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7 Questions to Help You Decide if You Should Hire Staff or Outsource

Facing a staffing crunch? You’re not alone: 60% of small businesses are struggling with worker shortages.

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Figuring out when and how to fill a need—either with staff or through outsourcing—is tricky. Wait until you’re inundated with negative customer feedback, and you could be behind the curve. “If your service levels are not at the point you’ll want them to be or that they’ve been historically, you might be acting a little late,” says Kara Hoogensen, senior vice president of specialty benefits at Principal®.

To add staff or outsource involves some concrete measurements and a little business owner intuition. Get ahead of any issues—or back on track—with seven key evaluations.

Do you expect the business growth to be short-term?

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Yes …

If current staff can accommodate the upswing with costs that are bearable to you (overtime and additional supplies, for example), you may not need to hire or outsource anything.

No …

If the growth promises to be more sustainable—a new product or client, for example—review staffing or outsourcing needs.

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Is the workforce need a business differentiator?

Yes …

Consider staffing.

No …

Either outsourcing or staffing may work.

Let’s say that your business makes golf balls; you need to design a new golf ball for a new client. That’s a differentiator: The potential workforce who can design the golf balls is specialized to your business. Mailing out boxes of those new golf balls? That’s not specialized and could be outsourced.

Is the proposed outsource fee more than it would cost to hire an employee?

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Yes …

Consider hiring staffing.

No …

Either outsourcing or hiring staff could be feasible.

Some needs are a function of the size of the organization and staff involved. “If you’re growing, for a period of time it may not make sense to have a dedicated professional for certain types of work; but you do want to track the volume of work being directed to any outsourcing,” Hoogensen says. “You may reach a point when you’re paying more to them than a full-time employee, which is a clear indication that it’s time to reevaluate the model.”

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Have you considered the lag time in onboarding for either choice?

Yes …

Just as you have growth measurements, keep track of any stumbles with either approach. Leverage past experiences to inform future ones.

No …

Plan for a learning curve, and if you think you might have an outsource need in the future, do some due diligence now. “Whether you hire someone or hire an outside firm, there’s still planning, preparation, and training, as well as managing an ongoing relationship,” Mike Rice, President, Aureon Consulting, an IT staffing business

You may also want to consider inventive solutions to your workforce needs, such as outsourcing until you can complete a hire. “You can have a two-pronged approach, with interviewing some outsource partners and job candidates so you have options,” Rice says.

What kind of small business owner are you?

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I don’t mind all the details of day-to-day business management …

Either staffing or outsourcing may work for you.

I like to focus on the core work; it’s why I started the business …

Consider the extra layer of management with either choice.

“As an entrepreneur, you wear a lot of hats,” Hoogensen says. “As you grow, some of those hats are going to take away your capacity and time to focus on your passion. That’s going to impact the choice you make for outsourcing or staffing.”

In addition, your expertise may change over the course of running a small business. “A generalist may have no clue on how to hire someone to do IT,” Rice says. “But they may be a whiz at finance and comfortable staffing for that need. Figure out what you’re good at and surround yourself with good people. Play to your strengths.”

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Have you thought about the impact of either choice on your work culture?

Yes …

Discuss the impact of outsourcing on whomever will manage the work with that firm; relationships with a new hire may impact the entire company, depending on the size of your business. The smaller the business, the greater the impact any one individual will have on the culture.

No …

Consider the scope of work impact on both you and your current staff.

As an owner, you’ll probably see a shift in culture either way. “In general, there’s more of a lasting impact with adding employees,” Hoogensen says. “If the addition is successful, then it should be additive to the culture. If you shortchange the selection process, it could have negative implications.”

Do you have a plan to review staffing or outsourcing allocations?

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Yes …

Great; include it as part of regular reviews of business operations.

No …

Map out what works best for short- and long-term business goals.

Outsourcing or staffing needs may be subject to a lot of variables; some may be measurable and some may not. Whatever choice you’ve made, it’s worthwhile to step back and view it through the lens of current market conditions and future growth plans. “You might want and need a level of specificity for something that you can’t quite afford to hire but that you can get from an outsource partner,” Rice says. “But maybe in the future you can pull the lever and hire someone part time that transitions into full time. There are lots of ways to get the expertise you need when you need it.”

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