Are you at a point where you need more help in your business?
You might be wondering whether to hire another full-time team member or outsource work.
Unfortunately, there’s no straightforward answer to this, as there are many variables that can influence your decision.
That said, your end goal, be it hiring in-house or outsourcing, is to grow your business by reducing operating costs and increasing revenue.
This article should help you make an informed decision about whether outsourcing or keeping work in-house is the right choice for you.
But before we get to that discussion, let’s look at the difference between in-house and outsourcing.
Outsourcing means that you hire outside resources to help you complete tasks or projects. These might include freelancers or agencies that specialize in performing a particular type of task or project. In-house resources, on the other hand, means a business would hire and use its own employees to complete specific jobs, making it an “in-house” job or operation.
When it comes to choosing between in-house and outsourcing, an organization must first analyse the advantages and associated risk and cost that comes along with each method.
Let’s look at the said advantages and disadvantages of each solution.
Advantages of internal (in-house) recruitment
Opting for an in-house team provides several advantages that can potentially increase margins and overall efficiency, including:
1. Better understanding
The in-house team is aware of the requirements and has a solid understanding of the project from its early stages to the end stages.
Being already in the company makes them a better cultural fit.
Unlike the outsourcing team, especially if they’re brought in mid-way, they’d need time to understand the project details.
2. Work continuity
Recruiting externally can be a slow process because of the onboarding and orientation process.
It is immediately eliminated due to the fact that the internal employee is already immersed within the organizational atmosphere and understands a company’s history.
Internally handling a project ensures everyone working on it shares the company’s values.
They become invested in your company’s success because it’s directly linked with their future.
Having a system that focuses on hiring from within also creates an atmosphere of motivation throughout the entire organization.
Employees will feel motivated to climb up the organizational hierarchy and will put more effort into their work to achieve growth.
4. Growing your team’s skills pays
Every new project is a chance to upgrade your team’s skills.
If you work with your in-house team, you can keep building on that foundation to get better and work on future projects.
Handling it in-house means you learn together and become more capable as a team.
Disadvantages of hiring in-house
While having your own in-house team is beneficial, it has its own share of risks and disadvantages too.
1. High ongoing costs
The overall cost to hire people in-house doesn’t involve paying their salaries alone.
There are other costs involved, such as putting the infrastructure in place, employee benefits, and training costs.
You’ll also need to invest in the recruiting process.
Bear in mind that you’ll need to pay their salaries even after the project has ended.
When the project is done, that person expects to continue working with pay.
This is the long-term commitment you’ll have to undertake.
2. Reduced job pool
Considering in-housing focuses on choosing a team from within, the practice immediately limits the number of job candidates and may eliminate highly qualified individuals.
For example, choosing to in-house may forfeit the potential opportunity to find the perfect team or person for both the organization and the project concerned.
3. Lack of necessary skills
Your team may not be good at everything.
You might not have in-house resources that can complete a particular project successfully.
It might not be practical to try to take on a project that’s far outside of your team’s expertise and training the team might be too time-consuming or expensive.
The resources you spend to train may take attention away from the things you can do well, and your results won’t be as stellar.
For key projects, it’s smart to work with someone that has the experience you need.
Now, let’s look at the other side of the equation.
Plus points of choosing to outsource
What are the some of the pros when it comes to outsourcing?
Here are a few.
1. Cost effectiveness
Outsourcing a task or project can be more affordable than handling it in-house.
According to a survey done by Statista, one of the leading drivers for companies to opt for outsourcing is cost-cutting.
59% of companies who participated in the survey cited that they outsource their services as it is cost-effective.
Having an in-house team will require you to spend time and effort on tons of interviews and equip the necessary workplaces.
But with outsourcing you only need to agree to a sum for the project and once completed, that’s it.
2. Access to expert talent
With outsourcing, you have access to plenty of freelancers or agencies who have the in-depth and detailed knowledge that your team might not necessarily have.
For projects where certain specialized skill sets are required to complete the job and your team doesn’t have these skill sets, it would make sense to outsource and let the experts handle this while you do what you do best.
This enables you to focus better on your core business.
Outsourcing allows you to bring in an expert, without long-term commitments.
You’ll need to pay only for the job.
On the other hand, an in-house team requires a long-term commitment that binds you to pay fixed monthly salaries along with other employee benefits.
Additionally, with outsourcing, you only work with them when you need help and that’s when you pay them, unlike an in-house team where you have to put them on a payroll.
4. Easier to set a budget
Hiring in-house may incur other extra costs such as additional training, raises or bonuses, overtime pay, and more.
Contractors usually stay on budget, for a specified project so you can plan your financial expenses better.
5. Reduce your in-house team’s workload
Hiring outside help can be a great way to make your team’s workload more manageable.
When you know you need to hire another team member soon, but you don’t have enough work or budget to support someone full-time.
Rather than asking your current team to pick up the extra work, a freelancer can lighten the load.
On the flip side, outsourcing staff has its disadvantages, such as:
- Less control for the company choosing to outsource;
- Divorces in communication and associated challenges between the company and the third party on matters to do with service delivery
- Lack of long-term commitment from the outsourced contractor
Conclusion – to outsource or go in house?
While there’s no obvious answer to this, there are some guidelines that can help you.
Whether you should handle projects in-house or outsource depends on your specific needs.
So, handle projects in-house if you:
- Want to have complete control over a project;
- Need long-term support; or
- Are handling sensitive information
Conversely, opt for staff outsourcing if you:
- Have a short-term need;
- Lack in-house specialists or experts; or if
- You’re on a tight deadline or tight budget
Deciding between hiring in-house or outsourcing, can have you at a crossroads, hence you’ll need to first evaluate your business needs.
After all, there are benefits and drawbacks to both options as discussed above.
Bear in mind that each approach is suitable for different situations and circumstances.
You need to analyze your company’s needs in order to make the right choice.
Whichever way you choose, you don’t want to become too dependent on contractors that your business cannot survive without them because you have not empowered your team.
Maybe that’s why in today’s market landscape, businesses are going for the hybrid approach; which uses a blended team approach of both on-site and outsourced team members, maintaining tight control and collaboration while increasing team flexibility.
At the end of the day, you want your business to prosper whichever method you opt for.