Can Outsourcing solve Recruitment pains for early-stage businesses?

For a long time now, certainly, as long as I can remember (although I’m industry biased), recruitment or talent has been at the core of most businesses’ DNA. People outperform marketing and strategy, having the power to push a brand forward or bring it down. No exception.

Questions and statements, such as the following, crop up regularly:

🏃🏾‍♂️ How do we compete in the war for talent?

🕺🏼 How do we engage the best people and teams when they have so many options?

🎯 What should we be paying for various solutions and how do we choose from the millions of options out there?

👩🏽‍💻 When are freelance/contractor resource a good idea, if at all?

🙌🏼 What does an employer brand need to look and feel like, in fact, what is it really?

💡 Should we use remote teams as a viable option at any business stage?

So many questions… and more importantly, a wide and non-concise amount or route to the answers!

We live in an ever changing digital world, so I will focus on remote teams and I will adopt the lens of early-stage business like startups and scale-ups — this then discounts any form of BPO (Business Process Outsourcing) or specifically RPO (Recruitment Process Outsourcing). These solutions are usually applied at scale and applicable at mid to large businesses focusing on areas like core CPH (cost per hire) and attrition/churn rate i.e., the critical connection points around people leaving a business and the reasons they do.

Building on the problem statements above, a number of wider solutions have presented themselves to the business community. I am certainly not going into the merits of recruiters here, the value, the stereotypes, the types of engagement models or virtues and stories all over the world. Nor am I going to go into the plethora of platforms available that enable recruitment, reduce dependency on 3rd parties and claim to automate or (not) this exceedingly complex and interwoven network of elements that results in head-count being filled or opportunities being explored and subsequently maximised…

I’m not even going to go into the new breed of hybrid consultancies that have sprung up from everywhere that can add value in every aspect from organisational design through to employer brand and talent management. The reason I am not going into analysis and detail on these topics is because this is evolution, it’s a cycle, it’s inevitable that delivery in recruitment had to change and will continue to do so. To me this cycle will go on ‘till the very end — RPO, for instance, came as a result of this cycle, the client requirement for scalable and affordable solutions and large agencies being rightly pushed to provide broader solutions.

But what about small businesses and in the main, early stage and startups?

QS — Are remote teams i.e. Outsourcing, a viable option for an early stage business in place of recruitment and organic growth?

Let’s explore the main options available and how they play out the majority of times.

1. Recruitment and growing organically

Most early-stage businesses, where it is possible, will look to build an internal team. The first hires are crucial and it makes sense therefore that the initial team is super amazing, it represents the fundamental core values and gives a great platform to build on. This however is easier said than done and the most desired talent has options, is very picky and looking to, of course, maximise personal career potential.

Initial networks are useful of course, recruitment of the 1st team, or even a Co-Founder, is key though many startups suffer due to the time and cost this effort takes internally. It often results in not very much and of course early stage business has to allocate budget to areas with significant ROI — they have to live, scale and evolve. Recruitment 3rd parties are an option, but that’s a whole other minefield (for another article). And the cost of recruitment is very often under-stated — it’s more complex than it may seem.

Take the following information — Let’s suppose the average salary of between 40–50k for a key hire in an early business in the Tech, Product or Design fields and average cost per hire (CPH) will work out as follows:

• The internal team hires i.e. Managers, Ops leads and admin staff running the process (assuming no in-house talent team at this stage) — 10–15% of salary or approx. £4.5k;
• Using a 3rd party increases this to around 22% or between £8–10k including the internal teams time as well as the 3rd party fee;
• Time to assimilation — how much time and effort does it take to have your newest hires bedded in and productivity level at the desired rate..? 30 days if you are lucky, so that means another cost of one month’s salary;
• Let’s hope the hire works out as many don’t… replacing costs twice the money to exit the last hire in the right manner and not to make the same mistakes again!

There is also time to hire to take into consideration. The average time to hire at a senior level is from 30–90 days, especially in the digital industry! That’s a month if the candidate is looking for an opportunity and the process goes well, and a whole quarter to onboard some of the team! This itself causes issues as you can imagine around delivery budgets.

Finding the right team members is super important and when it does happen, it’s amazing for you, the company and the brand — you are building first stage culture right there!

The fact is, however, although it’s the ideal scenario, organic growth is generally the toughest of the options and although not rocket science, it is definitely a ‘science’ and takes considerable time, effort and cost, cost, cost.

2. Facilitation through consultancy

There are consultants of all types and size that can and will help early stage and startups. Either acting as internal talent consultants or advising in areas such employer brand, talent attraction and onboarding which overall, and in time, can strengthen your proposition as a great company to work for or a ‘destination employer’. As a growing early-stage business that has scale ahead, this is a valid option but essentially it enables point 1, to recruit.

The downside is that there are many consultants, and although nowhere near the minefield of choosing a recruitment consultant to provide qualified candidates, there are plenty of good and plenty of ‘not so good’ consultants — establishing this and building a partner relationship takes time and money and, in the mid-term, maybe a viable investment especially if the business has budget and a scaling plan.

