It's Time to Shut Down Your Video Production Department

Gary North

Feb. 17, 2011

Peter Drucker began preaching the benefits of outsourcing a generation ago. His philosophy has been captured in this slogan: Do your best and outsource the rest.

In this department, I show why you should have your own YouTube channel. Even a business executive should have it. He should run it himself.

If a business has an in-house video production department, it is making a mistake. Senior managers do not know if the company is paying too much if it does not get competitive bids. The longer any department has operated in the safety of "no competitive bids," the more certain it is that the company is paying too much. A basic law of bureaucracy is to increase costs and not increase output.

Senior management must conduct a careful investigation of the total costs of a video department. This includes:

1. Salaries
2. Health care benefits
3. FICA taxes
4. Medicare taxes
5. Retirement plan
6. Unemployment insurance
7. Equipment purchases
8. Equipment maintenance
9. Cost per square foot of staff offices
10. Cost per square foot of video "filming" rooms

Then management must find out what the net income is for the department.

In almost all cases, any organization that is not 100% in video production will find that the video production department is producing losses.

The department should be closed and the staff let go. If the firm wants to keep one or more staff members, it can encourage them to set up a video production company. The firm can then accept bids on projects.

Competitive bidding brings reality to former staff members of a video production department. They now have an incentive to cut costs, increase output, and buy make better use of production equipment. This is basic market competition.

Drucker at age 94 provided his last word on outsourcing.

What outsourcing does is greatly improve the quality of the people who still work for you. I believe you should outsource everything for which there is no career track that could lead into senior management. When you outsource to a total-quality-control specialist, he is busy 48 weeks a year working for you and a number of other clients on something he sees as challenging. Whereas a total-quality-control person employed by the company is busy six weeks a year and the rest of the time is writing memoranda and looking for projects.

Not everything can be outsourced. The generation of new ideas cannot be outsourced. Engineering should stay in-house. Anything that rests on team spirit should not be outsourced. But technical skills that can be purchased on the open market should be outsourced.

If you fire all members of a department because you are shutting down the department, you are less likely to face lawsuits for unfair firing. Check with your lawyer on questions of unemployment insurance.

Any company that keeps its video production department in-house is almost certainly throwing away money.

With new techniques of low-cost video production, it's far better to have video-savvy employees with a message to promote set aside an hour a week to produce their own "guerrilla videos." The master here is Bill Myers, "Guerrilla Bill." Visit his site here: www.bmyers.com.

If you are thinking of getting these skills, think of contracting with businesses that have not yet added a video department. Find out which firms do have departments. Be ready to make offers to them for small jobs. A smart firm will get the message if you do good work: "Let's shut down our high-overhead department."