What is the difference between outsourcing and delegating?
They are both approaches you can take to redistributing your workload. This is key to building a business that can operate smoothly without you – giving you more opportunity to grow and scale sustainably.
Outsourcing and delegating deliver some common benefits, including:
- Freeing up time to focus on high-level, strategic and value-add tasks
- Accessing a wider pool of resources and skills
- Improving efficiency, productivity and time management by removing bottlenecks
- Giving you more time to pursue interests outside of work
But there are distinct differences between outsourcing and delegating. And pros and cons associated with each. If you understand the differences between outsourcing and delegating you can use each to their best advantage.
What is outsourcing?
Outsourcing is a business-to-business (B2B) transaction. You contract an outside party to provide a specific product or service.
Outsourcing focuses on the delivery of a certain outcome or product. You can specify the outcome you want, but you have limited control over how that outcome is delivered.
For example, I outsource my bookkeeping and accounting. I expect a certain outcome – e.g. tax compliant financial reporting – but don’t have much say (or interest!) in how my accountant delivers that outcome.
Other examples of business outcomes that are commonly outsourced include:
- Payroll processing
- Social media management
- IT management
- Website design
- Premises cleaning
What is delegation?
Delegation is a management or leadership strategy. You assign authority for specific tasks to another person in your team, so they take on the responsibility and accountability for the results.
Delegation is also focused on delivering an outcome, but when you delegate a task or process you remain part of the process and can influence it directly to achieve the desired outcome.
Traditionally, delegation takes place between an owner/manager and an employee. But the rise of remote and virtual workforces has seen the definition of what constitutes a “team member” becoming blurred. It no longer strictly applies to employees, but can also include roles like virtual assistants, online business managers and other freelancers.
Many business owners are achieving great things by using a delegation approach to redistribute their workload to a remote workforce.
- Using a virtual assistant to manage your inbox and calendar
- Having a remote worker schedule your social media posts
- Giving an online business manager authority to clean up and manage your digital files
Pros and Cons of Outsourcing
Benefits of outsourcing include:
- Gaining access to specialist skills you might not be able to find, hire or develop internally
- Reducing your involvement in the process – leave it to the experts!
- Increasing your capacity to focus on your core business activities
- Reducing costs associated with growth, and helping to achieve economies of scale
Potential downsides of outsourcing may be:
- No/limited control over how tasks are performed
- No opportunity to develop the skills and experience internally through on-the-job learning
- Lack of transparency, which might produce inferior results
- Lack of flexibility in product/service provision (depending on contract arrangements)
- Loss of internal process and task knowledge
- Risk of being dependent on outsourcing partner
Pros and Cons of Delegation
Benefits of delegation include:
- Retaining control over how work is done
- Growing the skills of team members
- Retaining IP and process knowledge, which builds resilience and flexibility
- Building a business culture of trust, empowerment, and continuous improvement
- Creating a collaborative team environment
Potential downsides of delegation may be:
- Requires clear communication of tasks, deadlines and expectations around output or outcome – which can be hard if it is all in your head
- Needing to remain involved in managing task completion and tracking progress
- Needing to train and mentor team members
- Requires upfront investment of time to set up processes, systems and tools to support workflow
Should you outsource, or delegate?
The decision of whether to outsource vs delegate depends on a few factors. This table can help you understand which might be the best approach for a certain task or outcome.
|Not a core business activity (does not directly generate profits)||Is a core business activity, or makes direct contribution to profits|
|No capacity or capability in-house||Capacity and capability exists internally|
|Requires specialised skills or qualifications||Requires less specialised skills or qualifications|
|No existing internal process, and no desire to create one||Existing process exists and can be optimised|
|Less need to retain process knowledge internally||Advantageous to retain process knowledge internally|
|Cost of purchasing product/service is less than cost of adding a team member||Cost of purchasing product/service is more than cost of adding a team member|
Redistributing your workload to others is a fundamental part of building a freedom machine. Outsourcing and delegating are viable options for shifting your tasks to someone else. You have the best chance of success if you strategically choose the best option based on the desired outcome.