Outsource or bring in-house?

I attended an interesting after work event in the city last night for entrepreneurs held at Smith & Williamson’s office in Moorgate. They had a number of speakers including Rachel Elnaugh (ex Dragon’s Den and Red Letter Days) to talk through their experiences in setting up their businesses. Actually Rachel didn’t talk so much about that but more about how we are ruining the environment and how materialistic people are, quite a hard subject I thought to pitch to the next generation of business tycoons, but she had some good points on the subject of social entrepreneurship.

But the chap I was most impressed with was James Lohan, the founder of the boutique hotel company, Mr & Mrs Smith. He gave a good overview of his journey from PR executive through to nightclub promoter before starting the business with his wife. He had a few gems of wisdom which I could relate to such as being a brand nazi with within his business, ie anything that is customer facing had to go across his desk to ensure consistency across the whole business. Very important, especially with new brands, on delivering a message the customers can relate to and feel comfortable with. It comes back to Rachel’s point on tribes or something.

His other observation is an interesting one, especially as businesses are moving into cloud working, consulting and outsourcing, that actually it is better to bring key roles in-house and this has made his business more successful. This is because, he argues, employees who work and believe in the company are much better at delivering a higher level of customer service and ensuring better client satisfaction. I for one fully endorse this and while it goes against all standard business school thinking it is the reason why so many businesses are in a mess today. Ok you may save a few pounds by outsourcing but the value in the product and the message can be much more costly, if difficult to quantify. We just have to look at the largest company (depending on stock market conditions) in the world, Apple, who are one of the few large businesses to adopt this methodology. But it works and I am sure an element in their success is their ability to deliver a uniform service and high levels of client satisfaction all the way through their business. We just have to sort out their manufacturing part…

But it got me thinking that there will start to be a divide in business as these different approaches to running each company get established and success or failure will be more apparent depending on the methodology used. Rachel even went as far as saying that the very idea of employees will be nonexistent in the future as every role in a company is outsourced into what would look like lots of one man bands. While I like the idea of more open working between people I do believe that this approach will make delivery of a service or product less successful, but maybe that is one of the ideas with social entrepreneurship – improve working conditions and life in general rather than wallet share.

The other last thing James went onto mention was the need to not employ people from within the industry you are starting up in. Much better for example to get sales people from a sale background in a completely different industry rather than your own – that way you bring fresh ideas and become a disruptive business. It is good advice and it has worked for us so far.

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