Should your business outsource?
Ed Chan
Founder & Non-Executive Chairman, Chan & Naylor
In most professions, outsourcing is still a very controversial topic. With the risk of sharing my thoughts that may be contrary to your own views, I do believe there are some big-picture benefits of outsourcing. At the very least, it is a topic that deserves an open, healthy debate.
Late last year I had a planning day with an Australian accountant who shared a view on outsourcing similar to many others I have discussed the topic with. He was totally against it and believed it to be an immoral activity. He said that we should be loyal to Australia, and both hire Australian staff and buy Australian goods.
I explained that China has reduced its poverty from 88.6% to 1.47% through trade and capitalism. As entrepreneurs increased their wealth, they created the tide that raised the wealth of the average person in the street. This has had a significant impact on their society and pulled many people out of poverty. All of this was done through trade.
Straight after the Second World War, Japan’s wages were extremely low, which made their products were very cheap. Through trade, their wages and standard of living increased. Today, Japanese wages are very similar to wages in Australia. We have seen the same in China more recently, where their wages and goods were cheap. But today, their wages are higher.
Australia’s unemployment rate has always been around 5% in modern times, which is full employment. The economy is growing at around 3% GDP, which will keep the unemployment rate at 5%.
We have lost our manufacturing industry, yet are still at full employment. Even when the car manufacturing industry in South Australia shut down and 6,000 lost their jobs, employment has been absorbed into other industries.
If we have full employment—and we are right up there in the top 10 wealthiest countries in the world—I cannot see why we should not help another country. When we in Australia—and other privileged countries—are comfortable, we can take less-fortunate people out of poverty by hiring them.
In my experience with our outsourcing endeavors at Chan & Naylor, it really warms my heart when I hear how some of our overseas staff have been able to pay for their father's heart operation, or buy a house or a car, or feed their extended families, or provide them medical care. Their opportunity to work with our organization has had a dramatic and positive effect on their standard of living and well-being.
These are the major benefits of outsourcing, which I see as a win-win for all.
We win because we can save some money.
Our local staff win because we can pay them more wages from the savings we make.
Our clients win because we can reduce our fees.
Overseas economies win because we can contribute to getting their people out of poverty.
Our country wins because we are able to address our labor shortages that are driving costs up.
As I mentioned, I understand if you have a differing view on the insights above, however, I do invite your feedback and debate on this topic. By doing so, we will only make our profession better.
Receive free weekly tips from Ed on scaling your business, just like this, directly to your inbox. Sign up now.