MAKE
OR BUY
Have you
ever considered which are the direct and indirect costs of
‘in-sourcing’ ?
In-sourcing and assignment
of an administrative activity to an employee implies at least the following
risks :
- risks of unforeseeable absence
for sickness, accidents, maternity
- risks for internal time
inefficiencies, as employees are usually paid on a time base and not on a
variable compensation per service unit
- risk of social contribution and
Labour National Collective Agreement which are difficult to foresee
- risk of resignation and
training investment loss
- additional cost for benefits or
incentives to decrease turnover and increase average duration of
employment relationship
- legal difficulties to prove
employee responsibility and possible negligence
- legal difficulties and possible
high and uncertain cost in order to resolve employment contracts in case
of negligence, redundancy, end of service need
- replacing employees means
additional indirect cost for recruitment and selection
Out-sourcing on the
contrary allows to avoid most of the risks above and have in addition the
following advantages :
a.
grants
higher cost flexibility (per service unit and negotiability)
b.
grants
easier benchmarking research for best market conditions re-negotiable from time
to time
c.
grants
usually growing volume discounts
d.
grants
usually higher specialization skills
e.
allows
to turn all organization cost and responsibilities on the supplier
f.
allows
to focus on results control.
The key
question is often therefore :
Hiring a new employee or searching for a
service agreement ?
Work on contract
agreements can be customized with hundreds of clauses which can legally grant
the best protection to the customer, and as a general rule can rely on a higher
efficiency level if results and quality are compared. This is of course not true in 100% of
cases, but can be a relevant information to take decisions.
