The Outsourcing Trap: Why Most Founders Do It Wrong (Until It Nearly Breaks Them) || Ep 287 with Nicolas Bivero CEO & Co-Founder of Penbrothers

0:00So Nicholas, outsourcing has been something that has completely changed and revamped my entire company. and many people that I know, it's been the absolute game changer for them. And there's something really interesting that's going on where it used to be the badge of success for a company was, how many people can I get? Like, I want to make a billion dollar company, that means I need to have 10 ,000 employees, right? And we're seeing these companies now where they're outsourcing a lot of the talent, and they're making billion dollar companies with like 40 full-time people. How do you see this all being transformed in a world where we are so global?

0:44Well, first of all, thank you for having me. And I think that's a very interesting question. At the end of the day, it's still, I guess when you look at what you just said about the example you just gave, the success for those companies is still the same. You still need the manpower or to some degree the manpower to deliver your service. Now, the question is, how do you source that manpower? How do you build those teams? like globally. And so if before you had to hire a ton of people wherever you were, because you had a factory or you had a service office or whatever, now, and specifically if the COVID, you can really build teams globally, remotely, and really go where the right talent is for whatever position you're trying to fill.

1:23But I think if I understood you correctly, the success of those companies is still based on the fact that they need to build those teams, maybe not at the 10 ,000 people scale, maybe at a smaller scale, but you still need talent. it and so then that's where outsourcing offshoring like this type of service comes in because you can find let's say you need in your case really good people for your web agency for your marketing agency whatever it is you can find them in the philippines or you can find maybe somebody really good who speaks spanish in colombia or you can find somebody who can cover certain time zones who's also very good in south africa for example so now you can still build those teams but you build them across the globe, you know, and that allows you to find better talent, fill the positions with people that have the right skill set or work in the right time zone or also have the right cost profile that you need to make your company successful.

2:17So I think it opens the door to be much more creative when it comes to building those teams. When you started Penn Brothers, what were some of the mistakes that you saw companies were making when they thought about outsourcing? I think outsourcing, offshoring doesn't work when you look or it's difficult to make it work when you look at it only like I need a warm body. I just need somebody to throw at this problem, at this, whatever it is, at the floods of emails I'm getting or customer complaints or customer increase, whatever it is that you're looking for, or accounts payables. If it's just a warm body, but you don't really know what to do with that body and you're not really looking for quality you're just looking for that one body then more often than not we have seen that it doesn't work or it gets frustrating very quickly because then yes you have somebody on the remotely let's say sitting in the philippines but it's not really delivering what you're looking for because you never sat down and assessed what is it actually that i want that person to deliver but if you actually turn this around and say like let me first figure out what i need and what this person is supposed to do and then fill that position with a good person regardless of where in the world, then more likely than not, it will be successful because then you also find the right person for those tasks that you're trying to get done.

3:33Yeah, you bring up a good point too. I think what I've seen where my friends go wrong is they hire somebody, like you said, kind of the warm body. They also don't really know how, like the questions to ask. There are cultural differences in people all around the world. And if you've never, I think, experienced going to that place, the people there. I mean, it's one thing having friends or knowing people, but it's hiring somebody and then having them fit into your organization. So after, what do you do to ensure that people are successful after the hire? Good question. So in our case, we actually spent a lot of time working with our prospect clients and clients before the hire to actually set them up to make this more successful from being the partner in the Philippines to really help them identify what is it that you're really looking for?

4:27What are the must-haves, the nice-to-haves, the cultural things that you also need in that particular talent so that it fits your team? Because if you don't look at that and you just pluck somebody like a warm body again and put it in there, it might actually be technically speaking a great talent, but it might not fit your team from a cultural perspective or from a personality perspective. So that's part of it. Then once you onboard the person, let's say the person gets hired and you onboard the person, then you still need to help bridge that gap a little bit. Specifically, if it's the first time the company is doing this, having a remote person in the Philippines in particular.

5:05Because, yes, as you said, the culture in the Philippines is not the same as the culture in the U.S. or in Australia or anywhere in other countries. So then once you bring that person in, you still need to help bridge that gap, help get a little bit better understanding of certain cultural idiosyncrasies, ways how Filipinos work, how Filipinos communicate and vice versa. You also need to help the Filipino talent. If for that person is the first time working with a foreign company or a foreign team, you also need to try to help them to understand how do you work with, let's say, an American or how do you work with an Australian or whatnot.

5:40So it's bridging that gap that becomes very important. I mean, we call it hypercare. I think that's where you're going with this. But it's called hypercare in the sense that we're trying to take care of both the client and the talent and bridge that gap as much as possible. Now, that said, it doesn't always work. I mean, we're still talking about human resources. Any organization, when you hire 10 people, it's likely that maybe one or two won't be the right fit. Even if HR did the best job, you did the best job interviewing, humans don't always work out. So that's, I think, why people are so excited about AI for a lot of other things.

