A company is nothing without its workforce. When a company hires employees, the leaders have more options for growth, innovation, and access to talent than they even realize. However, they also need to keep in mind when they hire internally, expenses skyrocket. These expenses include labor cost, renting office space, insurance, furniture, utilities, and so much more. For the purpose of helping companies save money, outsourcing is a suitable alternative. This article will provide an overview of what outsourcing and insourcing are and the pros and cons to each.
What is Outsourcing?
Outsourcing is when you hire an outside service provider, consultant, freelancer, or an agency to manage a portion of your business. It garnered public notice after the Great Recession period, which forced the United States to outsource and offshore positions, teams as well as entire departments to save their money and bottom lines.
However, as time went by, things took a complete turn and companies started relying on their in-house employees once again. It promoted a new kind of hiring movement called insourcing.
What is insourcing?
Insourcing is the practice of bringing in specialists to fill in temporary spots or simply training in-house personnel to perform tasks that could have been outsourced.
A strong example of this is the use of in-house engineers to write technical manuals for the equipment that they have designed, instead of assigning the task to an outside technical writing team.
It’s also important to note that in order to complete such a task, the engineers would have to take technical writing courses at university, college, or trade school. There are several other instances where in-house employees may require additional education to complete a task you could hire a remote worker to complete.
But insourcing is not for every business as it also comes with its share of pitfalls. The hiring method that you choose has to depend on the kind of business you are running. And, to give you a better view of which strategy to opt for, here is a list of pros and cons to each.
In the end, you decide which hiring process suits the needs of your company best.
Pros of Insourcing
Better Monitoring Of Workers
By having employees of your own company or anyone from the outside temporarily working for you in your building, you will be able to better manage and probe them under your watchful eye. At this rate, the quality of projects and services can be more appropriate as the company intends it to be.
It’s Easier to Rally the Troops
The reality of business is that not every movement of every client is predictable and sometimes you have to put out fires. In the event that something goes wrong, and you need to call an emergency meeting with your team, it’s a lot easier if you are all in the same building. Rather than waiting on the schedule of a remote employee, you can walk to the desk of each key player, and bring them into the conference room.
Employees Can Have Better Buy-Ins
Whether you are going through a company change, assigning work, or dishing out additional responsibilities, it’s often easier for in-house employees to have a better buy-in.
There are several reasons for this including they see the inner workings of the company day-in and day-out, they feel like they are more a part of the team since they are within the same physical working space, and they have better access to management when they have questions.
When you have in-house employees, it’s possible for them to be more on board with team goals.
There is a Unique Opportunity For Insourced Teams To Learn And Grow
There are plenty of opportunities for learning experiences that are in place for in-house personnel. These opportunities are found in an individual’s ability to self-educate and keep up to speed with industry trends, developments, learning innovation, gathering insights and implementation strategies.
Additionally, you may even consider hiring an in-house training manager to provide resources, books, seminars, and in-house trainings to your employees. This is helpful in skilling up your in-house teams and educating everyone on different aspects of the business and different jobs.
It’s also not unheard of these days for companies to hire an in-house dream manager. This dream manager can lead programs that help employees focus on long and short-term personal and professional goals. Access to this kind of support can be invaluable for many employees.
Communication is Better
There is something to be said about having a conversation face-to-face rather than over the phone or via chat. Of course, you can still easily communicate with remote employees via Google or Skype, but you do miss out on the ability to walk over to someone’s desk and hold an in-person conversation. Additionally, when you hold an in-person conversation about something, you have the advantage of being able to see body language, read facial expressions, and properly hear intonation.
Employees Have an Insider View of How Your Business Works
Another winning factor in having your own in-house talent on board is that they already understand your business and how things work around the office. In other words, they have an insider view of your business and the workings of your office.
When employees have an understanding of company culture, office politics, and the overall mission statement, it’s easier to protect jobs and boost your local economy.
It Encourages Growth Of Employees
It is far easier for companies to offer salaries to employees who are invested in your company on a long-term basis. It also encourages a slow and organic growth of employees who work closely with the company. When you have a more personal relationship with your in-house employees, you can really come to understand what skills, talents, and potential they have. This gives you the opportunity to reward loyal and talented employees by promoting from within whenever possible.
