Wednesday, October 24, 2012

Would Outsourcing Benefit Most Associations?

Have you ever noticed our common practice when introducing ourselves (and our associations) saying the size of our budget and number of employees we have? It is almost as if CEOs and associations define themselves and their “worth” based on these two factors.
When I first read The World is Flat by Thomas Friedman, I was surprised to learn that Ford Motor Company had outsourced shipping of its cars to UPS.

Here’s Tom’s account:
  • In 2001, Ford Motor Co. turned over its snarled and slow distribution network to UPS, allowing UPS to come deep inside Ford to figure out what its problems were and smooth out its supply chain. “For years, the bane of most Ford dealers was the auto maker's Rube Goldberg-like system for getting cars from factory to showroom,” BusinessWeek reported in its July 19, 2004, issue. “Cars could take as long as a month to arrive-that is, when they weren't lost along the way. And Ford Motor Co. was not always able to tell its dealers exactly what was coming, or even what was in inventory at the nearest rail yards. 'We'd lose track of whole trainloads of cars,' recalls Jerry Reynolds, owner of Prestige Ford in Garland, Tex. 'It was crazy.'” But after UPS got under Ford's hood, “UPS engineers... redesigned Ford's entire North American delivery network, streamlining everything from the route cars taken from the factory to how they're processed at regional sorting hubs”– including pasting bar codes on the windshields of the 4 million cars coming out of Ford's U.S. plants so they could be tracked just like packages. As a result, UPS cut the time it took autos to arrive at dealer lots by 40 percent, to ten days on average. BusinessWeek reported: “That saves Ford millions in working capital each year and makes it easy for its 6,500 dealers to track down the models most in demand... 'It was the most amazing transformation I had ever seen,' marvels Reynolds. 'My last comment to UPS was: 'Can you get us spare parts like this?'”
I thought of this story when I saw a UPS bar code sticker on a Ford I rented a week ago.
And, again when I read about FedEx’s plans to reach out to major corporations with overnight computer repair. It's launching its TechConnect service with the repair expertise of a small niche computer player Getac, a Taiwanese-based manufacturer of "rugged" computers aimed at the military, law enforcement and utility workers.
These stories make me ask: “Why do most associations attempt to do everything with their own staff? Why aren’t they looking seriously about using outside specialists?”
As you may recall, I’ve been both a senior executive of a large international association and the owner of an association management company.

I’ve been a part of and watched as associations normally employ staff for all functions rather than look at outside firms who normally offer more expertise in specific functions.
I’ve wondered how some associations can justify the costs of housing staff in expensive cities in Washington or New York when they could save money by having “backroom functions” based in lower-cost cities.

The other night, the CEO of a “small” statewide association mentioned how he was outsourcing staffing needs. The association’s long-time (and highly paid) “executive assistant” retired. Rather that hire another staffer to replace the retiree, the CEO contracted with a meetings company to manage the association’s meetings. And, contracted with a CPA firm to provide bookkeeping services. He said “while I may not get instant answers from the contracts as I would from an on-site staffer, I cut my costs 50% and got more specialized support.”
Last week on the ASAE CEO Networking Online site, Mary Steele Williams, Executive Director of the Association for Molecular Pathology, answered a new CEO’s question on how to staff the human resources function:
  • “My philosophy is to outsource functions that are highly technical or specialized and that do not require a full time effort. I put HR services in this category. There are numerous laws and regulations, which change every year, as well as many tasks to remain compliant. I can outsource HR for 25% (or less) of the cost to have an FTE plus support their continuing education in the HR field. Take it on myself? Never! I know enough about HR to be convinced that it would not be a good use of my time.”
These and other examples convince me that associations need to take a critical look at all of its mission-centric functions and determine whether those functions can be provided better and more efficiently though outsourcing as opposed to hiring staff.

1 comment:

  1. Outsourcing is an excellent strategy in marketing and the its pro's actually outweigh the con's. It makes the product more accessible, and it's more cost-efficient.

    ReplyDelete