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The pros and cons of business process outsourcing

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Inflation, high-interest rates and a war. It’s easy to see why a number of businesses are hesitant to pull the trigger on many new full-time hires. But what happens when you outsource and your corporate culture takes a dive?

Facing more and more budget concerns, organizations are returning to a mainstay of safety: outsourcing. Indeed, spending on so-called business process outsourcing (BPO) has clearly picked up from last year’s reported $202 billion—projected to grow to $212 billion this year in the race to fill key roles.

“We're not really talking much about the Great Resignation anymore, but it's still going on,” says Sherzod Odilov, Associate Client Partner in Korn Ferry’s Culture, Change and Communications practice. Our latest survey of HR leaders shows that nearly three-quarters of executives still worry about talent shortages and the impact on their organization’s growth plans.

But BPO is not a one-size-fits-all solution and requires careful consideration. It saves on costs and improves diversity but can also create other issues. Here is a look at how the two options stack up.

PRO: Cost

BPO can often be more cost-effective than in-house staffing. Indeed, over half of businesses reportedly outsource in order to cut costs. “You might be able to save money sourcing talent from lower-cost areas,” says Mark Royal, a Senior Client Partner for Korn Ferry Advisory. Further cost savings come from businesses being able to pick and choose only the specific services they want from a BPO, as well as being able to scale their workforce up and down per seasonal demand, adds Royal.

CON: Culture

Short-term hires can possibly not be around long enough to adapt to a company’s culture, and it only gets harder if the business has a workforce spread around the world. “I've seen organizations really struggle because of the different ways that [leaders] communicate their value systems and work through challenges,” says Sarah Jensen Clayton, a Korn Ferry Senior Client Partner leading the Culture and Change capability in North America. Our research from the World’s Most Admired Companies revealed executives from top businesses claimed culture was responsible for at least 30% of their market value. Culture clash, says Clayton, can cause delays in productivity due to the more intensive onboarding that outsourced workers may require.

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PRO: Diversity

There is a flip side to the culture argument, say experts. Outsourcing gives businesses the opportunity to bring in more diverse talent," says Odilov. “So, from a cultural standpoint, it may help you in that way,” he adds. Our research shows that well-managed diverse teams can significantly outperform well-managed homogeneous ones. The critical phrase here, say experts, is ‘well-managed,’ which requires inclusion—something that becomes more challenging when managing a widespread team. Also, for smaller teams that need quick access to capabilities they don’t currently have—like AI for instance—outsourcing can provide a time-sensitive solution. “They may give a business access to deeper expertise and experience,” says Royal.

CON: Reputational Risk

If word gets out that a company is moving jobs overseas and underpaying employees, experts say a business could be exposed to reputational risk. “Those types of issues can really damage a brand and do tend to be covered by the media,” says Clayton. The risk of IP and personal data theft also looms large as the US currently debates shutting down a major social media platform due to foreign ownership.

To learn even more insights from our experts or if you’re looking for help in expanding your workforce to achieve your organization’s vision, contact us to talk to one of our experts today.

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