

Tags: Blog | A/V Professionals | Instructional