Employ or Outsource? 'Virtual teams' and other modern business trends

Employ or Outsource? ‘Virtual teams’ and other modern

business trends

http://www.jpabusiness.com.au/

jpabusiness.com.au +61 2 6360 0360 2

Table of Contents

Introduction ........................................................................................................... 3

Chapter 1: Business owners are from Mars, employees are from Venus (with apologies to John Gray) .......................................................................................... 4 Tips for achieving employee flexibility and business stability ......................................................... 5

Chapter 2: Outsourcing and the ‘virtual team’ ........................................................ 8 An outsourcing success story .......................................................................................................................... 9 Tips for managing outsourcing partnerships and virtual teams ................................................ 10

Chapter 3: Operating your business in a global marketplace ................................. 13 Positive impact of globalisation on JPAbusiness ................................................................................. 14 Global economy changing the way our clients do business ........................................................... 14 Managing an offshore relationship .......................................................................................................... 15 How offshore and outsource partnerships are affecting business value .................................. 15 Take advantage of technological advances .......................................................................................... 16 Challenge of operating in a global economy: hyper competition ................................................ 17 Tips for operating in a global economy .................................................................................................. 19

Chapter 4: Free JPAbusiness Outsourcing Checklist ............................................... 21

Disclaimer: The information contained in this eBook is general in nature and should not be taken as personal, professional advice. Readers should make their own inquiries and

obtain independent advice before making any decisions or taking any action.




Introduction Comments by James Price and Jeremy Frew JPAbusiness Pty Ltd

he past 15 years have seen a rapid expansion in globalisation, alongside technological advances that have forever changed the face of business.

And it’s not just the Unilevers and Nestles of the world that are feeling the effects.

Small to medium-sized enterprises (SMEs) like JPAbusiness and many of our clients are also affected by globalisation, technological advances and the resulting changes in business and workforce management.

This new business landscape presents a number of advantages for SMEs, such as lower costs of production due to the ability to outsource manufacturing and services from developing nations.

However there are also new challenges, including hyper competition and the complexities of managing ‘virtual teams’.

In this eBook we’re going to examine three current issues for small to medium-sized business owners and managers:

1. Staff flexibility versus business stability 2. Outsourcing and the virtual team 3. Operating your business in a global market

We’ll take a look at how these issues are impacting businesses and give tips to help you turn them into positives for your own enterprise.

We’ve also created the JPAbusiness Outsourcing Checklist to help you decide when to take advantage of the myriad outsourcing services and opportunities available in today’s market, and what to retain as core, in-house activities.

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Chapter 1: Business owners are from Mars, employees are from Venus (with apologies to John Gray)

Employees seeking flexibility

Employees are operating in an increasingly complex environment in which technological change and connectedness are bringing family and personal priorities into the workplace, and work into the home environment.

Advances in mobile devices such as tablets and smartphones provide access to data, emails, texts, reports, notifications, payments and receipts in the field, and at home. No matter the location, information is becoming instantaneous.

Unfortunately, these technological advances have created a growing expectation, including from customers, that people will be available 24/7, creating a work and life imbalance.

In order to address these competing demands on their time and to achieve the work-life balance we all seek, employees are seeking increased flexibility in how they manage their work day.




Employers seeking stability

Juxtaposed against the employee’s desire for flexibility is the business owner’s need for stability, consistency, repeatability, quality and customer focus.

If we’re not careful, these two goals can be two trains on different tracks.

So, as a business owner or senior manager, how do you deal with that dichotomy of interests in the workplace?

I like to say that business owners are from Mars and employees are from Venus. There really is a divergence of interests, but with a bit of effort and a realisation that these two ‘planets’ are in the same universe, a harmonious ‘marriage’ can be achieved.

Tips for achieving employee flexibility and business stability

Tip 1. Ensure expectations are aligned

Business owners should constantly check and refine their expectations of their employees and the roles they have within the business, against the employees’ expectations. Check if you have a match or a mismatch. If it’s the latter, do something about it!

Tip 2. Focus on the what, not the how

Once you’re confident both employer and employee expectations are aligned, focus on what outcomes you want the business to achieve rather than solely on how those outcomes are achieved.

