Richard Pierce Thomas

Leadership and Small Business Consultant

I swung the hammer at the threaded axle spindle in frustration, and the moment it smacked the end of the shaft, I knew I had made a bad situation worse.            

I had also proved my wife correct when she had asked before I started the work, “shouldn’t you take it to Mike the Mechanic?” Resigned to defeat, I called Mike and told him my situation.

“We have special tools for doing that,” Mike said dryly. It was what he didn’t say that spoke volumes.

Point taken, but I was in too deep to drive the car to his shop so he could bail me out of the mess I had made of it. Fortunately, mercy being Mike’s greater virtue, he lent me his thread file and axle spindle puller and I was soon back in action, though not nearly making the dent in the rest of the honey-do list I had promised my wife I would get to.  

It was then that my words came thundering back to me. Just because you can, doesn’t mean you should. How many times had I heard myself counsel my clients with this statement? Simply put, I had failed to use the very criteria I had established and preached in business management to avoid these types of scenarios.

You see, we face them every day—the decision to make or buy. Regardless of where the business is headed, whether we are bringing processes and capabilities in-house (make), or choosing to outsource competencies and expertise (buy), the decision itself begs for a framework to help us sort out which way to go such that it effectively complements our business and core competencies. Following is the criteria I had established for determining whether we should bring processes and capabilities in-house (make):

1. Does it leverage a core competency in the business? An example of this decision that many of my clients have made is the outsourcing of the HR functions. For most, the legal and regulatory aspects of HR have pushed it beyond the capability of the average small company to handle. As it is not a core competency of their business offerings, they have chosen to outsource the management of the HR, benefits and payroll. Another of my clients is in the business of HR outsourcing (www.XeniumHR.com) and they made a business of managing other companies HR operations.

2. Does it build the business? A reason to consider bringing a business process or competency in-house is if it adds to the top line in a substantial way. There is nothing wrong with adding core competency as long as it builds the business. Another client of mine was primarily in the metrology industry, offering Coordinate Measuring Machine (CMM) services for a number of OEMs in the area. 

Increasingly, they were being asked to machine features on the titanium castings their customers were providing to be able to measure the parts accurately. As the requests became more frequent, they decided to get into the machining business to capture the revenue rather than continue to send the dollars out the door. Though it was a steep learning curve, their newly developed capabilities in 5-axis CNC machining on titanium and other rare allows is now a larger contributor to the top line of the business than the metrology work they had started out in.

3. What is your track history? There is nothing like experience to tell you whether a make or buy decision is the right one. The important thing here is to be honest and assess your success rate. If it is less than 50%, you may want to rethink taking on a new process or capability that will pull your focus off where it is needed, unless you are going to couple it with bringing in the experience with it. Often this becomes the genesis of a merger, where the management experience is as valuable as the capability.

All this to say, I could have saved myself a lot of frustration and just driven the van to Mike the Mechanic. Choose carefully with your next make, or buy decision and you’ll be sure to save the business from unnecessary distraction and potential business killing risk. 

 

Rick P. Thomas is President of Activate Leadership, a leadership development consultancy in Washington state. He consults and speaks to organizations across the country, focusing on individual and organizational achievement.