If your organisation has been severely impacted by coronavirus you may be looking at cost-saving options and trying to avoid or reduce redundancies.
Before dismissing employees, first look at any and all outsourcing arrangements you currently have in place; reducing your commitments in this area can help you save jobs amongst your workforce and retain staff so that when things pick up again you can respond quickly.
Here are our top tips to reduce your external commitments with outsourcing partners.
Understand the financial commitments. Arm yourself with information and pin down exactly how much you are spending, and with which outsourced partners, so that you can easily identify where you can potentially make the most efficient savings. Expending time and effort reducing commitment where spend is low may not be efficient; if you need to act quickly, identify where to focus your attentions to have the most impact.
Check exactly what services are being delivered. Find out exactly what it is the various outsourced providers are doing for you, so that you can quantify how valuable the service is to the organisation and identify whether any of it can be delivered in another way. The services being provided right now may also differ from when the service was outsourced in the first place, due to ‘scope creep’ or changing priorities, so ensure you have an accurate understanding of the current position.
Speak to managers involved in using a service to find out how valuable it is and how much time or money it is saving them currently. Services you are assuming are ‘nice-to-haves’ might be absolutely vital, and vice versa.
Remember why you outsourced in the first place. You may have outsourced a service to reduce administrative burden, save costs, benefit from expertise you don’t have internally or to gain a level of independence to what is being performed in terms of external checks and balances. If you choose to now ‘in-source’ a service that is currently being provided externally, you are not just going to get the headline ‘glamorous’ bits back, you will get all the administrative and logistical burden involved in delivering that service as well, and if you were seeking external expertise or independence, you will lose those.
Make sure you are realistic about the implications of terminating an outsourced arrangement.
Prioritise. If you curtail or reduce your reliance on an external provider where the service is business critical, you will need to find another solution. To reduce costs more efficiently as well as reducing the administrative headache, prioritise those outsourced services you can manage without completely, rather than those which would involving you finding an alternative, such as getting existing staff to do the work instead.
Think creatively. Managing through crisis requires agility and creativity. If you need to bring a service in-house temporarily (or even permanently), and you are making changes to your workforce anyway, this could be a redeployment opportunity for someone (or for several people) albeit a temporary one. Who could deliver what you need? It’s essential to be creative in order to avoid placing an undue burden on an already-overstretched HR team, or other staff depending on the nature of the work involved.
Beware of TUPE obligations. Don’t forget that bringing an outsourced service back in-house could well involve a TUPE transfer, if there are staff working at the outsourced partner dedicated to working for your organisation. Steer clear of those as the cost saving will probably be minimal and the administrative and legal burden high.
Check terms and conditions carefully. All your outsourced providers should have terms of business setting out the circumstances under which the arrangement can be terminated, and sometimes provision for variation as well.
Check any notice requirements, restrictions on termination and whether there is any provision for varying the service during the term of the agreement. If some providers have more flexible terms, they may be a good place to start.
Don’t assume termination is the only answer. Rather than just seeking to terminate the arrangement consider what other options may be possible. Reducing service levels with a corresponding reduction in fees, stopping elements of the work the outsourced partner does, temporarily reducing or ‘pausing’ fees (to be recouped later) might all be options that could work.
Approach constructively. You will want to maintain good relationships with your providers and they will want to retain their clients, or get them back again once things pick up. So even though their income will be affected in the short-term, if they are pragmatic and commercial, they will receive the news of your need to make a change in a realistic manner, especially given the current climate.
A sensible outsourcing partner will want to engage in finding a solution rather than pushing back and potentially losing a client altogether.
In a dispute. If you really need to cease an external arrangement but there is not provision to terminate, and your provider is not being cooperative, you may need to consider other options for getting out of the contract.
Advice from a good commercial solicitor will be a worthwhile investment if you need to terminate an expensive arrangement but before you do that, go through the service level agreement or anywhere else the expected deliverables are set out in the contract. If your provider has not delivered on anything they are supposed to, this could give you some leverage.