Manage employee performance based on delivery, not just the process of getting there.




For example, issues such as whether the employee is working from home because they need flexibility to handle family issues, or working shorter hours in your office, or working at a hot desk shared by five other employees, or doing a mix of those things, becomes secondary.

What’s most important is whether the expected outcome is being delivered in a consistent manner.

Tip 3. Accept that every employee is different

In our eBook Managing Staff for High Performance we talked about the fact every employee is different and people cannot be treated like robots.

Every employee has a different work-life balance threshold, driven by their diverse personal and career goals.

Business owners and managers need to create a positive work environment and culture that meets the business’s requirements and is also conducive to the employee achieving their full potential.

The old autocratic style of employee management may not be gone yet, but – with the decline in manufacturing in Australia, disaggregated business models and the shift to higher value, services sector jobs – it’s certainly on the way out.

http://www.jpabusiness.com.au/e-book/managing-staff-for-high-performance

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Tip 4. Focus on staff health and wellbeing

Managers need to monitor their employees’ behaviour to ensure they’re getting the best out of them and providing a workplace that provides the opportunity to grow effectively and efficiently.

A culture that not only encourages, but mandates, work-life balance, is important for both employee health and wellbeing, and long-term business success.

In her book Sleeping with your Smartphone, academic Leslie Perlow points out the negative impacts of getting caught in a ‘cycle of responsiveness’ created by advances in communication technology.

In this cycle, the more ‘available’ you are to teammates, superiors and subordinates, the more they will expect of you and the less productive you will become.

Among other things, Leslie recommends setting a predictable time each week to ‘experience the joy of turning off’ your wireless device.

This advice is just as applicable to you, the business owner or manager, as it is to your staff.




Chapter 2: Outsourcing and the ‘virtual team’

Fancy term for an old idea

Your ‘contingent workforce’, or your ‘virtual team’, is the part of your business team that provides services or works on particular projects for your business, but usually doesn’t operate regularly from your office. They’re here, but they’re not here!

‘Virtual teams’, ‘virtual resourcing’ and ‘contingent workforce’ are fancy ways of saying outsourcing.

They’re modern terms, but their development is based on the very old business adage of ‘do what you do well and rely on others for the rest’.

It’s about businesses focusing their efforts and resources directly on core activities, and then marshalling a range of service providers to assist them with non-core activities.

Why has this suddenly become more of a trend and an opportunity for business?

The more agile and flexible a workforce can be, the more agile and flexible a business can be.

A major consequence of globalisation, technological advances and the hyper competition they’ve produced is that businesses are increasingly using a flexible, contingent, geographically dispersed workforce to drive efficiencies.

Resources are often ‘employed’ to fill a specific role for a period, based on project or task deliverables.

The use of contractors, part-time and casual staff, consultants and advisors, is now common among SMEs and larger businesses alike.




At JPAbusiness we use the contingent workforce for roles such as marketing and administration, legal and accounting, IT and online, and specialist knowledge-based roles for particular projects.

We meet with some of those providers regularly, while others we may only see once a year and in the interim communicate remotely as required.

An outsourcing success story

Some of your outsourcing resources may be ‘virtual’, in that you never see them face to face, but others will be traditional outsourcing, where you still have regular face-to-face meetings.

One of our clients is a good example of how traditional outsourcing can be used successfully for non-core activities.

This client is a large player in Sydney’s wholesale and service market but the reality is that all their inward receival, picking, packing, pallet stacking and product delivery is done by someone else – an outsource party.

When I visited their warehouse recently, there were 60 people working in the warehouse but only about five were employed by our client.

All the other people’s salaries were paid by an outsource party who was delivering to a set of specifications.

They were doing part of the process which was not the core business of our clients.





Well-documented agreements key to good relationship

The success of our clients’ outsourcing ‘partnership’ is based on clear expectations on both sides.

In a recent blog we spoke about how important it is to have solid supply agreements with suppliers and outsourcing parties providing services, so the expectations of all parties can be understood.

