Are you worried about losing your job to an outsourcing firm? Your anxiety could be right on target. These days, anything a corporation doesn’t rank among its core competencies can be farmed out to a firm that promises to do it cheaper, better or both.

But you may be able to turn the outsourcing trend to your advantage -- if you have an entrepreneurial streak that you’ve been suppressing. When senior management starts thinking about outsourcing your department, you can offer yourself as the most qualified person to take it outside the corporation.

It’s an ambitious strategy, but one that has worked well for managers such as Steve Medici. He was director of employee benefits at CS First Boston in New York, an investment-banking firm that was on the verge of outsourcing part of his department to a consulting firm. Before the deal was struck, he offered to form an independent firm that would provide benefits administration to First Boston and, eventually, to other companies as well.

Mr. Medici now heads that independent firm, Black Mountain Management Inc., which holds a five-year contract to administer First Boston’s benefits. No one lost a job in the transition, since all 10 members of the benefits department joined Black Mountain. And Mr. Medici received numerous inquiries from other companies interested in outsourcing their benefits administration to his firm.

He isn’t the only manager to have successfully led a department outside:

• Garland Robinette was vice president of corporate communications at Freeport-McMoRan Inc., a big mining company in New Orleans. In 1993, he and his entire staff of 23 employees resigned to form Planit Communications Inc., an independent public relations firm. Mr. Robinette is president of Planit, which has a five-year retainer from Freeport and a growing list of other clients.
• Jim Miller was vice president of environmental affairs at Freeport-McMoRan when two major expansions were nearing completion six years ago. The chairman asked Mr. Miller and another vice president, Roy Pickren, to consider launching a spin-off that could provide the reduced level of engineering and other technical support Freeport would need. They accepted the challenge and formed Crescent Technology Inc., an independent firm that hired almost 50 Freeport employees. A number of other Freeport engineers soon were laid off.

Today, the lion’s share of Crescent’s income still comes from Freeport. Dr. Miller explains that the mining business has improved, and Crescent wants to make sure it can continue meeting the mother company’s expanding need for top-quality service before adding too many additional clients.

• Kathy Herbst and Laura Ford constituted the human resources department at LinguiSystems Inc., a 50-employee educational publisher in East Moline, Ill., until they launched an HR consulting firm, New Avenues Inc. Their office remains at LinguiSystems, where they continue to perform most of the work they handled as employees.

Outsourcing your department, a strategy that’s sometimes called "outventuring" or "extrapreneuring," calls for good timing. If you wait until senior management is already talking to outsourcing firms, you could be too late. And if you make a proposal before management is ready to outsource, it likely will be ignored.

So how will you know when the time is right? Don Elias, an outsourcing consultant and president of DL Enterprises Inc., in Lowell, Mass., says to begin paying attention if your boss is able to find less and less time to understand your department’s needs. In the past, companies outsourced mostly to cut costs. Today, a common reason for outsourcing is to free up management time for higher-priority tasks.

A second warning sign is that your company is reluctant to invest in the technology your group needs to continue providing state-of-the-art service. More companies are outsourcing to gain high-quality service based on the latest technologies.

A third sign is if you’re told to downsize your unit. "Once management decides it can get by with a smaller group, it’s not a big step to deciding the group doesn’t have to be in-house," says Mr. Elias.

Once the writing is on the wall, don’t step forward with your proposal until you’re convinced of your ability to lead a successful outventure. After all, you’ll be starting a new company. A host of issues must be weighed.

1. Do you have the right people in place? "We had a very strong, well-balanced department," Mr. Medici says. "If I hadn’t had exactly the right people, I never would have tried this."
2. Can you persuade your subordinates and key colleagues to follow you into uncharted waters? They’ve probably seen co-workers laid off, so they no longer assume their corporate jobs are secure. That will help them accept the risk of joining a new venture. Even so, few employees are ready to become entrepreneurs overnight. Mr. Medici didn’t ask his benefits staff to invest in Black Mountain. The $100,000 start-up capital came from his own savings and borrowing. "I didn’t want them to be at risk for anything more than their livelihood," he says dryly.
3. Can you devise a persuasive proposal by yourself, or do you need help? The most critical selling point you can offer to top management is that you know the corporation intimately and have already established smooth, working relationships with internal customers. You can also point out that having your staff join an outventure would be far less disruptive than the layoffs and sagging morale often prompted by conventional outsourcings.

Seek help if you think you need it to create a proposal that top brass will take seriously, says Mr. Elias. He was instrumental in spinning off the former Digital Equipment Corp.’s marketing communications group -- now called Quantum Communications in Andover, Mass. -- , and offers himself as a consultant to managers seeking to outventure their departments.

A truly creative approach may be required when devising the terms for a proposed contract with your mother company. Mr. Robinette got nowhere the first time he suggested an outventure to Freeport’s chairman. Then he tried again, using a new formula that capped Freeport’s communications costs while giving it a percentage of the profits his new firm would earn on new business, he says. That led to serious negotiations and an eventual agreement.

On the other hand, make sure the services covered in your outsourcing contract are priced to ensure the viability of your new firm. Your first objective, says Mr. Miller, should be to determine your costs. You can work the numbers out yourself, if you happen to be an expert on everything from the cost of medical insurance to the implications of forming a partnership versus a closely held corporation. Most likely, though, you’ll need to get expert advice.

"You’ll learn some lessons the hard way if you don’t," Mr. Medici warns.

A long-term contract -- five years is common -- will reduce the cost of your real estate and equipment leases. Longer terms also are attractive to mother companies because they ensure continuity of service.

Just as crucial as your outventure’s financial underpinnings is its human side. Bear in mind that creating a new firm represents a golden opportunity for you and your co-workers to create a truly entrepreneurial culture, which most big corporations strive for in vain.

"A number of our people are making more money than I do," Mr. Robinette says, thanks to his firm’s profit-sharing plan.

"At First Boston, I’d always pontificated that you can’t pay good people too much," adds Mr. Medici. "And this was an opportunity for me to put up or shut up." Black Mountain also shares profits, and because every penny saved fattens their pay, employees have become acutely cost-conscious. "Sometimes it’s hard to get them to spend any money," Mr. Medici says.

His staff is looking forward to the day when the contract with First Boston allows them to seek additional customers. "Because we have the infrastructure in place, when we take on other clients, the profit margin will be a lot wider," says Mr. Medici.

The entrepreneurial drive to make money is just one key to making an outventure succeed. The other is allowing broad participation from all employees in business decisions. Your title may be president, but "you can’t play El Presidente," says Mr. Robinette.

At first, he experimented with a completely flat organization that proved unwieldy. Now that structure has evolved into a more practical, team-based organization that draws on everyone’s creativity, he says.

Knowing what he knows now, would he do it again? "Sooner or later, your department or a portion of it is going to be outsourced," says Mr. Robinette. "Either do it yourself, or they’ll do it for you."