Automation versus Delegation

According to Webster the definition of Delegation is a person or group of persons officially elected or appointed to represent another or others. Traditionally when we use the term in a business sense, the explanation is commonly that of passing lower priority work off to someone who is entrusted to complete it, so that the delegator’s time and attention can be put to use on higher priority issues or activities.

Any small business owner who started out in whatever line of work they’ve chosen as a result of their own expertise in whatever industry they’re in will tell you that the hardest part of growing their business is letting go of the idea that they have to have their hand in every process, on every product and in every service that they provide to ensure they are giving their customers the same kind of quality product or service that they gave would give their best friends.

Knowing that they can’t do all the work themselves and still meet the expectations of their clients and their own financial goals, they pass off work to apprentices or representatives so that they can take care of the most important aspects of their business.

They delegate work to accomplish specific objectives.

In a broad sense, that’s why any company has employees¦because the boss can’t do it all himself and meet the same financial goals. It’s not so much the idea that the boss even wants to do everything himself, many times he or she doesn’t, however, if processes or activities could be completely automated, the need for employees would diminish and the bottom line profit margins (assuming that the maintenance would be less than salaries) would increase.

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The problem is that changes in technology are so fast-paced, that by the time you select some new revolutionary technology and get it implemented, it seems as though it’s already obsolete. In addition, most automated processes require a resident expert in the technology and use of the software, not to mention the IT people who maintain it’s healthy operation. Furthermore, given that employees are in fact internal customers, there are some internal processes that nearly demand a face and name as opposed to a button and password.

Understanding that not every process or activity can or should be automated, any shrewd business owner will look for ways to do more with the least expenditure of their hard earned dollars. So they hire employees to do specific tasks that are core to the success of the business and unfortunately along with employees come the myriad of regulations, compliance issues and generally aggravating procedures that need to be created and adhered to. Not to mention the burden of taxes and benefits.

Unfortunately most companies also hire employees to do specific tasks that are not core to their business success. For example, a dentist, regardless of the size of his practice, does not need an expert in payroll processing to give his clients better dental hygiene. Nor does a software company need an expert in Human Resources on staff to provide their clients with more innovative or better quality software applications. In both cases, the activities like payroll processing, HR, benefits and other various administrative tasks are not core to the business success. Literally, efforts devoted to these tasks are non-revenue generating and should be avoided if at all possible.

Now don’t get me wrong. I am a huge proponent of the use of Human Capital Management as a strategic tool. Using HR experts to place the right people in the right jobs and complimenting that with the right policies and procedures not only reduces the cost of hiring and training, but also bullet-proofs the company against employee related lawsuits that can sap a companies profit margins in the pound of a gavel. However, in short, why pay top dollar to have these experts on staff when you tap service providers that have far greater expertise and are far less expensive.

No less am I a proponent that managing cash flow, budgeting, capital planning and financial analysis are strategic and unique to a company. However, accounts payable, accounts receivable, billing and general accounting are critical, but not core functions. As a potential investor, I would be reluctant to invest in a company whose management is focused on running the best accounting shop in their business, unless that is their industry. A service provider that can process these functions for multiple clients in the same facility can provide significant economies of scale and efficiencies, resulting in lower costs. Again, the short version is: Leave it to the people whose core business is accounting.

And the functions above are by no means the only tasks that can be delegated to outsourcing experts. IT, manufacturing, e-commerce and even various types of sales are commonly outsourced to provide far-sighted business decision makers with both expertise in areas they lack and good fiscal sense to use.

Yet few small and medium size business owners really understand outsourcing. To many it appears to be relinquishing control of specific areas of their business when in fact it is just the opposite. Outsourcers commonly have more procedural checks and balances in place because it is their core business, so the end result is generally of higher quality or accuracy. They have experts at the ready that some small businesses could not afford to talk to, much less use to administer a non-core function of their business. They also are in the practice of helping their clients grow by providing them with better and faster ways of doing business, not sapping them of their hard earned revenue.

Delegating work to those who best know how to perform it and can do so at a lower cost is one of the most common sense business decisions and business owner can make. Outsourcing non-core business functions can provide small business owners with more time to do what they love, meaning do what they do best and not have to worry about back office (or in some cases even front office) activity.

Experts say that those companies that are not developing an outsourcing strategy are behind the curve. The bottom line is that delegating business functions via outsourcing providers directly impacts the bottom line. Clearly we are leaps and bounds past where anyone would have dreamed related to automation of business processes on every level, but until we have talking heads on a computer screen that can answer literally any question that anyone asks and perform any procedural task with unfailing accuracy, I’ll stick to what I know. And what I know is that I don’t know everything. That said I’ll leave my non-core business functions to those who do.