Category Archives: Management

Having a foundation in business for long term growth

March 27, 2014 by 123outsource
Categories: Management | Tagged , | Leave a comment

I was just listening to yet another Harvard Business Review interviews on their blog. Hearing their content is a relief from the endless reading I do on their site. The topic was having a foundation in your business.

Apparently, many companies in the USA provide services that compete on a global market. But, the cost for those services is somewhat high. Countries with less expensive labor can grow their business presence like weeds by capitalizing on their lower labor costs. This works for a while. But, what people don’t always think about is that labor costs are not static. Labor costs in China have gone up a lot, and will probably continue to do so. Currency rates in India have made labor a lot cheaper. The cost of labor is very unpredictable in a global market place making it foolish to bet on long-term cheap labor. The real estate market is equally unpredictable making your office or industrial space something that can really fluctuate in cost.

The moral of the story was that companies in stable places like Germany, America, or other wealthy countries may not always have the cheapest price, but there is an element of refinement. The workers have been doing the same work for a much longer time, and management structures have been in place much longer making them more stable. There is an element of efficiency in what these companies do which can often rise over time. Many American companies are using robotics and other high tech means which make them able to successfully compete against the Chinese whose labor costs are much higher than a few years ago, and who do not have the means to use robots.

In a sense, it seems like some of the poorer countries are hitting a growth ceiling. Maybe that ceiling is temporary, or maybe not. For them to grow to the next level, they will need to learn about efficiency, and building long term relationships, developing higher and more consistent quality standards, and a lot of other things as well.

I tend to think that China will make it even though they are having growing pains. India and the Philippines I am not so sure about. India thrives on doing everything in the most inefficient way humanly possible, and shows no inclination to break out of this moronic way of life. It will be impossible for them to ever become an economically comfortable country with this attitude. I call it inverse optimization!

Tweets:
(1) Developing countries with rising labor costs need to master the art of efficiency if they are to survive in the long run
(2) Developing countries need to understand that their real estate and labor expenses can fluctuate in either direction overnight!
(3) America is using robotics & successfully competing against Chinese manufacturing = a growth ceiling for China?

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Do you over analyze or trust your instincts?
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Your employees are depressed
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What would Bill Gates do?

February 6, 2014 by 123outsource
Categories: Management | Tagged , | Leave a comment

What would Bill Gates do?

Do you want to be really rich? Then learn how to think like the rich guys think! Look at one of the world’s richest men. Bill Gates. He must think about money all the time… wrong! He thinks about benefitting the world, and God rewards him with success.

Do you think about the world in your business?

How can you apply that to your outsourcing business? Do you think about the bigger picture? Do you think about benefitting your clients and the world? Maybe you should. In the long run, money comes from God. In my experience (I’ve known God for a while now) God rewards people who produce more and who give to charity. There are sometimes rewards for spiritual practice as well, although that is not consistent!

If you are efficient in your work and hire others to create a large organization which helps many, God rewards this type of operation. Bill Gates’ mind dwells on philanthropy much more heavily than almost anyone else I can think of. But, he has the intellectual and financial means to make his visions come true. Most people wish that self-benefitting things would happen, but don’t get very far. Gates has transformed the world of computers and cares tremendously about the world of philanthropy as well.

Basically, the secret is to come out of yourself and expand your perspective. You are not a separate individual. You are a part — perhaps a critical part — of the universe. Everything you do affects the entire universe in some subtle or not-so-subtle way! The minute you have the desire and competency to make a bigger difference, that is when the money will start rolling in.

So, forget about this week’s profits, and your other petty concerns. Turn your business into a lean, mean, world-helping machine!

Tweets:
(1) Wanna be rich? Then, learn to think like the rich guys think. Take Bill Gates for example.
(2) The secret to wealth is to come out of yourself and expand your perspective.

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Steve Jobs watched his programmers carefully — so should you!
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The mindset of a millionaire
http://bpo.123outsource.net/2013/08/05/the-mindsetof-a-millionaire/

How often do you do monitoring and give feedback?

January 24, 2014 by 123outsource
Categories: Management | Tagged , | Leave a comment

How often do you do monitoring and give feedback?

Putting aside how saavy your methodology of training and watching your staff is, many companies simply don’t do it hardly at all. To have good workers, you need to constantly be molding them. If they are resistant to being “worked on,” maybe they are not a good fit for your company.

