Agency owners, however, are also realists. If outsourcing can boost productivity without producing negative side effects, many owners can and do use it.

Outsourcing often receives a bad rap. Some large corporations use it to cut staff and overhead. But for agency managers, outsourcing can facilitate growth and stimulate productivity–particularly when experienced staff are hard to find or expensive to hire.

Outsourcing, too, should not be a tool to replace employees who have important experience and skill sets, but rather a means to maximize the impact of these employees.

Choosing what tasks to outsource and what outside firm to retain is critical. Some agency services should never be outsourced, and any firm offering outsourcing services should be thoroughly screened before entering into an agreement.

When we sit down with agency managers, we like to discuss seven steps that all small- and medium-sized agencies should take when conducting due diligence on insurance process outsourcing.

o Step 1: Outsourcing Should Be About Growth, Not Downsizing.

Agencies with an experienced staff should consider outsourcing as a means to make the best use of employees' time, not to downsize and cut costs.

Outsourcing routine tasks can reduce costs, liberating resources that can be deployed more productively.

o Step 2: Keep Control Of Your Systems and Security.

In traditional business-process outsourcing, some vendors promise cost savings by adding a client to their agency management system, arguing they can run agency functions more quickly and at less cost.

The problem with that approach is if the relationship falters due to price increases or a decline in the quality of service, the agency can be saddled without the systems and the people to run critical back-office functions.

A more prudent approach is to have the outsourcing company connect remotely to your system, learn your processes, follow your procedures and essentially become an add-on to your agency.

The same way you connect to your server from home, they can from their offices. That way, all the information stays on your server and can be monitored daily by your managers.

Meanwhile, should you ever decide to end the relationship, you need only change your password to maintain exclusive control and access to the system.

o Step 3: Maintain Close Communication.

This is an obvious and critical need. However, to assure effective communications it is wise to consider only industry specialists who understand the challenges and objectives specific to your kind of insurance agency.

Look for a provider that maintains its corporate head office or at least a fully functional branch office in the United States to ensure quick turnaround in the event a problem.

Also, check the education level of a provider's staff, as well as their professional and English proficiency. Reducing errors and omissions from levels current in an agency is definitely possible, but depends upon the quality, education and training of your service provider's employees.

o Step 4: Ease Of Implementation.

Some outsourcing solutions can involve substantial investment in new information technology systems, processes and training. Others do not. It often depends on how a service provider connects to the agency's office, and whether the solution requires the agency to migrate to another system or continue to use their own.

Often the most painless and effective outsourcing solutions do not require systems or processes changes, which means the learning curve takes place with the service provider, not the agency staff.

Find out the typical length of time that outsourcing solutions take to implement, compare costs between solution providers, and ask for references to learn about other client experiences.

o Step 5: Winning Internal Support.

Critical to the success of any outsourcing project is the support and buy-in of an agency staff. This is why outsourcing solutions that involve downsizing do not make sense for small- and medium-sized agencies.

An agency's staff needs to understand the objectives behind the outsourcing project–that it is designed to enhance their positions; make their work more interesting by stripping out the routine, monotonous and low-value tasks; and consequently raise their productivity and impact within the organization.

Management needs to provide clear direction, be responsive to questions and concerns, and reassure staff that the outsourcing solution is designed for their individual benefit as well as for the agency as a whole.

o Step 6: Do The Due Diligence.

What is the track record of the specific service provider? Look at the firm's existing clients and find out what were the concerns, challenges and solutions they went through, and whether there has been a net improvement to top- and bottom-lines since the service has been provided.

Some service providers will provide, at no obligation, free trials for prospective clients, to demonstrate how the solution would work specifically for an agency's task requirements. Be sure to clarify what is involved in such a trial to determine whether this can be accomplished with minimum inconvenience to regular daily operations, and to set performance metrics.

o Step 7: Do The Math.

It is a given that the economics have to make sense. In this respect, offshore solutions can offer the best returns on investment if quality control can be maintained.

Agency managers need to know their current fully loaded costs of doing the work in-house–including salary, benefits, hiring, training, management supervision and attrition–and compare these costs to your service provider's solution.

Besides purely financial gains, there may also be intangible yet significant benefits to outsourcing, such as the greater ease of adding additional capacity to your operation by documenting workflows, and by placing the burden for hiring, management and quality control on the service provider.

By following these seven principles, agency owners and managers can generate substantially greater confidence about pursuing outsourcing as a means of making their agencies more efficient, more competitive and more profitable.