Our clients’ expectations – and his outsourcing service provider’s expectations – are clearly documented in a service agreement, understood by both parties, and monitored regularly.

Tips for managing outsourcing partnerships and virtual teams

Tip 1. Figure out what you’re good at and concentrate on doing it well

Decide what you need to control and do yourself and make sure you set your business up to do that really well. Then decide what activities could be provided by virtual resources, advisors or outsourcing parties and service providers on a more efficient, marginal-cost basis to help support your business.

Tip 2. Regularly revisit Tip 1

When deciding what to outsource and what to maintain control of in-house, understand that your needs will change over time as your business changes – it’s not a ‘set and forget’ task.

Tip 3. Where you can, get agreements documented

These agreements need to detail the expectations on both sides of an outsourcing or virtual team relationship. This will ensure you follow Tip 4…

http://www.jpabusiness.com.au/blog/posts/james-price/2015/01/18/what-the-2015-economic-outlook-means-for-you




Tip 4. Ensure your expectations are aligned

Communicate, communicate, communicate.

Tip 5. Brush up on your project management skills

Today’s manager has to be an effective project manager, as many operations are now run ‘as a project’ to deliver a particular outcome.

Consider your outsourcing and virtual resources in this project management sense. And remember, they’re running services for a range of parties so you’re competing with other clients for their time. Go back to square one and ensure expectations are clear on both sides regarding projects, services and timelines for delivery.

Tip 6. ‘Conduct’ your team

Managers must be able to ‘conduct’ a diverse team, with an equally diverse set of requirements, from ethics and culture to virtual team performance, managing specialist and technical resources, delivery to business requirements, role and job diversity.




Employee management requires more than managing staff in your physical office: it includes managing your outsourcing partners. You may not see them regularly, but these outsourcing parties are key to delivering projects, so you must think of them as part of the team.

In fact, business owners and managers in this environment may need to think of themselves as a conductor where the string section of the orchestra is not visible!

Tip 7. Nurture a shared, positive organisational culture

In the increasingly competitive, globalised organisation environment, managers need to understand and influence teams containing members with a diverse range of values and cultures.

A culture of shared vision, flexibility and adaptability will provide for a more performance-driven business, while managers who fail to strike the right cultural balance will hinder their business’s operations.




Chapter 3: Operating your business in a global marketplace

The 21st century has seen a blurring of geographic and cultural boundaries, resulting in the creation of a larger, more dynamic and competitive environment for human resources, products and services.

On the upside, these changes have removed many barriers between developed and developing nations.

Businesses can access a wider range of services from product design and manufacturing, to specialist IT, marketing and other business services (such as financial and planning advice), often at a lower cost or risk, or both.




Businesses also have access to a much wider market for their own products and services.

The Free Trade Agreements Australia has negotiated with China and Japan are simple examples of the way the world is opening up for Australian businesses. These FTAs are ‘long burns’ but they’re gradually removing traditional barriers that have excluded our businesses from accessing those markets.

Positive impact of globalisation on JPAbusiness

Being a regionally located, service-based business, globalisation and the accompanying technological advances have allowed JPAbusiness to expand our services to clients from the US, Japan, UK, NZ and throughout Australia.

As we tell our clients, if you’re a business in Orange, NSW, there’s no reason you shouldn’t be focused on customers in Orange County, California.

These days we find there is declining interest from customers in where we are located, and they rarely expect us to be based in the same city.

Given this, we must take care to ensure we have a clear understanding of each client’s specific requirements, locations, time zones, cultures and expectations, tax and other regulations.

Global economy changing the way our clients do business

One example of a JPAbusiness client positively impacted by globalisation is the case of a retail and wholesale business which produces outdoor products.

Driven by globalisation (including the competitive cost of cheaper imports and improved quality control in offshore markets) the business switched from 100% Australian manufacturing to now sourcing 60% of its product range from manufacturers in Singapore, Taiwan, China and India.




This business turns over $3-4 million a year so it’s a significant business, but it’s not huge. By moving manufacturing offshore their margin is double what it would be if all their products were produced in Australia, while product quality has been maintained.