A samurai sword is not something that an amateur craftsman just throws in the fire and pounds haphazardly on. It is something that is worked on with intricate attention to detail and care by a very highly experienced and skilled master. And if the samurai is not pleased with your workmanship, I think they cut your head off which raises the average level of performance of the sword makers who are still alive.

Putting samurai jokes aside, step one in having a good work force is to monitor them regularly as a matter of course. Knowing what to look for and what to monitor is another question though. You really need to make a very long list of categorized points to work on. It might not be possible to work on all of those points all at once, but the awareness of the complexity of a seemingly simple job is critical for success!

The next thing that matters is who you pick to do your monitoring. You as the manager need to understand who is to be monitored and how. But, you need someone else to do the actual monitoring and then compare notes with you. If you pick someone careless, or someone who rubs people the wrong way, then you will be out of business soon. Learn to pick the right folks for the right job. They should be pleasant and have a passion for details!

Rewards should be given for top-notch workers, or even mediocre workers who improved a lot. If you are keeping a detailed score card for each member of your team, it will be easy to track improvement and reward it. Everyone likes to feel they matter, and rewards are a way to do it. You could have employee of the month, mention them on the company newsletter, or throw a small party in their honor. In my opinion, mixing it up is a good way, otherwise the rewards get boring. Creating an atmosphere of fun is important not only for the one being rewarded, but for the other ones who will have to wait until next month to get their just desserts!

(1) To have good workers, you need to constantly be molding them. Do you give regular feedback?
(2) Rewards should be given for top-notch workers, or even mediocre workers who improved a lot

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To micromanage, or not to micromanage, is there a question?
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Does your team function as a team?

January 18, 2014 by 123outsource
Categories: Management | Tagged , , | Leave a comment

Does your team function as a team?

There are many types of company structures, and many ways to play politics in any of these structures. There is always jealousy, resentment, competition, greed, and arguments. The question is, how do you get your team to function as a team?

Sometimes I feel that the people who work for me function as separate individuals and have very little positive interaction with each other. Often times they just don’t like each other. When you combine bad chemistry with territorial types, you end up with a lot of trouble. Should you hire people because you feel they will do a good job or do you hire people who will blend in with your other workers?

Bad interactions between even two workers can ruin your company culture and fill the air with a bad vibe. On the other hand, if people work more remotely, it might not matter as much if people don’t get along. Assessing the damage of bad internal relationships is not easy. What really matters is how the customers feel. If they interact well with your staff, that is yet another set of relationships to consider. In a perfect world, we would all get along with each other, but on planet earth, we need to optimize our relationship structures!

For me, honestly, there are too many variables. Just to find someone who can function at all is a huge challenge. If you pair that with company culture and internal relationship issues, it is more than I can even think about.

If your team doesn’t function as a team, sometimes talking it over just doesn’t help. Certain people just don’t like each other and there is no remedy. Sometimes talking it over just submerges people’s hostility until it blows up in your face at a later date.

Tweets:
(1) Should you hire people because you feel they will do a good job or do you hire people who will blend in with your other workers?
(2) There are many types of company structures, and many ways to play politics in any of these structures.

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The magic of collaboration
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Steve Jobs watched his programmers carefully — so should you!
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Is it better to have a woman do your phone calls?

January 4, 2014 by 123outsource
Categories: Management, Semi-Popular | Tagged , , | Leave a comment

I do a lot of my own phone calls.
But, I learned that my female counterparts are more popular with our clients than I am. Hmmm, what am I doing wrong? Is it me, or is it my gender? I just had a lady do some of the calls that I normally do, but, she got a much higher sign up rate for our newsletter list than I get? Part of it is gender, but she is also slower and more patient — clients like that. Interestingly enough, I once hired a guy with a high pitched voice. He was very popular over the phone because people THOUGHT he was a woman.

But, is hiring a woman always good?
Speaking slowly, clearly, listening, and being able to answer questions is very important. I am a boss, and in a huge hurry because I have more tasks than I do time. People like someone who has the time to go a little slower, so hiring someone else who has less on their late is a great idea.

But, when should you hire a man?
People respect men more as authority figures as a general rule. I am a very gentle guy, but I get more respect as an authority as my company than my saleslady. The irony is that she is much tougher than I am, but because of her gender, she is treated as less powerful than I am. The fact that she is not the owner is part of the reason she is treated as less powerful. But, actually, she is very powerful, because she influences me. If she says a particular client is trouble, I will “write them up” in my files, and that client could be in trouble with us in the long run! I would say:

For call lists that involve a person of authority, a gentle man with a manly voice might get a better result than a tough woman!