6:14It's one of the reasons why I never started in a company of offshoring. People ask me before, and I'm like, I don't want to be in the business of HR personally. It's a great business. And I think it's incredible to help not only the companies, but also helping people all around the world make money and prosper, I think is amazing. But it definitely has its intricacies. you said something that really stuck with me in my corporate experience the biggest downfall i felt that they would do is they never put people in the right place it's almost reminding me of strength finders if you read that book it's like if somebody's not doing well in a job they performance improve them out they try to get them fired even though maybe they'll be doing great if they were in a different position so i've always always had in the back of my head like is this person not doing the job because they're not a good employee or not a right fit for the company?

7:08Or is it that they're not a right fit for the role? So how do you see that when it comes to just leadership in general? Like, how do you recognize that if somebody is good still for the company, but maybe just needs to move to a different position? Yeah, that's an excellent question. I think that's the real tricky part of HR and organizations. How do you deal with those circumstances? Sometimes I think there is no clean cut answer to that. In my opinion, in my experience, it really comes down to the situation itself. You might have situations where you can experiment. You can actually move a person from one team to another team thinking that, okay, maybe this person is a better fit over here with the environment or the team or even the boss can make a big difference.

7:56But I think also sometimes you don't have the luxury of time to do those experiments and play around. So I think there you need to be more, I guess, conscious of what priorities do you have, how much freedom you have, how much time you have. That applies to my own company, but I guess also to my clients. Sometimes you might have just to bite the bullet and say like, listen, maybe this person would work somewhere else, but I don't have the freedom or I don't have the time to try it out. So let's replace. And other times you can actually try it and you can move people around and see how it goes.

8:26So that's really tricky because it's not a clear cut situation. There's a saying in the startup world, hire slow, fire fast. I'm not saying it's the right thing to do. I'm just saying like, it's definitely something. I think it's kind of been a phrase that's been slowing down. But I remember many years ago, I had so many mentors, bosses were like, stick to this phrase, right? I don't know if it's probably not even a good thing. Let's go back to your story though. I know you've had the incredible opportunity to live in different places around the world, which I think is the most amazing thing that anyone could do is travel around the world if they can.

9:04How did you get to here in the Philippines? Which, by the way, we're filming now in the Philippines, which I think is amazing. But how did you get here? Well, that's a long story. So after university, I had the opportunity of spending about six months in Japan to do martial arts. I had been doing martial arts on and off since I was six years old. had been already one time over the summer doing my studies in japan and then truly enjoyed it fell in love with the country and with the people so i got this kind of like what do you call this like a sabbatical opportunity after finishing my master's degree went to japan spent six months there learned some japanese thinking that it was much better than it really was but at least i thought i could now understand a little bit of what was happening around me and then decided to do an internship at a try to get an internship i got lucky to be very honest i was very fortunate to get the opportunity to be hired as an intern by a japanese company it was a amazing and also very scary experience scary in the sense that i was the only foreigner in a big medium-sized japanese company i the beginning the first two weeks is literally what you said like i was a warm body they needed somebody who speaks english but they really didn't know what to do with me so They hired me.

10:16They put me there. My boss wasn't there. He was on a business trip. So for the first week, I was just sitting there and going for lunch with them and then sitting back on the table and doing nothing. But over time, it became a really great experience. And that work with a Japanese company, business development for them in Southeast Asia, including the Philippines, brought me to the Philippines for the first time in 2005. And I had a great first trip here, great experience. We built some really interesting, really fascinating, fast-growing companies. and for me that was an exposure to the Philippine culture and to the Filipinos so we were building joint ventures in the Philippines at that time and for each of those joint ventures we needed a Filipino team and that's where I realized how how great they are from a talent perspective but from a personal perspective from a team perspective so that exposed me to to really working with them and building teams with them and seeing firsthand, while I was working with them, how good they are and how diverse of a tatton pool you actually have in the Philippines.

11:20I mean, a lot of times, unfortunately, the Philippines has a little bit of a reputation of having certain type of tattons. If you talk to, I mean, it's in the seafarers or cleaning ladies or nurses or nannies, correct? But it's a big economy. There's so much more. And so that working for the Japanese company with Filipino partner was very eye-opening to me. And then in 2011, they actually asked me if I wanted to come over for two years. That was the original plan. So I volunteered, I came and I stayed. So it's been 14 years here. So you started this company. In some categories, you've grown to being one of the fastest growing companies here in the region, which is amazing.

12:02I mean, thousands of people are being helped every year. what is it to you that when you look back and say wow success to me means this for me in particular i mean i'm half south american and half german but i grew up mainly in south america and unfortunately the country where i am from and this applies to a lot of south american countries there's a lot of migration out of those countries because there is just not enough jobs enough opportunities enough yeah options of things that you can do even if you have a good degree And so for me, what is success, particular with Penn Brothers and here in the Philippines, is really seeing how we can not just build teams for our clients, but really create super interesting jobs for Filipinos without them actually having to leave the Philippines or having to leave the countryside nowadays after COVID.

