Choosing whether to hire in-house or outsource to a professional service provider has a huge impact on your organization’s expenses, performance, and culture.
Many business leaders struggle to decide when to use each hiring option since there are so many factors to consider. In this article, we’ve summarized the research on this subject into three topics that are key for your decision-making process:
- Pros comparison of hiring in-house versus outsourcing
- Cons comparison of hiring in-house versus outsourcing
- How to decide if you should hire in-house or outsource
By the end of this article, you’ll know which solution is right for your hiring needs.
Pros of Hiring In-House Vs. Outsourcing
Hiring in-house and outsourcing both many benefits that support various business needs. The table below lists some of the most valuable pros of each hiring option.
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Pros of Hiring In-House
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Pros of Outsourcing
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Overall, outsourcing is a cost-effective solution for accessing talent on-demand. Meanwhile, hiring in-house can be a better way to retain collaborative talent.
Cons of Hiring In-House Vs. Outsourcing
Though hiring in-house and outsourcing both have their advantages, there are significant downsides to each as well. Consider these factors when determining which option is right for you.
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Cons of Hiring In-House
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Cons of Outsourcing
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Hiring in-house is an expensive option that may not be worth it for many hiring needs. However, you need to weigh the costs against the communication challenges that may come with outsourcing.
How to Decide if You Should Outsource or Hire in House
Since hiring in-house and outsourcing have comparable pros and cons, most smart business owners don’t favor one over the other. Instead, they strategically choose which business functions are best completed via each hiring option.
Ask yourself these three questions when you’re trying to decide whether or not you should outsource a business function:
1) Does the process directly relate to your business’s core value proposition?
Deloitte’s Global Outsourcing Survey found that 57% of companies outsource so that they can better focus on their core business.
Focusing on your core business activities and outsourcing the rest many benefits including:
- It helps you create a business culture where everyone is focused on achieving the same goals.
- It reduces the amount you spend on business functions that don’t directly contribute to revenue growth.
- It’s a cost-effective way to improve your team’s efficiency. Outsourcing miscellaneous business functions enables you to have an in-house team that is specialized and able to leverage the support of outsourced workers.
When you’re a growing company, being laser-focused on your product/service is one of the most effective ways to ensure your success. To keep your organization lean, consider outsourcing the following business functions:
- HR
- Admin support
- Accounting
- Sales support
- Website development
- Plus other business functions that aren’t product-related
2) Do you have the time to recruit, train and manage additional employees?
Hiring and managing in-house employees requires a significant time investment. Before you hire, consider whether your leadership team has the time to effectively manage additional employees and if it’s worth their time to do so.
Here are some signs that your business doesn’t have the capacity for additional employees outside of product/sales roles:
- You don’t have a manager who has the knowledge and/or time to effectively guide employees on projects that are outside of your core business.
- Your company already struggles to keep up with your existing HR needs.
- It’s challenging for you to find affordable talent to serve in non-core areas of your business.
- Your management team's time is better spent on other activities.
If any those points apply to your business, outsourcing non-core functions may be the best option for you.
One of the biggest benefits of hiring a professional services firm is that they’ll take full responsibility for finding, training, and managing the people who will work on your account. This lets your managers focus on empowering your core employees.
3) What are the complete costs of hiring in-house vs. outsourcing?
When you’re comparing the cost of outsourcing vs hiring in-house, hourly wages are often deceptive because they’re only one piece of the total costs. You need to consider additional expenses including:
- Benefits
- Perks such as bonuses and subsidized food
- Taxes
- Materials (computer, desk, software, etc.)
- Management time
- Training
- Recruiting
Outsourcing is typically cheaper since you’re not responsible for most of those costs. However, there are some cases when the reverse is true. Here are some examples:
- You need on-going support in a specialized and expensive business function. Marketing is a great example of this. Often, it’s more affordable to hire a generalist in-house than outsource everything to an agency.
- You have a large, growing need for a business function that, though not part of your core value proposition, is critical to your business’s success. For example, if your team is growing rapidly it may be time to hire a couple of HR people.
- You need access to immediate support for a critical business function. For example, you have a complex software set up and need someone to troubleshoot issues throughout the day and make time-sensitive improvements.
Answering these three questions will help you answer which business functions you should outsource and which you should keep in-house.
Learn More About Outsourcing
Interested in outsourcing your admin, sales, and or operations support? Learn what it's like to work with our virtual assistants.
Our free guide will explain:
- What kinds of tasks you can delegate to your assistant
- How to get your VA set up with your tools
- How to develop a productive relationship with your virtual assistant
- Our process for training your VA to excel at your projects
- What we do to ensure you never go a business day without service - even when your assistant is out of the office
- How to use Prialto to support many members of your team
About the author: Emily formerly led Prialto's content production and distribution team with a special passion for helping people realize success. Her work and collaborations have appeared in Entrepreneur, Inc. and the Observer among others.