Boy, the world is such an unfair place!

Tweets:
(1) Proven fact — it is better to have women do many types of customer service phone calls!
(2) Women are more patient with phone customers. They listen better than men. Ironic, considering guys spend so much time listening to them!
(3) Women listen better to phone customers than men. Ironic, considering men spend so much time listening to women!

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The 2% rule; Only 2% of companies are worth hiring
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Is finding an outsourcing partner like an arranged marriage?

December 24, 2013 by 123outsource
Categories: Management | Tagged , , , , | Leave a comment

Finding the perfect outsourcing partner is like finding a mate: you need to find someone who absolutely gels with you in so many ways. Americans dream of finding the perfect mate, and I’ll bet some actually expect to find the perfect outsourcing partner right away, too. Good luck!

A good relationship (although maybe not the perfect one) can be developed if you take the time to get to know each other. Just because the company has a few good references does not mean they will be good for you. Unless you have taken the time to get to know your outsourcing partner and really have common standards and goals, the relationship will be little more than an arranged marriage. Whoever your point of contact is–your project manager?–will be The One.

Here are 5 tips to evaluate and develop your relationship:

1) Since you are thousands of miles away, you need to have communication by phone, skype, and email. Talk about a variety of topics to determine how that person thinks and whether he or she really wants to do business with you at all. Be sure to talk for at least 15-20 minutes because it will take at least that long to find out what that person really thinks. Then, ask that person three to five ‘test questions’ and have the person answer these on the phone or skype— on the spot. These could be situational questions that you feel strongly about—how you handle a difference of opinion, how do you tell if you can trust someone…even how you choose a girlfriend or a mate. Be sure the person can give examples. You should not feel hesitant to ask questions. These questions will help you see if you have values in common or if that person has a point of view you feel comfortable with. Listen to the person’s answers and see if they appeal to you. If you have any doubts at the beginning…proceed with caution!

2) Based on what you have heard so far, do you have similar cultural and personal values? Cultural values can be discussed or referred to in initial conversations (above), but personal values are probably more important. For example, do you believe that you have to lie sometimes in business? What lies are acceptable? If you have to complete an important job and you become ill, how do you handle it? If you are late on a deadline and have a phone conference with the client, how do you deal with this/ what will you say? Are results more important than how the job gets done–and does that gel with your own way of working? Answers to questions like this may actually tell you something revealing about the other person and his or her policies. Listen carefully. Your future depends on it.

3) What is quality? What constitutes a quality product in your industry? Have the person tell you. If it is a call center—how will you know the callers do a great job? What specific things do they do that demonstrate “quality”? If your contact has a vague idea of quality or cannot speak well, this will tell you something about how profitable it will be to work with this company. Does the person just refer you to a link on the company website? The more details and examples the person can give you, the better chance he or she really has a good team and will be a great outsourcing partner. If the person is obviously reading from a script or says “I will need to think about this and call you back,” that is not a good sign.

4) No contract will test out your relationship as well as an actual test assignment. It will answer questions like “Do you follow directions?” and “How much do you get done in a certain amount of time?” If you are in sync with your partner, you will both get through the test assignment and will learn enough about each other to move on to the next stage–or to back off. A small, well-designed, paid test assignment—before you even sign a contract—before the “marriage”—will tell you how this company functions in a relationship. This will also test what they said in the answers to the other questions (above). You will find out whether the person / company knows how to do what they say and how cooperative they are. If they make a mistake, will they offer to correct it for free? If they did not understand the directions and did not ask—will they take responsibility or will they say “The directions weren’t that clear…” Shouldn’t they have asked?

5) Finally, to find a good outsourcing partner (outsourcing company), you may be better off finding a ‘matchmaker’, a friend or family member who can introduce you to qualified candidates and help you screen them—rather than trying to find that perfect match on your own. Talk to people you know who have outsourced or who know you well, and rely on their advice. When marriages are arranged, they are arranged by family or even a professional matchmaker. Ask your matchmaker friend a lot of questions and he or she will help you define what you are looking for. Do not just grab an outsourcing company from the internet—or you may end up in a relationship you do not want, and this may make you hesitant to seek the right outsourcing partner in the future.

