Which term describes the process of hiring an external party to manage certain business processes or functions?

The term that describes the process of hiring an external party to manage certain business processes or functions is outsourcing. This practice allows companies to focus on their core competencies while delegating non-core activities to external specialists who can provide expertise and efficiency.

Outsourcing can lead to cost savings, improved quality, and increased flexibility, as external parties often have the resources and capabilities to perform specific functions more effectively. Businesses may outsource various functions, such as customer service, payroll, IT management, or manufacturing, to utilize the specialized skills and technologies that external companies possess.

While decentralization refers to distributing decision-making authority closer to the operational levels of an organization, franchising involves granting the right to use a business model and brand name to an independent party in exchange for fees. Contracting can overlap with outsourcing but typically implies a more specific and limited task being delegated, usually under a formal agreement between two parties. In contrast, outsourcing encompasses a broader range of functions and activities transferred to an external entity.