Companies are reluctant to own certain hard assets, including a labor force, because they are inherently risky, says Ryan Cates, regional vice president of nGROUP. Companies either can be strategic in their employment and hope to avoid litigation or they can turn hiring and managing of workers over to an outsource provider who takes on the responsibility and risk.

The reality is that we live in a litigious time. For employers, wherever they are situated in the supply chain, the risk stems from the labor force, says Cates. "I don't know the last time that a forklift or truck sued anyone."

Consequently, few companies want to own hard assets anymore because they have to be operated by a labor contingent. "What they want to own is intellectual property." Nevertheless, they obviously need humans to perform certain tasks. So what to do to minimize the risk associated with a labor force?

Cates says you can attempt to be strategic and hire very carefully, but his view is that it is better to simply outsource operations. "Companies like ours bring resources that help improve productivity and increase service levels and quality, and dramatically lower costs, from 10 percent to 30 percent or more," Cates says. "But the bottom line is that we separate our customers from the liability associated with their employees."

How? Cates says outsourcing providers actually manage the labor portion of the business. "We are responsible for the hiring, managing and using of that piece of the business."

Turning employee management over to a third-party can be a emotionally trying time for some employers, Cates says, especially if they have worked with some employees for many years. He acknowledges that outsourcing partners have to be sensitive to such issues.

To view this video interview in its entirety, click here.