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Three ways for startups to save on office space

November 29, 2013 by 123outsource
Categories: Management | Tagged , | Leave a comment

If you are creating a small start-up, you may want to find ways to save money on office space. Still, it is always better to have an office than to work out of your home. Companies with offices are seen as more reliable…and in our experience, companies with an office do a better job somehow. Interesting. Here are three ways to get less expensive or free office space:

1) Find a big company that has extra office space and is willing to make a deal with you: this could be a company that trades you office space for work (IT, design, phone work, or admin work of some kind). If you have a few connections, try asking around. One young woman we know was pleasantly surprised that several business owners she knew were enthusiastic about the idea. She made a deal: she did marketing and social media work for the company two days a week to ‘pay’ for the office space, a 12′ x 12′ area that was used as storage for old file cabinets and separated from the larger office with a fold-out partition. Within 8 months, she had enough clients to move her office–but chose to stay at the same location for a monthly fee…and a better space. Her company eventually provided the company she rented from with all kinds of services, and they had an excellent working relationship that referred her several other big clients. She eventually moved her office across the hall and now has several employees.

2) Rent an office by the hour or the day: depending on what type of business you have and whether or not you have employees, you may not need an office 24 hours a day. If you need one only a few times a month to meet with sub-contractors and clients, you can easily find such offices. Companies like metroffice.com in the Washington, D.C. area will rent you space in different parts of the city or the region depending on where you need to have client meetings. Every city has office rental companies that will rent you space by the hour, take phone messages for you, and give you a phone number and an address for your mail. You can gradually build your business and get a permanent office when your company has a solid income.

3) Check out your local government offices: city government is downsizing, and depending on where the office is, you may be able to get space there. Again, you can offer to trade your skills to get the space you need. Keep talking to them, find the decision maker, and go meet with him or her and convince them that you are someone they want around. Find out what they really need (someone to answer the phones?) Then, if you like the space, make them an offer that will help them fulfill that need. One young marketing entrepreneur ended up supervising and training a group of callers one day a week, and later offered free weekend classes in telemarketing in exchange for the space. He was adept at making all sorts of calls, and he was good at explaining the whole calling process to others. He discovered that training people to answer the phone and training telemarketers was actually a great niche for him in his area, and these trainings became popular and started a whole new business for him. He is in part responsible for developing the call-center industry in his area of South Carolina.

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Cramped offices are like slave ships
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Office space prices and outsourcing
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5 Tips for Rewriting Your Outsourcing Contract

November 26, 2013 by 123outsource
Categories: Management | Tagged , , , , , , , | Leave a comment

If the workers assigned to your project are not at the level you originally requested both verbally and in writing, or if your Service Level Agreement is not being fulfilled as agreed upon in terms of time and quality, it may be time to renegotiate your contract. Such factors should have been part of an initial verbal agreement and contract, but since only hindsight is perfect — renegotiate your contract now!

1) Are you getting the level of experience you asked for? If you discover, for example, a few weeks or months into an IT project, that you originally asked for a senior programmer (5+ years) and are being billed for such–but that the programmer you have been working with has only 3 years of experience and is extremely slow and inflexible, you want to obtain some kind of credit and better accountability going forward. Write it into the contract in more definitive language, and include what the penalty will be for such an oversight. You as a consumer have the right to get what you originally contracted for and were promised. Is a required training period being adhered to (in a call center campaign, for example)? Ask that a specific level of skill and work experience be documented as part of the contract. Since this request was not adhered to from the very beginning–although it was agreed upon–see if the company is willing to give you a credit or substantial discount, particularly if there have been problems that might not have occurred had you been assigned a more experienced programmer or worker. And–write that penalty or discount into the terms of the new contract.

2) Are you getting your money’s worth per hour? If the company is giving you less effort per hour than you know to be indicative of an hour’s work, find a way to put that in writing: build in an incentive for certain quality delivered on a certain schedule, and for work done in much fewer hours than you think is necessary–with good results, of course. Money (a bonus) is the best incentive, but a few companies have succeeded in creating effective incentives such as trips, restaurant dinners, or shopping sprees (see www.anyperk.com for ideas on how to do this in the U.S.; in a foreign country, ask managers what employees would like). By the way, incentives are better than penalties, but they work hand in hand as we discuss in “Motivating workers with bonuses or shortages”

3) Forgot to include checkpoints and reviews? Add them this time: include periodic virtual (Skype or phone) meetings to let everyone know what is going well and what needs to improve. If you include in your contract this simple review process– and how often such checkpoints or reviews will occur– your needs and intentions will be clearer. Be sure to include wording that lists exactly what you will be looking for–for example, number of hours spent, specific tasks accomplished, concrete suggestions made by the project manager and workers, improvements made since the last checkpoint, and what procedures are yet to be perfected. Put it in writing. Then, the outsourcing company and its employees will know your expectations and respect your standards.

