Automation vs. outsourcing: the differences and when you should employ them

Learn the differences between automation and outsourcing, when it’s best to use them, and the importance of managing them.

Winning the game of business isn’t solely about dollars in the bank. Having smooth operations is a significant sign of success. Employing the dynamic duo of automation and outsourcing will help you get there and stay there.

What is automation?

Automation involves placing certain aspects of your business on autopilot. Not every aspect of your operation requires active oversight from you or one of your employees. Identifying those tasks and plugging them into a program or system lets them run behind the scenes, freeing up valuable time and brainpower for more crucial duties.

An example is automatic bill payment, a boon for both the mindful and forgetful. Putting bills on autopay takes human error out of the equation. No one likes the sinking feeling of a forgotten bill, nor the costly late fees accompanying it. That’s where automation helps—with both time and financial management.

That being said, signing up for autopay doesn’t absolve you of the responsibility to perform monthly bank reconciliations nor prevent you from altering said payments whenever required.  You still need to actively manage your business finances, but you just don’t have to remember to manually pay the electric bill. Taking a routine task off your to-do list while protecting yourself from late fees is a win-win proposition. 

This is what automation does: It moves tasks that, in many cases, are menial, routine, and relatively mindless into a system designed to get it done without anyone having to remember to do it. 

Here’s a list of some commonly automated tasks:

• Kitchen tickets
• Bill payments
• Inventory management
• Email marketing campaigns
• Customer invoicing

Not all automation has to involve technology. The systems you create for you and your employees are also examples of automation because they create a series of steps for everyone to follow. These systems provide a clear roadmap of how you want things done, setting boundaries that keep everyone on track and aligned. 

Some examples of systems-based automation are:

• Customer service scripts
• Opening and closing checklists
• Cleaning procedures
• Recipes and formulas

What is outsourcing?

While automation streamlines tasks, from conscious thought to autopilot, outsourcing removes tasks entirely off your plate. Outsourcing is when you reach out to a person or organization outside your operation to handle various aspects of your business.

A classic example of outsourcing is tax preparation. Few are qualified to run their business and complete tax documents. Even in the simplest enterprise, the realm of tax law is mind-numbingly complicated. Therefore, hiring an accountant is typically the first foray into outsourcing.

Some common examples of outsourcing are:

• Legal advice
• Tax preparation
• Human resources
• Bookkeeping
• Payroll

Other examples are:

• Entertainment
• Cleaning
• Linen laundering
• Grant writing
• Marketing and advertising
• Graphic design
• Equipment maintenance and repair

Understanding when to employ them

Now seeing the differences between automation and outsourcing, the key is understanding when you should employ them and when you shouldn’t.

Identify the problem first

Throwing money and resources at a problem can sometimes feel like an easy solution, but first, you should identify and understand your pain points and then figure out the best way to heal them. Automation and outsourcing are excellent tools, but if they’re not fully able to address and accomplish your given task, you’ll likely be stuck with the same core issues.

You probably already have an idea of where your business has some sticking points. Start with the simple ones that can easily be solved using systems or people, then decide which would serve you best.

When to automate

By their very nature, automations work independently of an individual or company. They are programs, systems, and protocols that run in the background. Automations don’t require thought or alteration by the one(s) using them.

Some solutions might be readily available (as in the bill autopay example), while others may require you to create them yourself (like checklists for your employees to follow). Automations typically take some time upfront to integrate into your operation. It might take a few hours to get your various bills on autopay, but once done, your involvement is no longer needed to get those bills paid. 

There may be programs to learn, materials to create, and training for yourself and your staff. But putting in the time upfront will save you significant time, money, and problems in the long run.

When to outsource

While automation relies on systems, outsourcing requires people… just not your own. 

Outsourcing is hiring a person or company to complete tasks better suited to those outside your organization. There are professionals for nearly every kind of need a business might have. In many cases, it makes far more sense to hire someone outside your organization to fulfill that need than it does to do it in-house.

For example, if you run a bar that provides live music, chances are you don’t have a ready band of talented instrumentalists on the payroll. So you hire performers to entertain your patrons instead. 

But not having the right talent at your disposal isn’t the only reason to outsource something. It’s also about where best to spend your and your staff’s time and energy. 

In the above bar example, you may have some guitar heroes working for you. But they’re already working behind the bar, and you need them there serving your customers when the music starts. 

A less obvious example is bookkeeping. You may have started your business doing your books because it saved you money. But over time, hamstringing yourself with this task will keep you away from areas where your input is more crucial. Your company needs you to be the leader, ready at the helm to make the big decisions and to have the bandwidth to handle issues as they arise. 

Just as with automation, spending the money on outsourcing problems you’ve identified will ultimately cost you far less than the benefits you’ll gain by having others provide the solution.

Set it, but don’t forget it

You’ve identified the problems in your business, chosen the best automation or outsourced solution, done the work to set it up or selected the best contractor, and things are off and running. It’s taken you some time and effort to get here, but this isn’t the end of the process. Be sure to monitor and keep track of your operations as a whole so things don’t run off-track.

Automations, while they are by definition automatic, still need to be periodically checked to confirm they’re both running smoothly and those interfacing with them are using them correctly. Build into your calendar regular “systems checks” to be performed by you or an appropriate staff member. Depending on the automation, you’ll want to ensure that programs are up-to-date, scheduled actions are happening (bills are being paid, for example), and employees are using those checklists. 

As with any solution, automation is not infallible. It still requires oversight to keep things running smoothly over time. Also, over time, you may find an automation is obsolete and needs to be replaced with a newer program or removed from the employee handbook.

The same goes for outsourcing. Monitoring the performance of various contractors is imperative to verify they’re providing the solution you hired them to deliver to your satisfaction. Again, your needs may change, or you could find another company that provides a better service package. Periodically reviewing your outsourcing providers and their work will help meet your needs as they evolve. 

The possible solutions automation and outsourcing can provide are as varied as there are businesses in operation. Explore the opportunities to see where bringing them in can help you along your journey to successful business management.