Outsourcing: A Growing Phenomenon

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April 01, 2002
CounterPoint
Neil Holm

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© 2002 Hospitality Upgrade. No reproduction without written permission.

Outsourcing is a smart way to do business. Big hotels and restaurants in the hospitality business have outsourced non-core work for years, turning to dedicated experts for efficiency and cost savings. And now even smaller businesses are choosing to fill out their organizations with outsourced expertise in the areas where they lack resources, capital and knowledge.

The traditional organization chart in the hospitality industry is branching out and shifting to include not only internal departments but also external suppliers.

These companies pay for in-depth expertise only when they need it, avoiding full time salaries, training and increased management costs. Outsourcing can lower costs, improve organizational focus and increase speed and flexibility of businesses. With effective outsourcing partners, hospitality businesses can powerfully achieve their corporate objectives in ways they could never do themselves.

Outsourcing is a quickly growing phenomenon that works well for many hotel, restaurant and foodservice providers. Now there are even Web sites (www.firmbuilder.com and www.outsourcing-journal.com ), business books, organizations and seminars dedicated specifically to the overarching topic of outsourcing and its benefits.

The recent 2001 Outsourcing World Summit highlighted that especially in this slowing economy, executives are feeling the pressure to find new ways to grow revenue and reduce costs – outsourcing being one effective method. Of the 500 attendees surveyed, the two most often cited goals for outsourcing were to reduce costs (36 percent) and to focus the organization on its core business (36 percent). Information technology in particular continues to be the most-mentioned area to be outsourced, with 34 percent of the attendees stating their company’s most significant project would be in IT.

When to Outsource
If an ongoing problem is keeping your hotel, restaurant or foodservice business from growing, outsourcing should be a serious consideration. Outsourcing might work well for you when:

  • Your business is stuck in a certain area and you don’t have the capital, resources or know-how to fix the problem yourself.
  • You avoid fixing the problem because it is never a high enough priority and you can never dedicate the time or resources to the recurring difficulty.
  • An outside firm can do the job more quickly and efficiently than you can in-house.
  • You are unable to focus on the success of your core hospitality business because you are repeatedly revisiting the same problem.

Once you’ve decided to outsource, gather names from others in the hospitality business to identify potential outsourcing partners. If possible, choose several companies and compare their offerings, costs and credentials in a formal request for proposal. Often, there are few providers to choose from, but even then make sure you speak with their executives, their customers and to experts in their industry to feel comfortable that the partnership can be an equitable one.

Managing the Outsourcing Relationship
Once you’ve decided to work with an outsourcing partner, it’s important to realize that customers also play a crucial role in the success of the partnership. Customers can sometimes be unhappy with a supplier without seeing their own contribution to the problem. Mixed messages, unclear goals and responsibilities and miscommunication can hamper the effectiveness of your outsourcing partner.

Treat your outsourcing provider as part of your hospitality business and keep these tips in mind:

  • Develop clear goals, responsibilities and an overall strategy for all those involved.
  • Insist on open communications from both sides. Talk continuously about what’s working and what isn’t.
  • Negotiate a win/win situation aiming for a long-term relationship supported by a continually renewable short-term contract.
  • Discuss the possibility of the relationship going sour and how both parties will handle the fall out. Try to anticipate possible conflicts and find ways ahead of time to minimize the likelihood of them happening.
  • Be clear on who is making what decisions (and on what basis), who will be consulted prior to any decisions, and who will be informed (and through what mechanisms) after the decision has been made.
  • Develop criteria to evaluate the performance of both sides of the outsourcing partnership and monitor them regularly.
  • Adjust the partnership where needed to achieve previously defined goals.

It’s no longer a matter of IF you should outsource, but more a matter of WHEN and HOW. Outsourcing partnerships will succeed if you manage the relationship diligently and realize that outsourcing clients also have an important responsibility – to communicate in a straightforward and honest way to help outsourcing partners do their jobs effectively. Outsourcing partners can really help your hotel, restaurant or foodservice business grow.



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