The average cost for an internal consultant is between £250-£500 per day, although you can and will find good people available for fixed rates of between £5–7k per month. The great points here are that assuming you find a good consultant, they should be available to integrate quickly, learn your business and take care of all of the recruitment and talent ‘stuff’. Strategy, process, engagement, onboarding, interviewing, etc., and this frees up the founders to do what they do best, grow their business.

In theory, although these consultants will probably be too busy engaging and hiring talent, a good consultant can and will focus on areas that make your brand attractive in the longer term; your employer brand, your culture, your environment, as well as leaving legacy operations for you to build upon when they exit.

More onerous points here are that you may have a professional at the helm, but you still have to work through point 1. You still need to find, engage and attract the right people. No matter how good they are, because you are small, new and likely just launching out your MVP (Minimum viable product) or second stage BETA, trying to secure funding as well as keeping the early adopters happy and validating everything… (phew..!) getting that talent to see what you see, is a considerable challenge.

3. Outsourcing

Outsourcing has a mixed reputation, the theory is solid — engage a team of 3rd party specialists to undertake specific requirements in your business. Sounds easy right but the practice has mixed results.

Outsourcing was initially a play around scale, coming to prominence in the 1990s — a large business could outsource functions and the money saved was so significant that you could afford the quality to be lower, deploy your own resource to ensure over time the quality level was acceptable and manage the % dip that inevitably appeared due to the team not being organic. The majority of countries that focused on providing outsourcing were long distances from origin clients with much lower income and economic standings. Although rapid deployment for large teams was possible, over time, gaps became bigger and more difficult to close being mainly deep-seated in communication between team and client.

In the mid-2000s, nearshore sprung into action and aimed to close some of these gaps. Essentially the same practice however delivery teams based in Europe or countries with similar timelines.

Cultures generally align well, education levels are solid and overall a new level of communication and delivery model was made available to clients through nearshore; this is no longer just about scale, it’s about ‘team extension’ with the ability to scale up and down efficiently, in an agile manner suiting SME’s, as well as large corporates.

The current trend of outsourcing in nearshore destinations supplies a much more aligned proposition giving access to ready-made teams to early-stage businesses who as we have already noted, struggle to recruit the right people.

There is a focus on communication and interaction with the clients. The cost of the resource is still low enough to be attractive, but modern communication methods and technology has made for a much more seamless and integrated working approach with heightened and visible delivery.

The average cost of nearshore solutions within development and design verticals as an example is between £19 — £28 p/h in Eastern Europe for seasoned and trained teams. Providers come from Romania, Ukraine, Belarus and beyond — the choice is wide and as some of these countries are part of the EU (don’t get a UK national started on that…), the bureaucracy level is low and a clear incentive for European partners.

Although the price point is good and the standard of ability generally high (although some countries are slightly better positioned than others in certain verticals), there is still a requirement to select and engage a team with a true partner mentality.

Being able to speak languages well does not ensure delivery — process, agility, a solutions-mentality and the ability to really work as a team extension is key to the success of utilising a nearshore model which has many elements.

This can take time and much like point 1 and 2, referenced above, there is a simulation period and there absolutely needs to be an onboarding process.

Outsourcing can allow for a fast ramp-up time — teams are in place with skill-sets ready to be deployed immediately and in many cases, the types of work certain teams deliver are specialised bringing further expertise and dependability.

As an example, it is becoming more common now for startup teams who have a core development team, to work alongside a nearshore partner to build out and test new functionality or features in the road-map that the core team cannot be deployed onto for fear of lack of delivery on core technology initiatives.

So in summary:

Not many people would deny that hiring key personnel into an early stage team organically is the best option when possible, but the fact is this is extremely difficult. Cost and opportunity put pressure on early-stage businesses whose main aim should be to iterate and release products as quickly as possible, with high levels of validation and adoption and, of course, quality and innovation.

Outsourcing is not a direct replacement for recruitment but it is, however, a very viable alternative at certain stages, allowing early-stage businesses to achieve milestones and benchmarks where organic recruitment becomes potentially more achievable and relevant. It also allows startups and scale-ups the ability to grow quickly and potentially work on areas a core team should not be deployed for multiple reasons, so as a dual model for delivery, outsourcing can work very well.

Outsourcing at an early stage can de-risk a young operational model — Founders/ CEOs and leadership teams can literally turn resource on and off and, if they partner with the right supplier, they can achieve multiple key areas hand in hand, such as Development and UX.

The key is communication and delivery frameworks. If the right mix of these elements is present, then outsourcing truly can relieve recruitment pain and add considerable value.

Cost wise outsourcing is also a viable option. It may not be the long term or end game solution and, in fact, I would encourage every team at the right stage to build internally for multiple reasons such as sustainability, investment readiness, and overall value as well as building a culture and value proposition around a core team which is key to sustainable business success.

In the meantime, outsourcing in today’s climate, especially given the heightened communication and delivery model that nearshore can provide is a very viable option for early-stage businesses to build out their teams and relieve a good detail of recruitment pain.

This should be the case at least until the point where revenue and time are more abundant and can underpin a clear internal recruitment strategy.

Explore best-in-class digital product delivery. Start your game-changing journey today!