What is Management Outsourcing?

Alexis W.

Outsourcing involves using external resources to provide services traditionally performed by in-house staff. Management outsourcing, specifically, involves outsourcing traditional management functions to an entity outside the company. Management outsourcing can provide tremendous cost savings to employers.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

There are several reasons why a company might want to engage in management outsourcing. These advantages can be especially paramount when outsourcing a management function. Managers are usually higher paid and more senior employees, so the benefits to outsourcing these positions may be more pronounced than when lower-level positions, such as customer service, are outsourced.

The first benefit to management outsourcing is that it reduces operational costs. Second, it improves the overall focus of the host company. Third, the company can utilize its internal resources for other functions, and lastly, it can share risks and problems with its contracted company.

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Management outsourcing can also help companies come up with innovative ideas and solutions. Often, workers who manage people at the same company for years can begin to get stale. Management outsourcing can provide the company with a new source of ideas for motivating employees and coping with projects.

Like any other business strategy, management outsourcing has its disadvantages too. For one, outsourcing decreases direct communication between the manager and clients or employees. This hinders the formation of solid relationships and may lead to dissatisfaction or disloyalty. Some employees are simply unable to work as efficiently without the presence of an in-house management team.

Without effective communication and task delegations from an in-house manager, project completion may be delayed or its implementation may be unsatisfactory. A manager outside the company may be unaware of the corporate culture. An outsourced manager may also fail to understand the full implications and requirements of a project.

The host company is also in danger of becoming overly dependent on its outsourced partner. As a result, they may become disabled if the other party severs its ties with them or goes out of business. This can lead to the collapse of projects, or even of whole departments.

For management outsourcing to be effective, several conditions usually must be met. First, company goals and objectives must be completely understood by all members both in-house and out. A written statement of goals is usually helpful in getting everone on the same page.

Second, a clear vision and project plan must be presented and executed. Third, effective management of internal and external ties must be constant. Fourth, open communication must be exercised. Lastly, executive supervision and support, along with active involvement must be constant.

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