4) Are there liability issues not covered by a contract that is essentially unfavorable to you? For example, if code is broken (IT), or the query system does not work (IT), or certain calls made by a call center on your behalf cause problems and actually cause you to lose business, be sure the rewritten contract states all terms in your favor as well as the outsourcing company’s. The standard contract may limit the company’s liability. Make sure the final contract asks the company to take a good look at what its negligence might cost if your business suffers. If the company is not willing to take responsibility for certain errors…you pretty much know what will happen if the contract-makers do not change their attitude.

5) Last but not least…your contract should include what party will mediate the contract if things do not improve. Again, this should have been part of the original contract. With a professional mediation organization such as mediate.com with mediators in every country, you may do better than with an international law firm such as perkinscoie.com with offices in both the U.S. and the outsourcer’s country. Remember: You do not want to get to the point of litigation…but you do need to consider how the contract will be mediated or brought to suit if needed. Otherwise, your company looks foolish and lacks the power needed to control the level of work you are getting from the company in the first place. If they realize you are savvy about litigation with a company in their country and have laid out all the possibilities, many issues will be solved in a professional manner from the very beginning. By the way: one tip so obvious you are likely to overlook it is to make sure the contract is bilingual. That way, no one can claim that certain points were not clear. Get someone to check the foreign language contract against yours (English) and make sure the agreements are the same in both languages. How did we think of this? We know of a case where the contract was substantially different in Chinese than in English. The company’s written contract, created and signed by them, was actually in several ways a different contract than the English version a U.S. company signed.

Good luck making your contract perfect the second time around. If at first you don’t succeed– do it again–or prepare to find another company to outsource to.

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Long Range Effects of Business Decisions – a Mistake That Got Turned Around

November 11, 2013 by 123outsource
Categories: Management, Semi-Popular | Tagged , , , | Leave a comment

A mistake that got turned around
I made a business decision a few months ago which was to reduce my involvement in certain processes of my business. I removed the weakest 20% of listings from one of my directories. We did not lose traffic as a result, but we lost growth. I didn’t know what the long range effect of my decision would be other than I would have less responsibilities. Luckily for me, I track my decisions and the results thereof. I quickly learn when I have made a bad decision and turn it around. But, sometimes it is not so easy.

Gaining and losing personnel
If you hire a new person, there are positive and negative attributes that they bring on board. Someone with a bad attitude can really interrupt the flow of your company. On the other hand, someone who is occasionally difficult might bring a lot to the table that your business might suffer from if lost. I just read an article on Harvard Business Review where a manager lost one of their key team members. A few months after the fact the manager stated how they didn’t realize how critical that member was to the team. It is very important to be able to assess in business. You need to know how important each of your team members is — because one day you might have to live without them, or you might have to decide whether to fire them or not.

Techniques for elastic expansion
Expansion is another popular topic for business owners. Most companies want to grow, but many don’t know how, or how fast. Trying to grow too fast can cause a lot of confusion, especially if you have to change your business model. But, what about changing the way you do business in a way that facilitates flexibility in the size of your company? What if you have seven people at your company, and you create a new team structure that allows you to be able to add or subtract team members without dramatically altering your personal workload. If you change your business model to incorporate more middle level managers, or reliable outsourced help, then they can handle whatever growth there is for you, and you can work as much or little as you like. On the other hand, those who try to grow too fast without a business structure that can accommodate it can fall on their face and suffer huge losses in the long run!

The long range effects of business decisions are fascinating to think about and read about. Make it a habit to think about the karmic effects of your actions. Think before you jump!

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How to Make Sure Outsourcing Companies Follow Directions

November 6, 2013 by 123outsource
Categories: Management | Tagged , , , , | Leave a comment

How to Make Sure Outsourcing Companies Following Directions

Following directions is a problem in any company. But, if you work with offshore labor, or outsourcing companies, they always blame the customer if they didn’t follow directions. Remember — the customer is always wrong. Most companies just don’t value the work you are giving them in my experience which is where the problem starts.

