The Wize Guys

Episode 120: Offshore Teams: Your Path to Business Growth

August 21, 2024 • Wize Mentoring for Accountants and Bookkeepers • Season 1 • Episode 120

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In this week's episode of The Wize Guys Podcast, Brenton Ward sits down with Ed Chan and Jamie Johns to explore the transformative impact of offshoring on accounting and bookkeeping practices. 

Ed shares his perspective on offshoring as a win-win strategy, emphasizing its role in keeping client fees competitive, providing pay raises for local staff, and aiding countries in need. Jamie highlights how offshoring has boosted capacity and strengthened team relationships at Sky, sharing a success story where an offshore team member was recognized in a client's annual report for their significant contribution.

Tune in to learn more!


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Brenton Ward:

From Wize Mentoring is The Wize Guys Podcast, a show about accounting and bookkeeping practice owners and the many stories, lessons, and tips from their experience of transitioning from a time- poor practice to a business that runs without them. I hope you enjoy and subscribe. There's still a big argument for and a big argument against offshoring, so I'd love to get your views on it and your experience with it today.

Ed Chan:

Yeah sure, thanks, Brenton. I guess it's a question around covers a lot of things, I guess it's obviously we do it because it's cheaper. This is a lot cheaper to offshore. There is a money issue involved as well. There's also a social responsibility issue. There are a lot of different angles you can look at it, but the way I look at it is that in our business, being the owners of the business, we're pressured by the clients asking the fees to be kept low and the staff wanting, you know, wage increase. So we're sort of squeezed in the middle and the money's going to come from somewhere to be able to do that.

Ed Chan:

And I see outsourcing as a win-win for everybody. And often the challenges that I was having in the beginning was you, you know the staff would push back saying that you know, oh, it's going to risk their jobs, but actually it's the opposite. You know, if they wanted to keep their jobs and wanted to get a pay rise, the only way that they're going to get a pay rise is if we save the money from somewhere else because money doesn't grow in trees. And then the clients are pushing to keep their fees low. So in order to be able to help everybody keep the fees competitive to the clients, be a be in a position to be able to give pay rises to your local staff, then if we save the money from somewhere which is often, you know, outsourcing, then we also help another country. And some of the countries are in poverty and it warms my heart when I see how we've helped them get out of poverty and improve their own standard of living and their family standard of living. And then the question of yes, but we should be giving jobs to Australians In our industry.

Ed Chan:

I'm 61, I've been here all my life and I've seen the unemployment rate go up and down, but it's averaged always at around 5% and 5% is full employment, and we've always struggled to find people in our industry. And then there's an argument around immigration. You know some people don't want immigration. Well, outsourcing is great. We keep them over there and they don't come over here, but they do help. So for all those reasons, I truly believe it's a win-win for everybody. You know we help our clients to keep our prices competitive, we can help improve our wages for our staff that we hire and we help another country who in our case we go to the Philippines, so it's helping them get out of poverty, and unemployment's always been around five percent, so you know, I just don't see a negative to it.

Brenton Ward:

Yeah, that's an interesting one we did even. 12 months on, the conversation has changed around the strategy and there's certainly more of a pro for as part of the growth strategy in any firm. But we wanted to open up to the teams because I think that message needs to get across as well. Coming from the team side of things is seeing where the balance is and where the strategy fits in with the overall growth of the firm. Now, Jamie, you're an early adopter of this strategy. Can you talk to us a little bit about how important it has been or what role it's played in the growth of Sky over the last eight years, 10 years?

Jamie Johns:

Yeah, look, it's been one of the biggest single innovative strategies that we've done at Sky it's. You know, to say it's been massive would be an understatement. We've got 10 full-time people in the Philippines and it's been fantastic for capacity, just actually getting the production work done. You know I've been down the track now for eight years on it. You know we've got team members that have been with us, you know, coming up six, seven years. So it's just been fantastic, Brent, because we've developed those relationships. Those people have been with us long term and in that journey we've educated them.

