Should You Hire In-House or Agency Employees?
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The pandemic has been a blessing and a curse when it comes to employment. Lots of people lost their jobs and some industries fell into bankruptcy.
But on the other hand, some businesses have boomed and are in need of manpower.
If you’re one of them and looking for a team, you might be thinking of hiring people directly in-house or outsourcing, both local outsourcing or offshore.
By no means exhaustive here’s a bunch of questions to help you determine which is better for you.
What is the maturity of your business?
First, we can categorize the maturity of your business. Your business maturity will be heavily considered all throughout our analysis. So your business maturity can be classified into 3 S’s: Starting, Scaling, and Selling.
The Starting stage is the first few years of your business where you’re still trying to figure out how things work, going through your “firsts” – first customer, first employee, first resignation.
At this stage, it’s highly recommended that you hire agency employees. Specialists in agencies are experts, or at the least very experienced in their respective fields. They have hours upon hours of specialized work which honed their craft, and they have usually worked across a variety of clients, which may give them insights in to business issues you’re trying to solve.
The Scaling stage is where you’ve already found your pace and you want to continue growing your business. But before reaching the Scaling stage, we recommend that you start thinking about hiring atleast some in-house employees because at this stage, you are now building your company’s identity and foundation.
From experience we find it’s best to have an in-house employee to manage your outsourced team. As your business grows in-house employees can be increased to manage growing teams of outsourced or offshore workers across marketing, web development, customer service or other areas of your business.
The last stage is the Selling stage. It’s the enterprise level. I call it the Selling stage not because you’re selling products like hotcakes. You are at the stage where you can possibly sell your business because it has been profitable consistently, or has the growth prospects for acquisition.
Even if you’re not planning to sell but you’re at this stage, you should consider both options. Both in-house and agencies can be advantageous for you at this stage.
You can get in-house employees to further strengthen your internal foundation for more growth and you can get agency employees for highly specialized tasks in your business.
Most businesses in this stage actually use both in-house and agencies as they can both produce a net positive in the business. This is especially true if your business is expanding worldwide and you are establishing presence in another country.
Maturity Can Change the Preference of a Specific Process
The stage of your business’s maturity does not just dictate whether outsourcing or in-house hiring is beneficial in general. Sometimes, a specific process is beneficial when outsourced in the Starting and Scaling stage but will be more beneficial in-house when on the Selling stage.
A great example of this is the customer service department. At the Starting stage, you have a few people in your team that already have a handful of things to do. Placing customer service on yourself or other team members can be an unfair and difficult burden to all of you.
Outsourcing customer service is not just recommended but it’s almost always the norm in startups, even in the Scaling stage.
On the Scaling stage, most of your focus is now on growing your business. And it can be impeded if you take on a time and attention consuming task such as customer service.
But on the Selling stage, having an experienced customer service team is a great asset to your business as they are the ones that are directly interfacing with your customers. And as a bonus, your business will look better to potential buyers or you can even ask for a higher price as your business has a higher value than businesses with outsourced services.
What budget do you have?
When we talk about budget, we talk about both 2 out of 3 of your most important resources in a business: time and money. The 3rd most important resource is what we’re trying to determine the source of: Talent/Manpower.
The rule of thumb here is easy: If you have more time than money, the best choice would be to do the things that you can do, learn from it, and outsource the things that you can’t.
That’s the reason why most startups almost always have agency help during their early years. Because the time they invest goes to their own learning and development of their processes and identity of their business.
Then once a business has already got those covered, the ratio between time and money narrows until money becomes more abundant. And by that time, the processes and identity of the business has already been established and there is more cash flow making it more viable to hire and train in-house employees.
What outcomes are you looking for?
Overall Outcomes and Success
In-house employees by default are invested in the overall outcomes and the successes of your company. Because if your business is not successful, they will be primarily and severely impacted. It can cost them their employment.
But even though agencies are generally more focused on the success of what you hire them for specifically –meaning the specific task such as accounting or marketing– they will still be affected by your success.
It’s the main metric that the whole agency and consultancy industry relies on, even though they are at less risk of losing employees. We had a conversation on Twitter with Rand Fishkin specifically about this.
Also, there are performance-based agencies that only ask for payment once your business achieves success on their task or in your business in general.
So overall success and outcomes can be produced and expected with both.
Fast, Temporary, or Experimental Outcomes
This is where agencies make sense the most. Whether you need quick help with processes because of a spike in demand such as Black Friday Cyber Monday (BFCM), transitioning online, or trying out new processes that you will eventually implement, outsourcing is the best option you have.
One scenario that is also best suited for agencies is if your business is in critical condition. Most agencies have a diverse portfolio of clients and have years of experience under their employees. They will most likely have encountered your problem and know the solution.
If the specific agency that you want to work with hasn’t encountered your problem before, then they can also talk with other agencies who might share the same problem as yours.
And agencies are almost guaranteed to produce outcomes for you faster than hiring and training employees.
Lastly, the added strain of having new employees might break your business if it’s already in critical condition.
But keep in mind that agencies are never guaranteed silver bullets to your problem. You might want to hire some in-house people to be trained by agencies to alleviate and eventually prevent the problem that you have.
What relationships are you looking for
An in-house employee has so many things that will depend on you, especially satisfaction. You have to provide benefits to them, leave credits, and so many other things that are sometimes required by law to be provided to your employees.
However, those things are almost non-issues to agency employees as they are provided by the agency themselves. By choosing agency employees, you are also outsourcing the hiring, vetting, and HR processes to the agency.
But even though they can be more demanding, in-house employees provide you with a long-term relationship that grows with you as you grow with your business. This is beneficial for strengthening your foundation to support your growth.
An agency employee relationship on the other hand is more like a partnership or a mentor relationship. They have more experience in general so aside from just performing the tasks that you need, they can also provide feedback or suggestions that they learned from other clients that can help make the tasks easier for you or provide better outcomes.
Some Things to Consider
There are business tasks or processes that are best gotten exclusively outsourced or exclusively in-house.
For example, there is no actual added value having a web development team in-house generally, unless you are a SaaS business or you’re selling apps. It’s almost always outsourced as there are only a few instances where you would need to talk to them.
Because if you think about it, you never want your plumber to live in your house and just be there in case there’s something to be fixed. They are on-call for a good reason. You can also use that rule of thumb to determine if a team is needed in-house or otherwise.
There is No Wrong Choice
To easier understand the functions of both in a real world scenario, think of it this way. Let’s say that you want to build a dog house and you have no experience of building one.
You can either buy the tools and learn how to build as you go, rent a dog house maker and let them do it for you, or buy the tools and rent a dog house maker to observe and guide you how to do it. All of them will bring you the same results and all of them have benefits to each method.
Don’t be afraid to try each or both of them even if it contradicts this article. Every tool is a hammer, and it’s not stupid if it works. We’re encouraging you to just try it and see which is for you.