But, the resolution to the problem is easy. Here are a few steps to ensure that your offshore company follows instructions well.

(1) Give them a test run before you give them any real work.
If a company is too sloppy to give a chance on something that might be time sensitive or critical, test a few companies out on your dime on a test project. I recommend TWO test projects. Companies tend to be “trying” more on the initial test project, and will slack off a lot more on the second one.

(2) Let the offshore company believe that the 2nd test project is real
Outsourcing companies will let you down a lot of the time if you are a small client. They just don’t care much about the little fish which doesn’t make good business sense. Little fishes are easier to catch, easier to keep, and lots of little fish add up to a big fish. Companies will be more careful in your assignment if they feel it is a test. If the second test project is a real project, then they go back to their regular habits of taking forever and making lots of mistakes in many cases. A second test is like a second interview. People are being “themselves” the second time around — and you need to know what the real “themselves” is before giving them anything critical!

(3) You need to keep clear instructions in writing, and then go over the instructions verbally after the fact. If you flood someone with emails, you will create a mess. So, only send needed emails and keep the information in them well organized. Anything that was assigned orally can be disregarded and YOU will be blamed. People can forget what you told them, or just blatantly disregard what you said. Or, if someone gets upset with you, then they might decide to not follow instructions.

(4) Have your offshore company check in with you periodically
It is impotant to have work get done in steps. You need to inspect each step. The first step should be the smallest. That way if your offshore company is on the wrong track, you can get them straightened out. But don’t assume that because you corrected the company, that they will follow directions from then on. Assume that they will continue making mistakes as they usually do. In real life they might make some of the same types of errors they made before and perhaps a few new ones too!

(5) Deadlines should be in writing
Give lots of smaller deadlines in writing that are reasonable. Use these to double check all of the work. The secret to having people follow directions is to screen out those that are beyond help, and to keep coaching the good ones! Deadlines assist in the checking process. They also provide a definitive line where you can fire someone. You could even have multiple deadlines for the same stage in the process. The first deadline gets you a bonus, the second keeps you going, and the third gets you fired for sure — no excuses! You can engineer so many business strategies with creative deadlines. Don’t overlook this opportunity.

Keep an eye on everyone, communicate all pertinent points in writing every time, and good luck!

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http://bpo.123outsource.net/2013/08/31/is-offshore-outsourcing-right-for-you/

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Small Software companies who lose a client as fast as they get one

October 22, 2013 by 123outsource
Categories: Management | Tagged , | Leave a comment

America has hundreds of small software development companies that are in business to lose clients. Why are they so stupid? It beats me. The way I look at it, if you only have one programmer, then you probably have no business sense. If you had good business sense, you would know how to grow your business and you would have multiple programmers, right? In real life, the answer is not so clear. But, my experience with companies that have only one software developer, or a few new ones is as follows:

These tiny companies will fail to deliver on promises by one means or another. They will acquire a new client, put them on the back burner in order to service another client, and lose the new client. Why take on a new client if you are just going to lose them? It seems obvious that taking on new clients is a sort of insurance policy. These small companies have no sense in knowing how much availability they have, nor do they care. They take on a new client when there is no time in their schedule to service them and no plan to service them either. It is really criminal if you think about it.

The big problem is that these companies are typically short-staffed. How can your company grow when you don’t have the staff members to get any work done? You can’t. So, these companies get a client, lose a client, get another one, lose another one.

Newsflash:
To grow a company, you need to get new clients faster than you lose clients. That way you grow. If you lose them as fast as you get them, it is like putting water in a cup with a hole in it. Not a good business strategy — but, try telling them that!

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“I refuse to sign”: International Contracts to Watch Out For

October 14, 2013 by 123outsource
Categories: Management | Tagged , , , , , | Leave a comment

Many business people accept the idea of a contract as a given. Sure; you are buying a service, so you need a contract, right? In the case of outsourcing to a foreign country, this seems to be even more of an assumption.

Here’s a question: if you do not know the company at all–except for a few references on the internet and a phone conversation or two– how do you know that signing a contract will head off any problems? And how will the contract work if you are thousands of miles away? Finally– what will you do if you actually need to consider litigation at some point?