12:51I mean, a lot of our people actually work remotely. To give you one simple example, we created or not created, we didn't create this job, but we have a client, German client, who needed a German-speaking accountant. now we didn't know if we could find somebody in the philippines when we gave it a try and we found a filipina who is half german grew up in the philippines speaks perfect germany worked for one of the big accounting firms but had started a family was works in the country or lives in the countryside and was looking for an exciting job but wasn't finding anything so now she works because of us or with us for a german startup has a super exciting job is really happy the startup is happy so everybody's happy and this are this is what makes us happy like creating those sometimes unique opportunities that otherwise wouldn't exist or enabling filipinos to have super interesting jobs where they can also learn and grow as per on a professional level on a personal level so that's what we see a success yeah there's some amazing talent here there's amazing talent like you said they're they get put in a box sometimes internationally as certain things but when you're here you realize that they're i mean they're super highly educated i didn't even graduate college it had like 90 of people i meet here graduated college and it could be you know so i'm amazed by the talent when you look back at scaling for your organization what was a moment that really stuck out to you where it was maybe harder to scale than you thought or it's something that happened while you were scaling the company that you never even anticipated?

14:27I think I would have to break this into like two days. So one of the challenges we had at the beginning, and we started in 2014 with scaling, is at that time there was almost no co-working space and all our clients or the majority of our clients wanted people in the office, even though they were working remotely. So scaling at that time always came with the added complication that you needed to create a space. And that's a surprisingly expensive thing to do and can be very, how can I, how can I quote this? It can be very, it can slow you down. It can make things difficult. So that was the first challenge.

15:02Nowadays, I think space is still sometimes of a requirement, sometimes of a problem, but you can also hire a lot of people now remotely, which is exciting. So it allows you to scale a little bit faster without that need for space. But then you have all the other challenges because now you're working with a large group of people who work remotely around like nationwide so how do you keep in touch with them how do you make sure that they're taken care of that they are have the right work set up that they that you actually know them you know that you you you can you meet them you talk to them so that comes with other challenges that are not easy to to scale because you know this this takes a lot of effort people by itself systems and structure and processes so i think it's really learning how to do that.

15:49So skating is never easy. Let me try to put it this way. But the challenges you have when you scale, they change over time. And you need to adjust to it and do your best to overcome that, learn from that. Sometimes we work with people and we have some businesses here that require people in very small provincial islands. And I never would have thought this if I had never been there around the power and internet so we had to buy them starlink because the internet was going out and they think every time it would rain something would happen like there's small things that we never expected yeah that right okay we never expected this but we need to put in this solution and this solution so i could see if i had never been here i don't know if i would have continued because i wouldn't have known like what to put in as a solution so i could see the the importance of having some sort of partnership like Penn Brothers, you know, working with an organization that's here that knows everything versus like trying to find someone online and just hire them.

16:50So just to finish out, if you were to give two tips to anyone who's like, okay, I need to, I need to look at offshoring, outsourcing. I really need to build my company and I need staff in the Philippines, for example. What are two tips that you would give that everyone should know? Well, I mean, rounding it out, when we talked before, I mean, first, really understand what are the role that what's the tasks that you really want to get done? And what are the, what does success for that task before that stuff look like? So that you, when you hire them, somebody remotely, Peter, the Philippines, or anyone else, you are able to set that person up for success instead of just a warm body that will be most likely frustrating because nobody really knows what that person is supposed to do.

17:33That's number one. Number two is, and now I'm obviously a little bit biased, find a good local partner because it's not easy. I mean, there's a lot of talent in the Philippines, but it's not easy to find the talent, to interview the talent, to like make sure the talent is properly set up. As you said, there's a lot of local idiosyncrasies that people don't think about because we don't have those comments in Germany or in the United States. Be it internet comes out when it rains or typhoons. You know, I mean, yes, if you're in Florida, maybe you're a little bit aware of hurricanes and that you need to have some redundancies.

18:05But if you're not, it never crosses your mind that electricity might be spotty in some place and so on and so forth. And so all of those things can be overcome much easier and smoother when you have somebody can help you locally. Well, I appreciate what you do. I appreciate what you do. I think it's amazing. Anyone that can provide more, not only jobs, but jobs that pay well enough where people here can. I mean, it changes their life. Like you're saying, it's amazing how not a huge amount of money can completely not only change one person's life, but their entire family. It could change a whole generation.

18:40They can put people through college. They can do a lot of things. And that also means they don't have to go travel to certain countries to then work in certain jobs. So I think it helps them better way of life. They can spend time with their family. It really changes when you see how the culture is and doing what you're doing can make an enormous change in a whole generation of well, which is incredible. But thank you, Nicholas Bavaro, Penn Brothers. What you've been able to do is incredible. Thousands of employees helping thousands of companies around the world. And you're like the Steven Seagal of the 2000s.

19:18No, I don't think so. I haven't been practicing for a long time. So when I was younger, I would have said I wish, but maybe not anymore. They got ship sailed. Doing all that. Well, you and I are going to have to do some Aikido. Yeah, I've been done it for quite a while there. It was like it hurt a lot afterwards. So I will be in a lot of pain because I've never even done it. But this has been great. And thank you so much for joining us today on Founder Story. Yeah, thank you for having me.