While reducing their labour costs and increasing efficiency, the change has also allowed the owner to focus on selling the products – a core business activity.

Managing an offshore relationship

Managing business relationships that cross language and culture boundaries greatly increases complexity and risk, so it may pay to find a credible, reliable agent that can act on your behalf.

In the case of our client who manufactures outdoor products, they have multiple offshore suppliers but have chosen to have one agent who acts as the go-between between themselves and these multiple manufacturers.

Their agreement is between themselves and that agent.

How offshore and outsource partnerships are affecting business value

As we conduct valuations for clients looking to sell and help others through the business sale process, it is becoming increasingly apparent that prospective purchasers doing due diligence want to pressure test the agreements businesses have with their offshore and ‘virtual’ service providers and suppliers.

It is now more critical than ever that business owners take time to formalise these arrangements where you can, particularly the key ones, because documentation will add dollars to your business value and improve the interest level in a sale process.

http://www.jpabusiness.com.au/selling-a-business/valuations-and-market-appraisals




In the case of our outdoor products manufacturing client, for example, business value is now focused on the documentation which outlines their supply agreements and defines their relationship with the agent, rather than on a large manufacturing workforce with investments in plant and equipment.

Your agreement should cover off on key matters such as both partners’ expectations of who does what, what’s the service level, what’s the term of the agreement, etc.

That’s not easy in every market and China is one example where it’s hard to get a documented and robust agreement.

Take advantage of technological advances

Technology has been an enabler for JPAbusiness. It provides the opportunity to service clients nationally and internationally, share information, access information remotely and market on a much larger scale than traditional marketing allowed.

Communications both with clients and internally has been enhanced, and improved functionality of mobile devices means we can now service clients in a more timely manner.

Technology such as Cloud-based sharing services (for example, Dropbox) also allows JPAbusiness to run secure data rooms for parties conducting due diligence on a particular business opportunity.




For example, in 2013 we operated an internal, secure data room with sale participants from the EU, US, NZ and Australia accessing common information on a client’s business based in southern regional Queensland.

Challenge of operating in a global economy: hyper competition

The blurring of boundaries due to globalisation and technological advances has produced hyper competition in many sectors.

Businesses can now source, manufacture, design and produce products in emerging economies for a fraction of the costs of developed nations, putting pressure on management to change business models, secure supply lines, monitor quality, reduce costs and increase productivity to remain competitive.

Managers also can’t assume their competitors are based nearby, experiencing the same geographic, economic and environmental pressures. As long as the competitor has an online presence and access to a reliable distribution network, they could be based anywhere in the world.

In our case hyper competition has meant JPAbusiness is competing with a much larger number of providers, with a range of value propositions.

These firms are outsourcing and developing information and client documentation in emerging economies, impacting our ability to compete if the value proposition is solely or substantially price focused.

We’ve had to refine our point of difference and competitive advantage to ensure our competitiveness in a globalised economy.




Staff seeking opportunities to grow

Hyper competition also means the workforce is continuously identifying and evaluating opportunities, learning and improving skills and capabilities to respond to these new opportunities.

To remain competitive and to ensure staff retention, organisations must recognise the importance of giving staff the opportunity to continuously improve, use and share these skills and capabilities.

Customers more demanding

Advances in technology and the resulting hyper competition have also changed how people interact within business and the economy.

One effect has been to make customers more discerning and demanding.

An online and digital presence has become a critical component for business, with phone, emails and live chat online often provided 24/7.

It’s all about providing the customer with choice regarding how they wish to interact and experience the purchasing process for a particular product or service.




Tips for operating in a global economy

Tip 1. You need a solid proposition, product and point of difference to be successful

Whether you use online models or physical models, in a retail sense, if all you’re doing is what everyone else is doing, it’s doomed to a mediocre result.

Tip 2. Geography is no longer a limiting factor – unless you want it to be

We know of a retailer with an apparel business based in Blacktown in Sydney, who only wants to service western Sydney. There is no reason, in the globalised economy, that business couldn’t be servicing a national market via online technologies that leverage their existing business model, but they’re happy doing what they’re doing.