Recently, before doing business with an IT company overseas [it was in Russia/ I thought it better not to say where], a U.S. company refused to sign a contract. Why? The IT firm required this preliminary contract just to be able to negotiate with the U.S. company and provide any details about pricing and terms and actual contracts! The U.S. company refused to sign. This idea of a preliminary contract was not a good sign: it indicated that the IT company was highly suspicious and unfriendly, had had several bad experiences communicating with or working for foreign companies, or was either burned out or inexperienced. In short, they did not want to do the work of finding out what the U.S. company needed or working with them on a trial basis for even a small paid project first– without a contract–so they could all get to know each other. If you find out at the very beginning that this is how a company operates, it is a blessing…but don’t think it will get any better because you sign a contract. Run, don’t walk, and find another company–no matter how friendly the sales people seem up front.

Another scenario: an IT company in India wants a U.S. company to sign three separate contracts before any serious conversations about work can begin. One is a “Master Services Agreement” that describes how the three contracts work, includes warranties, obligations…and an entire section that suggests what part of the client’s website might in fact be the intellectual property of the company creating or working on the site. This master contract by itself is daunting, but the combination of the three contracts (including a SOW or scope of work, plus a mutual non-disclosure agreement) makes the relationship–before it has even begun–a maze of unpleasant twists and turns, unknown obstacles, and hidden agendas.

Consider this advice from www.answers.onstartups.com:

Enforcing a contract where the parties to the contract are from different countries is very difficult. The reason is that even if you win from a legal perspective, you still need to collect damages, and in order to collect damages you probably need to file suit in the country of the other party. (enforcing international agreements, 2011, http://answers.onstartups.com/a/27846)

In other words, with any contract, you need to know ahead of time what court has jurisdiction over that contract; this must be agreed in advance. Otherwise, it is just a friendly understanding between business associates, not an enforceable legal contract. The commentary justly concludes:

Even if you get over that hurdle, and you win the lawsuit and the court says that the defendant owes you $1 million, you have to be able to collect that money from the defendant. If the defendant does not have any assets in the U.S., then the only way to collect money would be to sue the defendant in a country where the defendant has assets, and that country may not honor the judgment of the U.S. court. In summary, if you have a contract with a party in Timbuktu and that party breaches the contract, you should just write it off and move on because the likelihood of collecting any damages is minimal. (http://answers.onstartups.com/a/27846)

In other words, an international contract may end up being just for show, a club held up in the air to convince you the company has clout. It is at best a power play by the outsourcing company, and does not often benefit the client as much as it benefits the outsourcer. Unless it includes statements that benefit your company, it is a bad start to a business relationship.

In my experience, it is whatever is left out of a contract that invariably becomes the problem. Remember, the contract specifies what service you are getting, for how long, and some liability issues. But the contract does not often control who will be doing the work, and how efficiently the work will be done. It is rare that an IT company will give you a contract that protects your interests as well as it protects theirs. You also don’t know if they are really giving you as many hours as they bill you for.
If you must sign a contract, be sure you have the ability to add or change certain parts, including the level of workers they give you and the quality of the work: be sure these statements are adequate. But you have to let them cover themselves, or they will not work for you. If you refuse to sign a contract, they will most likely not do any work for you at all.

If you are outsourcing, be prepared to think hard about the details of any contract and ask hard questions like ‘Why should I guarantee the hours of work I am giving you–if you can’t guarantee the quality?’ And—if you ask this kind of question ahead of time, you will find out enough about the company so that you will get a better idea of whom you are dealing with, how they really do business.

Ultimately, that is why, if you outsource, you may want to go to the country to meet them…and then be prepared to lose everything you have already put into the relationship. If you find you do not like how they do business, there is no use pursuing a business relationship at all.

In other words, agree on scope of work, penalties and incentives… and try to make a preliminary “contract” or agreement by email, but suggest that you make the contract informal until you have had a chance to work with the company for a short while. If a company will not allow you to have any input into how the relationship will work, and will not do a paid test project for you without an extensive legal contract, chances are that signing a contract with them will not lead to results you will be happy with, and you will save yourself a lot of grief and money if you Just Say No.

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Pre-contracts for outsourcing: before the real contract!
http://bpo.123outsource.net/2013/09/09/pre-contracts-for-outsourcing-before-the-real-contract/

Using contracts to get more clients for your call centers
http://bpo.123outsource.net/2013/04/05/how-to-get-clients-for-call-centers-contracts/