Jamie Johns:

It's, as Ed said, it's been a total win-win. You know, really, I would say up until the point just recently, accumulating to the point where one of our senior accountants got mentioned in the annual report of the client. You know that the contribution that that person and you know happy to say it was Charmaine got mentioned in the annual report of the client, that she's contributing to their organisation and helping it grow, helping it expand and just as an important team member, and that gives you some insight into how important these people are. And I was speaking to accountants all the time, and even in the US and wherever else, who have never done offshoring and it's such a game- changing insight that if you can build an offshore team, it really changes your whole firm. It's a win-win for everyone. It really is. As Ed said, it's a win-win for everyone.

Brenton Ward:

In terms of embracing this strategy. As the leader of the firm, what are some of the things you had to reflect back on since you started or commenced the strategy all those years ago? What are some of the big standout things that you can reflect on in terms of embracing it and getting it firmly embraced by the firm itself?

Jamie Johns:

Yeah, the biggest thing that I found, and also just with working with firms, is existing team members. So if you've got existing employees or existing clients, the biggest thing is change management. It's just simply that fear well, maybe from the existing team members that someone's going to potentially take my job. That's the first thing. The second thing is working with your clients and offshoring and how all that. You know someone's going to potentially take my job. That's the first thing. The second thing is you know working with your clients and offshoring and how all that plays out and how that works as well. You know security concerns, all sorts of concerns that you'll have With new team members that you get on board and they understand that you have an offshore workforce or team or even new clients.

Jamie Johns:

Their resistance is so much lower because they're open to change. They're open to new ways of doing things and whether it's a new team member, you know we just recently hired an assistant client manager and the fact that we had offshore team members to help that assistant client manager to do his work was just fantastic to him. And these people have been with us for five years. They're experienced in payroll, technically competent, and you know that person just thought that was fantastic. When you introduce new clients, you can simply say to them we have offshore team members that have been with us x amount of years. This is how our business works, and you'll find that 99% of people are fine with that. If they don't want their work done offshore for some reason, you can simply say you know, we'll do it here.

Jamie Johns:

Just to recap, it's really the change management. When people have a fixed mindset and think that, oh, that's not possible or whatever, that's more of the challenge. But when you've got new team members or new clients, they're open to change, they're open to innovative ways of doing things, and so that's been my experience from the offshoring experience, the offshoring team members. It's not just one point to cut costs, of course. That's why we do it. But you know, from me down, everyone believes in the ability of teamwork, both with the onshore team, and the offshore team, and, in effect, will become part of your values, and so meet clients who don't embrace that global view, or working together in that way to for the betterment of, you know, everyone, even in the clients, and get the work done. Then sometimes, you know, use this question whether they need to be part of your organisation, so it's about your ideal client. What's your ideal client?

Brenton Ward:

Yeah, that makes a lot of sense. Anything to add there in terms of embracing the strategy before we get into some of the nuts and bolts of it?

Ed Chan:

Yeah, I think there's confusion around outsourcing or offshoring. There are different types, so you've got to get the right type and we spent quite a few years doing the wrong type of outsourcing. If you like, you can take up an outsourcing offering that you pay an hourly rate for, so you just buy what you need, so to speak. And we spent quite a few years doing that and we found that few years doing that and we found that that wasn't very good. So there's a lot of trial and error going on and you know, make lots of mistakes. The problem is that kind of outsourcing only works for a certain type of work SMSF seems to work okay with that kind of outsourcing where you're buying, you know the hours, and the reason why SMSF works, you're buying, you know the hours and the reason why SMSFs works better is because you know SMSFs are pretty much the same. You know you invest in shares, you invest in a property and the parameters are pretty easy.

Ed Chan:

But when you start doing SMEs, the SMEs work a lot more complicated in that you know each client is slightly different, and if you use an hourly rate basis because it's the first time they've done that job, you've still got to train them.

