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Managing outsourcing — organization charts

Our book, Shoestring Venture, is all about harnessing the power of outsourcing and offshoring in order to realize the fullest potential of a start-up business. But the book isn’t a cheerleading, rah-rah book about making millions from outsourcing. Realistically speaking, business requires work and running a business that relies on outsourcing requires that you become an effective outsource manager. And its sobering to realize that the biggest corporations out there usually get outsourcing wrong.

For that reason, I’m hard at work on an outsourcing management book for shoestring entrepreneurs and small businesses. Like anything else, running a company using outsourced vendors requires skills you may not have and tasks you may have never performed.

Top on that list is building an effective organization chart.

“Wait a cotton-picking minute! If I outsource most or all of my business functions, what in blue blazes do I need an org chart for? I have no employees!”

It’s because your outsourcing so much of your business functions that you need an organization chart far more desperately than a traditional business. More after the break.

Many moons ago, I worked for a marketing communications firm that had caught the “disorganization bug” big time. I spent hours and hours drawing up an organization chart that the principals eventually let rot on a shelf. A few years later, I was called on by a start-up Flash gaming firm to do a prospective organization chart to present to investors. Their whole purpose for attracting VC funding was to build a world-class organization. They were funded beyond their wildest dreams and built their entire organization around this organization chart and used it as the basis of their future growth.

The marcom business without the org chart shut its doors last year; the Flash gaming business is growing by leaps and bounds.

Simply put, an organization chart and its accompanying materials answers three questions:

  • What are the “things” that need to be done in order for the business to succeed?
  • Who is responsible for doing these “things”?
  • And at what level of performance?

    So an organization chart consists of a chart, a set of job descriptions, and a set of performance expectations to go with each job description.

    With an organization chart, the people running the business have a handle on all the functions and tasks that have to be performed. They know who to go to if something needs doing and individual employees know exactly what their jobs are and what the expectations are. Without a dynamic, living, breathing organization chart and job description catalog, it’s highly likely that very important tasks — in fact, survival tasks — won’t get done. Or they’ll get done at a low quality.

    That is the number one problem with disorganized businesses. Without an organization chart, critical tasks go undone. Or only partly done.

    And in my experience, that is the number one problem with businesses that outsource many of their functions. And for exactly the same reason: the business are not organized. And most shoestring entrepreneurs and small businesses I deal with feel that outsourcing essentially liberates them from having to organize their businesses.

    On the contrary, organizing the business is the first and most critical task in managing outsource vendors.

    Unlike a traditional organization chart, an outsource organization chart is “virtual” in the sense that the slots are filled by functions rather than actual people. But the process is very similar:

  • You start by listing all the tasks and functions that your business must perform.
  • You assign those tasks to “virtual” vendors.
  • You draw up “job descriptions” for these virtual vendors.
  • You draw up performance expectations for each of these job descriptions.
  • These become the basis for finding, negotiating with, and evaluating the performance of vendors.

    The great benefit of outsourcing is it can be used on an “as-needed” basis. But that’s no excuse for the improvised, catch-as-catch-can style of outsource management, which, more often than not, leads to farcical rather than happy endings. “As-needed” should never mean “as-unplanned” if you want your business to succeed.

    Now, the whole process of building organization charts is a complicated affair. Which, of course, is why you’ll have to buy the book when it comes out. Ha!

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    2. [...] genius, you will need a tool to organize your business. Thankfully, you have one. It’s called an organization chart and it has three [...]


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