Service outsourcing is a global phenomenon aimed at improving and raising process quality standards. Through it, always focusing on business results, organizations seek to increase competitiveness through structural cost reduction.
However, despite being a well-established practice, Brazilian executives must be mindful that our country has a series of particularities regarding regional cultures, business models, and, most importantly, legal regulations and statutory limitations concerning the procurement of services.
This is because the Brazilian reality shows that, despite the intensive use of outsourcing, many corporations have not effectively structured themselves regarding outsourcing management across its various levels (contract management, operational management, and contractor management).
This reality stems from the fact that organizations often view outsourcing solely from an operational standpoint and with a strong focus on costs (which are often confused with price), overlooking the effective need for management.
Among the main problems typically identified in organizations, we can highlight:
1) Lack of planning;
2) Absence of policies and standards aligned with the process;
3) Lack of knowledge of basic outsourcing rules;
4) Inadequate control over the number of contracts and personnel;
5) Lack of management processes and tools;
6) Outsourced companies facing financial dependence or ceasing operations;
7) Lack of monitoring compliance with labor and social security obligations;
8) High volume of labor claims and legal provisions.
Indeed, as previously mentioned, although outsourcing is established in the business world, there is a need for organizations—to a greater or lesser degree—to constantly evaluate their service provider procurement model and policy, and to carry out prior oversight (so-called contractor management) of labor and social security risks.
In this regard, it is essential for contracting companies to implement effective contractor management, which is the process of constant monitoring by the client company regarding the fulfillment of legal obligations by service providers, aimed at the early identification and rectification of potential hidden liabilities.
The practice of contractor management in organizations has shown the following advantages:
a) Early identification of non-compliance with labor obligations by service provider companies;
b) Settlement of outstanding issues during the contract term;
c) Early identification of service providers with inadequate practices or weakened financial health;
d) Prevention and mitigation of the risk of generating labor and social security liabilities;
e) Potential future reduction in labor provision amounts;
f) Prevention and mitigation of the risk of administrative fines from the Ministry of Labor;
g) Reduction of reputational damage risk for the hiring company;
h) Safeguarding of workers' rights.
For outsourcing to be efficient and effectively represent a competitive advantage, it must focus not only on quality improvement and structural cost reduction, but also on selecting the best partners and monitoring provider compliance with proactive correction of any irregularities.
Adriano Dutra da Silveira is an attorney and corporate consultant, graduated from PUC-RS with a specialization in Business Management from Universidade do Vale do Rio dos Sinos-RS. He is a Consultant at Level Group responsible for the executive coordination of consulting projects in outsourcing, risk management of outsourced contracts, and the training of executives and managers across various organizations.
