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Optimizing outsourcing

September 1, 2006
by DANIEL C. BROWN
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Key questions to consider before selecting an outsourcing firm

Behavioral health, in comparison with other industries, has been relatively slow to turn to outsourcing as a management tactic. However, as organizations develop a better understanding of what outsourcing is and what it can bring them, the use of outsourcing is increasing among behavioral health organizations. Outsourcing isn't just being used for technology (a typical starting point for behavioral health organizations) but is being used for management, human resources, fiscal, marketing, clinical, regulatory compliance, corporate compliance, and quality improvement (regulatory and operational processes) functions.

Why Outsource?

It's no secret that behavioral health organizations, given industry pressures, need to be more efficient, effective, and innovative to remain successful. Organizations have to improve internal processes, strengthen competencies, reduce costs, and create new revenue centers. Using outsourcing as a management tactic can help organizations respond to these and other challenges. Outsourcing's benefits include:

Reducing costs.

An immediate benefit of outsourcing should be reduced costs, allowing resources to be shifted to other areas of the organization.

Refocusing.

Many organizations have problematic and underperforming areas, which continuously need leaders’ attention. Outsourcing can allow leadership to keep their focus, thus preventing a functional decline in performance.

Enhancing competencies.

Outsourcing should bring targeted competencies that the organization lacks. Outsourcing can reduce issues and costs related to employee turnover for contracted areas. A strong outsourcing firm also can offer the organization knowledge related to other areas of organizational performance.

Creating an improvement curve.

Outsourcing should reduce the learning curve and “accelerate” performance improvements in outsourced areas. Outsourcing firms should bring best-practice standards and processes, implementation knowledge, and the resources required for implementation.

Is It Right for You?

When considering outsourcing, leaders should consider cost and performance in relationship to the organization's immediate and strategic needs. What could the benefits be? Could the “right” outsourcing firm do the job better for less costs? What else could be brought to the organization if you outsource? What are the disadvantages? Major considerations include:

Organizational culture.

Does outsourcing “fit” with your organization's culture and management style? Not all organizations and management teams are ready to “open up” and “share” control with outsourcing firms. Will your organization lose control or gain more control? How does your organization handle change? Will your management team be held more accountable for its performance?

Strategic direction.

Will outsourcing support the organization's strategic direction and help your organization keep its strategic focus? Can outsourcing help provide the resources for your organization to grow, maintain its size, or downsize, depending on your strategic initiatives?

Cost.

What is the current cost to the organization of the area to be outsourced? How does this compare with the cost to outsource? When looking at costs, organizations should consider salaries, benefits (including holidays, vacation days, and sick days), management resources, training, equipment—everything that relates to having employee(s) on the payroll.

Organizational performance.

If your organization is underperforming in certain areas, processes, or functions, this typically will negatively influence the performance of at least two related areas. Will outsourcing positively affect the performance of other areas of your organization?

What Should You Outsource?

How do you decide what area(s) to outsource? First, as you look at your organization and its operations, consider what are the most difficult, time-consuming, or expensive jobs. What areas continue to be problematic for your organization? Are there areas that require targeted expertise? What areas are underachieving? Consider the organization's core and noncore areas. You will identify some as “hands off—many times these are your organization's core functions—while others will seem to fit well with outsourcing.

How to Select an Outsourcing Firm

Outsourcing's effectiveness and success depend on the firm(s) you select, as well as your ability to measure their performance with preestablished outcomes. With an outsourcing relationship you are seeking performance, not just advice. Many independent consultants, as well as consulting organizations, have a difficult time moving from a traditional consulting role to an outsourcing role requiring performance and implementation. Some considerations for selecting an outsourcing firm include:

Experience and references.

Experienced outsourcing firms know what to expect, how to deliver the resources they require, and how to manage their resources. How long have they been providing outsourcing? What types and sizes of organizations have they worked with? Check references.

Culture.

How does the outsourcing firm's business culture match up with your organization? Will the firm be flexible in scheduling? Is the firm collaborative? Will it understand your organizational priorities and the role they have in your organization's success? Does the firm's values align with your organization's values?

Pricing/value.

Will the outsourcing firm improve performance and save you money? Will there be hidden costs? Will the firm provide its own administrative support?

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