How to make offshoring work for you

When recruiting local staff becomes virtually impossible, offshoring can help fill the void so your business can continue to grow. Here’s one SME’s experience with offshoring.

A retailer may not be the first business that comes to mind when you think of outsourcing offshore, but that is exactly what Perth-based kitchenware retailer Kitchen Warehouse has done with some of its employees.

My Business spoke with co-director Peter Macaulay about his experience in setting up and managing an offshore office, the key lessons he has learned in doing so and what advice he can impart to other SME owners considering a similar move.

Why would you look at offshoring?Map of Australia with sonar waves resonating from its centre

“My thoughts at the time were that we were a retailer; we were able to be online, but we were a retailer – we didn’t want to become a web developer or a web development company,” explains Peter.

“So we, at that point in time, were outsourcing our work to a third-party company in Uruguay, and that third-party company was acquired by a much larger business, and it became apparent that it wasn’t going to be a long-term relationship, that we needed to go and find a different solution.

“Researching the option, that’s when we made the decision to set up, or to hire some staff from the Philippines to run that development and design function for the business.”

And so Kitchen Warehouse now operates an office out of Manila in the Philippines, with around 14 staff taking on a range of back-of-house duties.

“To prepare for scale, efficiencies [in the Philippines] with some labour costs, and particularly things like graphic design, web development and finance, accounts payable specialists – we use that office rather than doing it here in-house.”

“You need to have in place very well-documented processes for staff to follow.”

Is it difficult to implement?

“It’s been a learning experience,” Peter says, although he believes that overall it has been a positive one, with many of those lessons improving efficiencies and operations within the broader business.

His main piece of advice is to document everything, so that there is no room for confusion.

“Particularity with certain job functions … you need to have in place very well-documented processes for staff to follow. You don’t want to have processes that require people’s own interpretation.

“So it particularly works well, for example the finance section, they look after the accounts payable out there, and that’s quite easy because everything can be step by step, a very structured decision tree, and the way the accounts payable works is that it comes full circle, that all the invoices for the month should add up to this, and so then there’s a check process in place as well.

“When you don’t have those processes and procedures, and things are a little bit airy-fairy, then it tends to be that there’s a lot of frustration because you don’t get the outcomes that you would expect.”

What are the main issues you have experienced?

According to Peter, the main concerns and challenges he has faced with the outsourcing of staff have been those that can very easily be foreseen.

“There’s some fantastic people in the Philippines, and a lot of the time the initial attraction ... for companies that outsource is the low cost, but as always – and it’s the same lesson here [in Australia] – that often ... hiring the cheapest option isn’t always the most beneficial,” he says.

“We said quite quickly that we’re better off paying a little bit more and getting top-grade staff, than trying to find someone at the lowest possible wage.”

”Make sure that everyone’s aligned to the same business goals."

Kitchen Warehouse director Peter MacaulayAre you concerned about the accountability of offshore staff?

“It probably still concerns me,” Peter (pictured left) admits.

“I think that broadly, the first step to that is making those people feel part of the business at large, as opposed to ... a robot in a different country, just not connected to the culture of the head office.

To achieve this, Peter says he flies to the Philippines to visit his Manila-based employees every few months, to engage with them, share the experience of what is happening back in Australia and outline the plans for the coming period.

“I think that’s the first thing in terms of making sure that everyone’s aligned to the same business goals, whether they’re in the Manila office or the Perth office.”

At an everyday level, though, Peter says there is not a great deal of difference between having employees based overseas, interstate or locally, provided you have adequate processes and systems in place.

“Having those – whether they are standard operating procedures and key measures – being able to ideally have key measures of whether someone’s succeeding in their job or not, helps to alleviate those concerns,” Peter says.

“And then lastly, there’s software that’s available these days, so you can have quite granular time tracking, about what time they’re spending on particular projects, and if you want to go as far as actually monitoring their work, there’s software available that will take random screenshots of their screens during the day.”

The need for the latter, however, probably speaks more about you than your employees, says Peter.

“If you’re at the point where you need to be checking that, then probably you haven’t done the first two points well.”

Overall verdict?

“It’s a heck of a lot easier when you’re sitting across the table from someone to make sure we’re all on the same page, [but] the world’s a lot smaller these days,” concludes Peter.

Check out other tips for SMEs on the My Business site about the benefits and pitfalls of offshoring.

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