When you’re overburdened with a new massive project, outsourcing some of the work may be what keeps your business going strong. Maybe your team lacks the necessary skills and time, or maybe they just don’t feel up to the task at hand. Whatever the case, there are upsides and downsides to consider when deciding between outsourcing and hiring (or training) someone in-house.
To start, ask yourself these questions about your project:
- How long will it last?
- What is the scope of work?
- Does your team currently have the necessary skills?
- How much time would it take away from your team’s current workload?
- What is your budget?
Once you answer these questions, you can take a closer look at whether outsourcing or staying in-house will be the best solution.
Outsourcing
Contractors make a living from those choosing to outsource – but finding the right one for your task can be complicated. What you read in reviews, hear at events, or learn from recommendations in your network influence your purchase decision. And while there are definitely benefits to outsourcing, sometimes the disadvantages outweigh them when it comes to your particular project.
Pros
Contractors have a specialized skill set.
This is a biggie. If your crew doesn’t have what it takes to get the job done right or you’re looking to fill in knowledge gaps, outsourcing might be your best option. Contractors are experts in their field — they have specialized degrees, maintain reputable certifications, and may have decades of experience behind them. Challenges don’t phase them, because no project is exactly like the next.
They know about the best equipment (and often bring it with them).
For specialized work, purchasing or renting equipment can blow your budget. Contractors are familiar with the best equipment to use, and often own it themselves. They may also have access to the latest advancements in technology to help speed up the project and lower your costs.
You only hire them when you need them.
Depending on your project timeline, you might only need a professional service for a short period of time. In this case, hiring a contractor is almost always ideal, especially if your in-house team doesn’t have the skills or time.
They are dedicated to their clients’ needs.
As previously stated, contractors make a living working for their clients – which really is a win-win. By nature (and necessity), they take time to understand clients’ needs and problems so they can carefully formulate the best solution.
That said, you might find a contractor that’s an exception to this rule. That’s why it pays to do a little research ahead of time and find out what their past clients think of them.
You can form lasting relationships with them.
If all goes well, the first time you work with a particular contractor probably won’t be the last. It’s easy to return to someone you trust for new or repeat tasks. Plus, it never hurts to grow your professional network – chances are they will refer you to their network, too.
It lessens the burden on your staff.
It’s possible that your team does have the capability to work on a project, but it’s so far outside their typical day-to-day tasks and would significantly interrupt their workflow and output. Outsourcing can greatly reduce or completely lift that burden, allowing staff to focus time and energy on their primary tasks.
You can stick to a set budget.
Contractors are used to staying on or under budget. This is another big pro compared to hiring in-house, where costs can add up between training, raises or bonuses, overtime pay, and more.
They’re used to tight deadlines.
Not only are they good at managing budgets, but contractors also know how to abide by strict deadlines. Before any work begins, they’ll discuss your project needs and provide exact schedules for completing tasks, barring complications or changes in work scope.
Cons
You shop – constantly.
Finding the right person or company can be a tedious process. You’ll spend a whole lot of time calling around for quotes, reading online reviews, or reaching out to your network for suggestions. Eventually, you’ll find a set of trusted, compatible contractors, but getting there can be time-consuming and challenging.
Hourly rates can be high.
The age-old debate of flat rate vs. hourly rate is alive and well with freelancers and contractors. Any way you cut it, their hourly rate will almost always be higher than someone in-house.
You’ll have to manage scheduling conflicts.
Contractors are busy, too. You’re not their only client, so if you need a project done immediately, they might not be available to help. They cannot always drop what they’re doing when the phone rings and you’re on the other end. And if outsourcing overseas, you may also encounter cultural or time differences that prevent quick response times. So if you depend on contractors, you can find yourself in sticky situations with time-sensitive issues.
Note: There are exceptions to this rule, such as emergency responders that are on retainer.
It can take a while to get them up to speed.
The first time you work with a contractor, your team will have to catch them up on all your needs and specific requests. As outsiders to your company, they rely on that information to be better service providers. But getting them to that point of familiarity takes time and patience.
Their work may discourage staff growth and morale.
