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Upskilling, outsourcing, hiring. We look at what works best for Australian SMEs, with tips on how to save money and time while building your business.
As your business grows, changes or adds extra dimensions, is it best to invest in your existing labour by upskilling, get certain tasks done by outsourcing them to someone else, or will hiring a new employee be the most effective way to fill the gap? These are the questions that every business owner faces at some stage in the growth of their business. And they never cease to generate debate.
That’s probably because the answers are far from straightforward and are bound to change depending on a wide range of factors, including your industry, the size of your company, your plans for expansion and how much the COVID-19 (coronavirus) pandemic has impacted your business. That said, there are a few particularly enticing reasons to consider – and reconsider – upskilling, outsourcing or hiring.
Put simply, it’s spending money to teach an employee additional skills that will benefit your business. This is not just about Joe picking up knowledge incidentally while on the job – it’s about actively seeking out ways for him to learn new skills that will give him (and you) a competitive advantage in the market. It’s popular among small and large businesses alike – in 2019, Amazon announced it would spend $US700 million upskilling 100,000 of its American employees.
Perhaps a better question to ask is, why should I upskill rather than outsource or hire?
Because Your Staff Want to Learn New Skills
A 2015 McCrindle survey found 30% of working Australians spent their own money on upskilling. That’s a lot of money Aussie workers are spending to be at the top of their game; they’re investing in upskilling and opening their own wallets to get there.
Because Upskilling and Reskilling Can Save Money
The World Economic Forum revealed that it costs about US$4,425 to hire a new staff member (another Australian report pushes the figure to $34,000 in recruitment costs), while the Association for Talent Development found that upskilling an existing employee costs about US$1,300. You don’t need an accounting degree to compute those savings.
Because a Development Plan Can Generate Staff Loyalty
Many employees leave jobs because they’re looking for new challenges and ways to advance their careers. If you can offer this through upskilling, staff tend to feel more valued and you’ll probably hold on to them for much longer, which will help futureproof your business. Reduced turnover equals less time and money spent on hiring new employees.
When Upskilling Is a Win-Win Situation
This is when both you and your employees get something out of it. For example, your employee Joe is excited about learning something new and it will give you a competitive advantage in the industry to have him learn new skills.
When Investing in Upskilling Builds on Existing Talent
Rather than growing a skill from scratch, tailor upskilling to suit an employee. If Joe works as a content creator writing features for your blog and has a passion for social media, it will probably take him no time to pick up digital skills and apply them to your business. However, if Joe is an accountant and doesn’t know what Instagram is, it’s probably not worth sending him on a digital marketing training program.
When You Can Upskill Rather Than Outsource
When you outsource, you inevitably lose some control over your team, as the people working for you may be doing it remotely, and will not have the depth of company knowledge your full-time employees and their local managers have.
When your business lacks a particular skill set, you look outside the company to find someone that offers it, either locally or offshore. It can result in cost savings, particularly when the skill is not core to your business.
It’s not a new concept – we’ve long seen businesses call in outside lawyers or accountants rather than ‘teach’ staff these skills – but it’s increasingly popular as technology makes it more affordable. In fact, it’s estimated 80% of Australia’s leading businesses use outsourced information technology alone.
Those 80% of businesses will advise you to outsource because they have enjoyed outsourcing results such as 200% increases in overall office productivity. Here are some other reasons:
Outsourcing to Improve Efficiency
When you’re a small business owner you tend to think you need to take everything on yourself, and play the role of accountant, HR representative, credit/debit guardian and manager. But assuming these non-core tasks will mean you don’t have the time to focus on what really matters to your business, like growing the core operations (and profitability).
It takes courage to identify your core competencies, because that also means determining what others are better at doing. Ironically, the same business leader who can spend a day convincing a customer of the value of giving up funds to purchase her company’s products, can struggle to see the value of letting another SME take over duties outside her expertise.
Outsourcing to Reduce Costs in Overheads
If you’re an SME or a start-up, you know how important it is to reduce large overhead costs and instead invest in operational growth. Outsourcing allows you to do this by eliminating the need to fork out for payroll taxes, superannuation, insurance and other full-time employee benefits for workers who are not integral to your core business.
Outsourcing to Free up Your Time
You want to have a life, right? If you’re spending your weekend trying to figure out customer service – or getting an employee to do the same thing, on top of their normal job – it’s time to look at getting someone who has the existing skills to take the task on.
Like you, they’re experts in their field: they have all the equipment they need to complete their job and they'll probably do it way faster than you will. Think about how this could relate to small, menial tasks that can end up taking up valuable hours, like picking up fresh fruit or milk for the office. Is it worth spending two hours of your time organising this every week?
Outsourcing to Scale for Time-Sensitive Projects
Got a big (and unexpected) design project due in a week and don’t have time to hire a full-time designer? These are the situations where outsourcing becomes an immediately attractive solution.
There’s no denying the importance of investing in your employees’ skills, but in some situations it just makes sense to get someone else to do the job. In Australia alone there are more than one million skilled independent contractors out there waiting to be hired.
The best way to decide whether or not to outsource a task is to perform a cost/time calculation – don’t forget to include the hours you’ll need to spend briefing your potential contractor on the work and relaying feedback. This calculation will only work if you set clear goals and timelines with your contractors. The below factors can also tip the scales toward outsourcing.
Outsource When the Work Is Not Your Core Business
If you outsource a particular activity, are you investing in another organisation’s ability to do the work you don’t need to be doing? If so, you’ve got a great case for outsourcing.
Outsource When You Need Way More Experience
Let’s face it, no matter how much training you give your employees, they’re not going to progress from having a love for numbers to a CPA in a few months. In this situation, it makes perfect sense to take on an external bookkeeper.
If you’re stressing staff out unnecessarily, adding to their day-to-day workload and spending hours doing something a specialist could do in 10 minutes, you’re actually losing money – and staff enthusiasm.
Outsource When the Skill Is Required on an Ad-Hoc Basis
Think about your core business – the team you need around you 24/7. And then think about the highly specialised skills you need at different times of the year, or when certain situations arise.
As an SME, outsourcing makes perfect sense when it comes to roles like accountants, lawyers, human resource specialists, PR and marketing advisors, manufacturers, customer service representatives and IT specialists. You might only have one campaign a year when you need these skills, so having an in-house department makes no financial sense.
As we’ve mentioned, hiring a new staff member can be costly, especially if you’re an SME or starting out in the industry. But as your business matures, it may begin to make financial sense to bring new roles in-house.
If you’re planning to grow from 10 employees to 1,000, bringing an HR specialist into the company to manage the hiring process and make sure new staff have all the resources they need to do their job might make long-term financial sense, rather than getting an external company to take on this role. Go back to your cost/time calculations to work the numbers – but remember that you might be making a long-term investment by hiring.
Keep in mind that even if you do make the decision to hire, you may not find a successful candidate: a recent report revealed 70% of Aussie businesses cannot find potential full-time employees with the skills they’re looking for. Allow 68 days to hunt down the right person, says another study. Hiring is about the future; be ready for a marathon, not a sprint.