There is More Solidarity
When all of your employees are in-house, then they have a unique opportunity to get to know each other and become friends. You can help foster a community of friendship through team activities, team lunches, and family outings. When your employees are friends, or at least more familiar with each other, it makes working together much easier.
When you have some members of the team in your office, and some in New York, and India, and Florida, and the Philippines, it’s much more difficult to get to know each other and promote a close culture.
Cons of Insourcing
Finding Top Talent Can Be Hard
If your company is new, then chances are that all of the top talents that you are trying to recruit have already been taken by your competitors. It can be really challenging to scoop the right talent from your local pool, especially if there isn’t any. For example, no matter how much local advertising you do for a developer position, if you don’t have any proficient developers in your area, you will need to go another route.
There is also an argument to be made that if you do need to recruit from another area of the country, relocation costs can be astronomical. This compounds when you are not sure how committed the leader you chose is to your company. If you have to keep replacing and moving key players, it’s much more expensive than it would be to just hire someone remotely, or promote someone in-house, to do the job.
It Is More Expensive Compared To Outsourcing
Not only is it expensive to recruit, but there is also a huge amount of in-house overhead or costs that you have to account for. This includes medical services, insurance, utilities, office space, and more. Also, the more your company grows internally, the higher your expenses are. For example, if you want to setup a new call center, the startup and operating costs can be quite higher than when you outsource that job.
There Is More Stress Involved In Skilling Up Your Employees
If you don’t allow yourself access to the global pool of talent, then the only other option you have is recruiting someone or skilling up your current employees.
It is fairly difficult to get internal employees to acquire new skills and talents which they have had no prior exposure or experience in the field whatsoever, unless you provide them the resources (which is helpful, but expensive).
Plus, the added pressure of more education could end up being quite stressful on their end. This added stress can often lead to results that are less than efficient. Sometimes it’s easier to just outsource to a contractor who already possesses the skills than it is to try and train your in-house task force.
Finding Talent Can Take Time
If companies lack the skills they are looking for in their own in-house talent, then recruiting, finding, negotiating, interviewing can be time-consuming, not to mention expensive.
Also, if an employee leaves the company, then the process begins all over again. This problem is often solved by outsourcing tasks to a remote employee.
Now that we have discussed the pros and cons of insourcing, let’s move on to the pros and cons of outsourcing.
Pros of Outsourcing
Costs Are Reduced
This is by far the biggest reason behind the company wanting to make use of outside talent. In many ways, it is relatively cheaper to hire a contract worker than employing domestic talent. When you hire a remote worker, you don’t have to pay costs of relocation, you don’t have to offer benefits, you don’t have to have a more expensive insurance policy, you don’t have to pay for a bigger office space, and more. Simply put, outsourcing is a lot cheaper than growing internally.
Additionally, outsourcing allows project managers and entrepreneurs to utilize contracted employees rather than the ones that are full-time. This means you don’t have to pay a salary; you just have to pay them for the hours they actually work. Many prefer to use a time tracking software that shows you exactly how many hours the remote workers are working, what projects they are spending time on, and when they sign in and sign out during the day.
Easy To Post And Manage Projects
The Internet, social media and a variety of online collaboration tools have certainly allowed organizations to tap into the progress and status of their employees, especially ones from the outside. Services like Upwork, Freelancer, and VWorker organize and streamlines the management of outside staff.
When you hire a remote worker, you can just post a project on the fly and fill the position in a timely manner. Likewise, project cancellations, deliverables, and payment schedules can easily be managed.
Not to mention, there is software that will help you and your remote teams stay on the same page. This includes software that manages time, manages projects, assigns tasks, and streamlines the process of projects from start to completion. Thankfully, this software can be used for both in-house and remote employees.
Simpler Onboarding Process
It is much simpler to finding the right remote worker to outsource a task or a project to than it is in finding a new employee to bring into your office. When you hire a remote worker, you won’t have to worry about managing the training and benefits of employees. This also includes the fact that you don’t have to account for sick leave, offer in-house performance reviews, or give raises based on an in-house contract.
With a remote employee, you are on a simple contract agreement with an external employee, and that’s all there is to it. Remote workers really simplify the processes and responsibilities of your HR department.
You Have Access To A Global Pool Of Talent
Another great thing about outsourcing is that your company will have immediate access to some of the best talent from the outside world. It means that you already will have acquired experts in web design, content production and paid search media and so much more.