Ed Chan:

And so you put in, you know the hours to train them, and then next year you get someone completely different and you got to train them again. So we found that it didn't work so well with SMEs. So the better way with SMEs was to hire your own staff over there. When you hire your own staff, the training you put into them, you'll get the benefit of that training the next year because they can do the work much quicker and faster. So that was the first thing just getting confused as to what kind of outsourcing is it offshoring, is it outsourcing, and what type is it? And so that took us quite a few years to work out. And then the second thing is obviously the staff. So there was a lot of pushback because they thought it was a threat, but when they realized it wasn't a threat, it was actually helping them get through the work.

Brenton Ward:

What were some of the things that you needed to do in order to disarm that threat within the onshore team?

Ed Chan:

Well, first it was an attitude. So we had to change the attitude, because if someone doesn't want to do something, you know they'll find every reason not to do it. So they'll cherry pick, you know, they'll say the quality is no good and then they'll blame it on outsourcing, whereas it was just either poor training and there are times you do hire the wrong person and that's the wrong person and they're not very good. But then most of what I found was that because there was a reluctance to embrace it, there was a reluctance to take ownership of that person and train them properly, and because they're overseas, it is harder. It's obviously easier to train someone that's right next to you than it is to train someone that's you know you've got to do it by Zoom, or the distance does make it harder. So the staff would gravitate obviously to the easy solution rather than the harder solution. So they ended up being an orphan and being left alone and no one directed them and taking ownership of them.

Ed Chan:

It also had to do with the team structure, you know, because if you run a narrow and deep structure, the leader of that team, usually the senior client manager, will take ownership of the team, whereas if you run a flat structure, nobody takes ownership.

Ed Chan:

And if you share staff and often the mistake we made initially was to share staff across you know, three teams and then nobody took ownership of that person and nobody wanted to train that person because the attitude was, if I spend all these hours training them, they'll just go work for the other team, it's just wasting my time. So you've got to work through all those things. So eventually we ended up having, you know, an outsourced person per team and you know that team took responsibility for that person and things like. You know, we made sure we had our daily huddle. So you're always including them with your team as though they're there. But you're just going to make sure that they are part of your team, they are part of your organization, and just because they're working over there, not here, doesn't mean that they're not. So you've got to treat them like they're part of the management meetings, the daily huddles. You've just got to involve them.

Brenton Ward:

Yeah, what are your thoughts about using centers that train their staff? Must they be on your payroll? So I guess that comes back to the outsourcing versus offshoring conversation debate, ed, I think At the end of the day, by the sound of things, you get a much better return on your investment when you do the offshoring strategy and employ staff, as opposed to taking staff who are paid and trained and managed by another outsourcing agency.

Ed Chan:

Yeah, absolutely. It's what I said earlier that you know, with SMEs, it's particularly difficult because each SME is different. They've got their own idiosyncrasies. So if you do use the hourly rate basis, then no matter, you know how experienced they are. You've still got to spend time with them to explain the idiosyncrasies of this particular client and then next year they give you a different person to do the work and then you've got to train that person and you never retain the training for your particular client, whereas when you hire your own staff, you know the training you put into that staff. If they took three hours to do it the first year, the next year they'll take two hours to do it and it gets more efficient. Uh, the years they stay with you.

Ed Chan:

So you know it took us a long time to identify what the problem was, because often you know you confuse the problem with the symptoms and it's really difficult to separate out what is a symptom and what is a problem because the staff will put it down to oh, it's just outsourcing, it doesn't work. But it wasn't. The outsourcing wasn't working, it was just doing it at an hourly rate. That didn't work. On the flip side, it worked quite well with SMSFs, with super funds. It worked quite well. So we had to through all of this, through trial and error, to work out what the problem was, as opposed to what the symptoms were.

Brenton Ward:

Okay, that makes sense. Thanks for tuning in. If you liked this episode, please remember to subscribe and leave us a five-star review For more practical, wise tips on how to build a business that runs without you, head over to wizementoring. com/ podcast to download a free copy of the Accountant's 20-Hour Workweek Playbook. We've included a link in the show notes below. See you in the next episode.