Tip 3. Document outsourcing agreements

Make sure you have a solid agreement, understanding and relationship with your offshore service providers and, where possible, document it.

Tip 4. Consider using an agent to manage offshore relationships

Managing business relationships that cross language and culture boundaries greatly increases complexity and risk, so it may pay to find a credible, reliable agent that can act on your behalf, especially during the early stages of the process and relationship.

Tip 5. Understand your market

Ensure you have a clear understanding of service providers’ and customers’ locations, time zones, cultures, tax and other regulations.




Tip 6. Continuous learning

Provide continuous learning opportunities as a way of retaining valuable staff.

Tip 7. Have a digital presence

Ensure you have a digital presence and/or flexible contact processes to allow timely communication with discerning and demanding customers in diverse markets.




Chapter 4: Free JPAbusiness Outsourcing Checklist There is a very old debate in the farming industry which ties in nicely with our earlier chapter on ‘Outsourcing and the Virtual Team’ and which highlights an issue relevant to almost all business owners and senior managers: the need for control.

This is how it goes:

If I’m a grain grower in a mixed farming area, where I might only produce 500 to 1000 acres of grain or fodder crop a year, do I need to invest in my own plant and equipment i.e. tractors, seeders, headers and hay-making equipment? (This could represent a $250,000-$750,000 investment.)

Or, do I use a contractor for those services, because I don’t have sufficient critical mass of volume to sustain that investment and economies of scale in terms of the ultimate cost of production?

When it comes to the answer, there are two different schools of thought:

1. “Outsourcing makes perfect sense because it’s a wiser use of capital and I can procure those services on a marginal-cost basis when I want them.” or…

2. “Bugger that – I’m not going to rely on Joe Blow the contractor because my hay-making needs to be done when it’s ready and I don’t want to be in line with someone else not knowing if my hay’s going to get cut on time – I want to be in control!”

So the inertia stopping the use of outsourcing and virtual resourcing, not just in agriculture but in a range of industry sectors, is the business owner’s perception of control.

It’s a legitimate concern because if you don’t have control there is a risk an important task won’t be done when you need it.




So how do you decide which business activities you need to control, and which can be safely outsourced?

We’ve created a free Outsourcing Checklist to help you as a business owner or senior manager decide where and when you can use outsourcing, or virtual resourcing.

Click on the Checklist image at left to download a free copy or go to http://www.jpabusiness.com.au/e-book/jpabusiness-outsourcing-checklist

The Checklist encourages you to look at the key components of your business value chain and rank your core expertise in each of them.

For any of these where you rate 1 or 2, consider and explore opportunities to use an outsourcing partner and formally document the expectations of both parties regarding what’s to be provided when, and for how much.

If your situation precludes that sort of service agreement and you can’t guarantee a sufficient level of consistent delivery and predictability (i.e. a substitute for direct ‘control’) then that's a good benchmark to indicate that particular activity may not be right for outsourcing.

Talk to your business advisor or contact the team at JPAbusiness if you need support finding the right option for your business.

JPAbusiness Pty Ltd Phone: +61 2 6360 0360 This work is licensed under the Creative Commons Attribution 4.0 International License. ABN 62 150 534 099 www.jpabusiness.com.au To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/.

JPAbusiness Outsourcing Checklist

Welcome to the JPAbusiness Outsourcing Checklist

mproved communications and the global economy mean businesses are increasingly using outsourcing parties to drive efficiencies.

Contractors, part-time and casual staff, consultants and advisers, are now common among SMEs and larger businesses alike.

We’ve created the JPAbusiness Outsourcing Checklist to help you determine if your business could benefit from utilising outsourcing resources.

The Checklist can also be used to highlight which areas of your business are ‘core’, or critical, functions which should most likely be retained in-house.

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http://www.jpabusiness.com.au/docs/default-source/e-books/jpabusiness-outsourcing-checklist.pdf?sfvrsn=0

http://www.jpabusiness.com.au/docs/default-source/e-books/jpabusiness-outsourcing-checklist.pdf?sfvrsn=0

http://www.jpabusiness.com.au/contact-jpabusiness



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