Your own employees may feel intimidated by the expertise and experience of a contractor. If someone on your team has been eager to develop their skills or grow in a different direction, hiring a contractor in their area of interest might extinguish that ambition.
There’s the potential for security risks.
When sensitive information changes hands, it comes with the risk of a security breach. As long as there is a high level of trust between client and contractor, this should never be an issue. However, if it’s your first time working with a particular contractor, you’ll want to make sure you discuss all your security concerns.
You might discover some not-so-obvious costs.
Every time you communicate with your contractor via Skype meeting, phone call, email, or text, some contractors will log that time. You should ask about these communication costs, as well as other hidden costs like document prep and travel, before starting any new project.
In-house hires or training existing employees
There are so many great things about working with a contractor. Even so, hiring or training someone in-house can strengthen the fibers of your organization and have considerable long-term benefits.
Pros
You have a say in their salary and schedule.
It’s much easier to agree upon pay rate and schedule availability with someone in-house. Knowing their schedule and availability aids in business planning processes, and knowing the cost of keeping them on staff assists with long-term budgeting.
You can build upon their (and your own) existing skills.
If you already have someone on staff who can successfully take the reins on your project, it becomes a perfect opportunity for you to practice your own leadership capabilities. And as they expand upon their skills, they will become an even stronger asset to your company.
In-house “stars” will differentiate your business.
If you choose to build your skill set from within, it will be another thing that sets your company apart from the competition. Imagine this thought process: “Company X does good work, but so does Company Y – and I’ve heard they have amazing project support staff.” Even though something like project management and support can be outsourced, with a little effort you can build an all-star team from within to help your business stand out.
Skills are transferable.
If you decide to train someone on a project-specific task, chances are they will be able to apply those skills elsewhere. It may sound redundant by now, but that makes your employee a stronger asset to your company.
They are already invested in the company.
If you treat your employees right, chances are they’re already committed to the company’s success. When they know that success is within reach, it can be a strong motivator for professional growth and development.
If you have the perfect employee in mind to develop or the perfect candidate to hire, all the above reasons can be especially convincing. As with any good thing, though, there are some negatives that go hand-in-hand with the positives.
Cons
You have to consider initial and long-term costs.
You might be tempted to look at only two numbers: the hourly wage of a new employee vs. rates of an experienced contractor. The latter will almost always tip the scales, probably to the point of strongly considering the prior without even thinking twice. But this simplistic comparison leaves out the additional short and long-term costs of hiring in-house. For example, healthcare benefits and specialized training, certifications, or continuing education.
Your perfect candidate might lack enthusiasm.
Your “perfect in-house candidate” might actually be apprehensive about stepping outside their comfort zone. They’re good at one thing, and want to stay on track.
If you can’t afford the time for proper training to keep them motivated, you might be backtracking to the detriment of your project and your employees’ professional development. Never assume someone will want to take on new responsibilities. It’s always better to have an open and honest line of communication for them to express concerns.
They might lack the necessary certifications.
There are a lot of tasks that are better contracted out simply due to the nature of the work itself. Take for example asbestos removal. Only someone with the required training and certifications can safely (and legally) remove asbestos-containing-material. If this is a one-off or sporadic project, training an employee is probably not your best bet
New tasks distract from existing tasks.
This is one of the biggest downsides to training an employee on something new – it will detract from the tasks they were originally hired to do. Although they may have the best intentions of effectively performing their balancing act, the truth is it’s not always feasible. There are only so many hours in the day, and a person can only be so productive. If they have too many expectations to meet, they run the risk of burnout.
So, what’s the right choice for you?
Any essential tasks that aid your company’s competitive advantage should probably stay in-house. For energy and materials industries, McKinsey & Company says these are often strategically critical tasks like integrated logistics and planning or reservoir management, while back-office functions like payroll can be outsourced with little risk.
Whatever you choose, you never want to become so reliant on contractors that your business can’t survive without them. That’s why most businesses opt for a hybrid approach. Which tasks you outsource and which you delegate to your team is entirely based on your budgets, timelines, and company culture.
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