No matter who you are looking for to fill a position, you will be able to find them. Moreover, you’ll be able to find them at a rate that is much cheaper than it would cost to bring someone in-house or skill up a current employee.
This also ensures that the work will be higher quality, completed more quickly, and more cost effective for your company.
Time Zone Factor And Holiday Schedule
Even if you’re sleeping, your office can still be open thanks to outsourced help, especially those who are wide awake on the other side of the world where it’s still daytime. Some of your outsourced help may not recognize your nation’s holidays, making it possible to keep your business operating on days where most of your staff is out. Hence, your office can stay on opened on Christmas, the 4th of July and more. This means your clients have access to your company when they normally would not, which can be especially helpful during busy holiday times.
Guaranteed Work Continuation And No Time Down
If you’re not working with a small company, then there is no guaranteed time off for your outsourced personnel like vacation breaks, sickness or looking for a replacement on a long service leave.
Cons of Outsourcing
Frequent Delays In Deliveries Or 4x Rule
The one thing that you will learn in outsourcing work is a general rule called the 4x rule. The 4x rule means that it will take four times as long to complete a project that it is quoted by the company or remote employee. It could be due to miscommunication, communication lag, inaccuracies, and more.
This is not always the case, but if your processes aren’t running smoothly, you are adjusting to a new software, or you are onboarding a new remote employee, then you should count on the 4x rule. The good news is that once you are more organized, and time has gone by, you should see work times increase and deliverable times improve.
Lack Of Focus On Project
Another downfall is the lack of focus of remote employees. When employees have to be in the office at a certain time and have a manager just one desk over, you can count on them being productive and accountable. Remote employees, on the other hand, don’t have the same expectations. This can sometimes lead in a lack of focus or productivity.
If you are looking to keep your remote employees on task, then make sure you are using a time tracking software, a project management software, and that you have clearly laid out expectations for projects before you hire the employee. This will be a favor to everyone involved.
Intellectual Property And Privacy Concerns
When asking for help from the outside, you have to pay immense attention to intellectual property and privacy concerns. This can be extra stressful considering you are employing someone from another country who does not abide by the laws of your own country.
It would be troubling if let’s say one of the programmers from another country steals the code from your software company. How will you take legal action then?
If you are dealing with patents, copyrights, or top secret information, outsourcing can be difficult. In the event you do want to outsource, then make sure you have an international lawyer draw up contracts that protect your company and your remote employee.
Dealing With Fake Accounts
Sometimes scam artists disguise themselves as contract workers. As such, it’s important that you verify the identity of the contractor before hiring them. You can do this by hiring from a trusted company, checking their social media channels, and interviewing them before hiring them.
Not everyone will be able to speak the language that is native to your country. Sometimes it’s not necessary for them to do so, but this can slow down the process if you have a problem.
When in doubt, make sure you list your native language as a requirement and hop on a phone call to make sure you can understand each other. The global talent pool is so wide and diverse that you don’t have to hire someone you can’t understand.
Freelancers Can Be Expensive
In most cases, hiring a freelancer will be more cost effective, especially when you take into consideration that they are not in-house, they don’t require a salary, you don’t have to pay them benefits, and more. However, there are instances when freelancers might be more pricey than if you hire someone in-house to complete a project.
The best option is to do a little math and determine where you will get more bang for your buck.
Communication Can Be Difficult
No matter how good of video conferencing or teleconferencing software you have, it is more difficult to communicate via the internet or phone than it is face-to-face.
First of all, there are always scheduling issues. For example, if you have hired a software developer in Russia, then either they will need to get up in the middle of the night to accommodate your schedule, or you will need to come in to the office early morning to accommodate their schedule. If you miss each other, then you usually have to wait another day to meet up.
Additionally, if something goes wrong with your software, then you can’t go to the next room to talk to each other. This means you’re left to either email or chat to communicate, which can be less than efficient.
As you can see, there are several pros and cons of outsourcing and insourcing. For most companies, it makes sense to do a combination of both. You’ll just have to weigh the pros and cons and see which areas of business it makes more sense to hire in-house and where it makes sense to outsource work. Thankfully, however, there are tools and resources that simplify the process either way.
About the Author:
Anna Marsh works as a hiring manager in UK. She supervises the hiring of new employees and is responsible for updating HR policy plan as per the SOP of the company. Her favorite hobbies are blogging, reading, and painting. Find her on Assignment help blog.