The difference between bringing an employee on staff and outsourcing the function makes a huge impact on your day-to-day work activities, the outcome of your project, and – of course – your bottom line.
The bad news: there’s no clear cut definition of when to outsource and when to keep the work in-house; each situation is unique and you must assess each decision on its own characteristics to ensure you have the right fit.
The good news: there are clear definitions of the benefits between the two options; so making a decision is merely a process of working out what you need.
Benefits Of Hiring In-house
- An employee will have greater buy-in to your company
- Knowledge and skills developed by working on your projects is kept in house and is available for later use
- An employee has greater familiarity with your organization, simply because they are onsite all the time. This can be helpful when you need to quickly get a project out. It can also prevent the doubling up of work efforts that can happen in communication from your employees to the contractor.
- When you hire someone you have greater cost control. If a project goes overtime and someone is back after hours, the costs remain the same
Signs You Should Employ Someone In-House
- You have a specific work culture that must be evident throughout everything you do and everyone you work with
- This function is a key competency of your business
- You are a large organization with a strong employer brand
- The activities involve highly confidential or trade secrets that could damage your business if made public
Benefits of Outsourcing
- Simpler onboarding process. Finding the right company to outsource to is an easier process than finding a new employee because most companies will want your business. Instead of managing the training and payment of an employee, including vacation, sick leave and the inevitable raise, an external company is a simple contract agreement.
- Guaranteed continuation and no down time. Unless you’re working with a small agency, outsourcing your work guarantees that there are no unscheduled stops like vacation breaks, sickness or scrambling for a replacement on long service leave.
- Concentrated expertise. Specialized companies are usually able to recruit experts with deeper experience. Because they work on a range of projects, they have wider knowledge of the subject which will benefit the quality of your project.
- No need to invest in equipment. If the role requires specialized equipment like design tools or software, you will be responsible for sourcing these for an employee. When you outsource, the contractor carries this expense.
Signs You Should Consider Outsourcing
- You are not sure that the work will continue after this project or that there is enough work to justify an ongoing position
- You are a smaller business establishing yourself in the market
- The function is not a core competency of your business model
To make this a little easier for you, we’ve put together a list of the steps to take to decide between inhousing and outsourcing a function.
1. Identify what areas you can outsource
Before you figure out whether to outsource, you need to identify what areas you can outsource and where you need help right now. Those areas might include:
- Online marketing, particularly SEO, PPC campaigns, mobile website, and all of inbound marketing
- Website maintenance and development
- Virtual administration, through freelancer websites
- Software development and programming
- Call centres / online support
- IT maintenance
2. Identify all the costs
When you’re considering the financial difference between the two options, remember to include the costs of your time and emotional energy. While hiring in-house is generally cheaper on paper, there are a host of responsibilities that go along with managing a new staff member. These include ensuring you have enough work on an ongoing basis and providing training and advancement opportunities. Don’t forget that you will also need to invest in equipment and a place to sit for the new employee!
3. Identify business-critical functions
Some functions that need to be performed by a business are not actually part of the business model; rather, they are part of running the business itself. For instance, for some businesses, online marketing activities are a key part of their competitive advantage, and their ability to turn over millions of dollars rests on this performance. For others, online marketing is simply what they do to maintain sales, but their core capabilities rest in manufacturing or design. If the function you need help in is not a core function of your business model, outsourcing will probably create fewer headaches for you.
4. Identify how much culture matters
Do you have a unique culture within your organization that really defines why your customers love you? Every company creates their own culture, and even if you find a close match in an external agency or freelancer, they will never be 100% yours. You can more easily instill culture in a full-time employee
5. Assess the market availability of skills
There are always market realities to consider. You may prefer to have someone in-house, but if you can’t find the technical or marketing talent, outsourcing may be in your only option. When making the decision, you need to consider the scarcity of skills in the market and whether you will get the level of professionalism you need for the budget you have.
Remember, when it comes to making a decision of inhouse or outsourcing you don’t need to choose either/or. It’s reasonable that one of your projects may be better off with an employee owning it while your another may be better off with an external company managing it. Even within a particular project, an external contractor could take care of one small part while the rest is managed in house. Design the solution that works best for your needs and the market realities.
Photo courtesy of Vic.