How to kill an outsourcing initiative.
- Lack of executive sponsorship
Lack of executive sponsorship is the number one reason why outsourcing initiatives don’t get off the ground. Time and time again, we see small business owners or CEOs with aspirations of building an offshore capability pass on the responsibility of the initiative to management. The strategic reason you create an offshore capability is to transform your cost base and free up funds for growth-related activities. Management rarely shares the same strategic thinking. Also, they often don’t have a P&L responsibility and thus are not commercially motivated personally or professionally.
Meanwhile, management finds it easier to manage team members who work locally and feel they can better sustain their organisational culture. Given the misconceptions about sending work to the Philippines, management doesn’t need much imagination to find several reasons not to build an offshore capability.
Granted, any worthwhile change is hard. However, it requires executive sponsorship to take management on a journey and better align their goals with the company’s strategic direction. Sadly, if you leave this initiative to your management team, the transformation is “dead” before it begins.
2. Poorly designed talent strategy
The most common mistake when exploring the talent market in the Philippines is becoming intoxicated with how cheaply you can hire folks in the Philippines. The current minimum daily wage in Makati, the financial district in Metro Manila, Philippines, is 610 PHP per day in January 2024. That’s equivalent to 13,268 PHP per month in month basic salary. In comparison, entry-level customer service roles that require no work experience pay 20,000 PHP per month. However, to maximise the value your offshore talent can deliver from day one, you need to make sure your talent comes with a few years of experience working in a Western business, so they have developed business-grade English and have very little or no cultural gap. For instance, we recommend that our clients pay a minimum of 35,000 PHP per month as a monthly basic salary to attract super-talented customer service professionals. At the other end of the spectrum, a full-stack developer with a few years of experience can expect over 150,000 PHP in monthly basic salary.
Save money in the Philippines, but don’t hire “cheap labour”. Hire cheap labour, and your offshore initiative is doomed to fail. Pay a premium in Filipino terms, and you will be pleasantly surprised by how capable Filipino talent can be.
3. Poor change management
Your outsourcing initiative will “live and breathe” based on your Australian management’s ability and willingness to set up their Filipino team members to succeed. If the Australian leader responsible for the first few Filipino talent hires is not 100% onboard and committed to their success, your outsourcing assignment will fail.
4. Pick the wrong outsourcing partner
Not all outsourcing providers are created equally. Please take the time to understand what you want from your outsourcing partner now and in the future. At one end of the spectrum, there are low-cost, low-service providers. At the other end, there are premium providers with a higher touch service model. Like most things in life, you get what you pay for. Time and time again, we hear of folks with well-established Filipino teams who, despite finding the bottom of the market in terms of price, are unhappy with the level of service they are receiving from their provider.