Hiring models: Responsiveness vs Risk vs Cost

Finding talent is difficult. In fact, it's one of the hardest and most challenging aspects of starting and growing a company. Several hiring models exist that companies can use such as hiring in-house talent, freelancers, outsource overseas and Jobsity's own model. All have pros and cons and are dependent on a multitude of factors. You are also not limited to just one and can approach talent management using a hybrid model; where some talent is in-house, and some is outsourced or freelanced. But let us look at all four models and specifically for web and application development using three criteria’s “Responsiveness, Risk, and Costs”. Let us first define all three criteria’s.

Responsiveness: I will define it as operational responsiveness which is measured by the model's ability to respond to changing conditions, how fast it is able to shift resources and/or priorities and efficiently react to customer interactions as they occur. Each model is capable of responding and adjusting to change due to different factors at different speeds. (The higher the responsiveness the better)

Risk: Each model comes with a certain amount of risk that is particular to it that could result in failure to achieve goals, delays, cost overruns, and poor quality. (The lower the risk the better)

Costs: Pretty straight forward here. What are the true costs/fees of each model? Costs can include acquisition, on-boarding, salaries, benefits, fees, taxes, training, management oversight and time. (The lower the cost the better)

Based on the definition of three criteria’s outlined above, let’s graph how each hiring model fairs:

risk-vs-cost

Let's explore each one in detail:

In-House Hiring

  • High Responsiveness: Having staff on premise and the ability to have face to face conversations and interaction can offer more engagement, stronger team work, built team cohesion and synergy, and the ability to quickly shift gears when needed. This leads to higher productivity, innovation and responsiveness to change. Even if separated by cubicles, floors, or office locations, in house staffs are united under the same corporate culture, processes, and goals and therefore can respond quickly to internal and external changes.
  • Low Risk: Having staff on site reduces the risk associated with the lack of oversight, integration and control. Never the less, risk still exists with finding the right talent and how well they integrate with coworkers, internal work processes, and your corporate culture. Risk can be mitigated thru the development of a strong hiring and on-boarding process and continuous training and employee engagement.
  • High Cost: When you start adding up all the costs of finding (time position is vacant, recruiter fees, job site posting fees, management time lost reviewing resumes, performing interviews, and deciding on who to hire), on-boarding, salaries, benefits, training and taxes it quickly balloons to 120% to 150% or more of the base salary.

Hiring Freelancers

  • Medium Responsiveness: Freelancers can work in different time zones and work at their own schedules. Due to their own schedules, time zones, and the number of clients they might have, their responsiveness can vary dramatically. Their higher-paying clients will most likely receive a higher priority which could lead to lower attention and ability to respond to change and needs for lower paying clients.
  • Low/Medium Risk: Due to communication lags (difference in time zones, schedules, client priorities), freelancers can be difficult to manage. While little or no direct oversight, miscommunication, differences in interpretation of what needs to be done could increase the risk of contracting out a project in terms of quality, delays, rewrites, and cost overruns. While a freelancer would like your repeat business, your company’s success and goals is not their priority. In house staff will have a greater commitment to your organization and protecting your intellectual property as well.
  • Medium Cost: While freelancers tend to be less expensive than in house staff, some freelancers can get quite expensive. Some of the highest rated freelancers can cost up to $300+ per hour. Experience, breath of expertise and reputation can impact cost as well. The more experienced and highly recommended the more expensive the freelancer's hourly rate will be.

Outsourcing (non US based)

  • Low Responsiveness: Since they are operating overseas, we are now even more under the effect of time zone differences than freelancers. Because of the time difference (half a day or more depending on where you outsource), you are limited in most cases to sending a task or project with your requirements and then must wait for the results which if not done right could lead to rewrites and fixes. Their distance considerably reduces their ability to respond quickly to customer requests, and changes to priorities since real time collaboration is limited.
  • High Risk: One of the biggest risks is quality. A huge issue when outsourcing overseas is quality control. You might not have any control on who works on your projects, how it is coded and how well it is done until after the fact since it is a drop and wait process. As with freelancers, we also face a similar issue with oversight, client priorities and time difference. All can contribute to create disjointed development that could result in poor quality, rewrites, and delays. Another issue with non US based outfits is litigation and recourse in case of non-performance and intellectual property issues due to them operating in a different country and legal system. 
  • Low Cost: Obviously the cost of outsourcing your development to countries such as India, China, Philippines, Russia, Ukraine, or the Baltic States will be a fraction of hiring in house. While you will save on per hourly cost, it will require more in management time in developing project scope, requirements, and tasks to insure the highest quality.

Jobsity

A little background, Jobsity is a NY web and application development agency that offers remote developers based in South America to clients in North America. Our model is based on combining the best of outsourcing and in staff recruiting. Developers are chosen by clients from an available pool of carefully picked and trained talented developers (top 5%) that are assigned exclusively to clients (full time or part time) on a flat monthly fee. Offering flat fees simplifies billing and makes budgeting projects and operations painless. Clients manage directly their handpicked developers without an extra layer of management from our side (PM/Tech lead) and use the processes, tools, and development methods there are accustomed to.

jobsity-facts

This offers our clients responsiveness (same time zone), stability (exclusivity), and control (direct access) to ensure a high level of collaboration and ultimately quality. Our model offers our clients the ability to build entire remote teams without occurring the hurdles, pains and costs (recruiting, legal, setup, management) of opening up new offices and the long term commitment a new office entails (our contracts length are of 3 or 6 months, with clients averaging over 2.8 years). So how does our model stack up?

  • High Responsiveness: Since our developers are based in South America they are able to collaborate in real time (Eastern Standard Time). Our developers use our clients’ corporate communications tools such as email, Slack, Jira, GoToMeeting, Google chat, and more. They are also available via phone, Skype, and video conferencing and are able to participate in client’s regular team meetings. Our clients also get to handpick their developers who are then assigned and managed exclusively by them integrating them into their organization like any other team member ensuring quality, responsiveness, and attention to client’s priorities and bottom line. Since our clients manage directly their developers they are able to quickly shift tasks and respond to change. It's like have another office down the street.
  • Low Risk: Being exclusivity assigned, our developers become more familiarized with our clients’ processes, culture, and expectations. This enables them to better understand and anticipate needs and become valued team members that bring ideas to the collaborative process to ensure high quality. By being tied to a client, our developers keep their focus on them developing a stronger relationship and higher level of customer service. Jobsity is also is a US based company which eliminates the risk of cross border litigation and IP protection issues.
  • Low/Medium Cost: While less expensive than direct hires and freelancers, we are a little more expensive than our overseas outsourcing counterparts due to our developers being exclusivity assigned to clients. The cost disadvantage is more than payed back in the form of greater responsiveness, stability and control for clients, which ensure a high level of customer service and quality. By giving control to our clients, we are able to eliminate an extra layer of bureaucracy, communication, and ultimately cost (no PM/Tech lead) with the savings passed on to our clients.

By combining the best of outsourcing with the best of in house recruiting, we believe that we have developed a model that is not only beneficial to our clients but is a winning combination. Jobsity’s hybrid nearshore model brings together the cost benefits of outsourcing with the control, stability and oversight that give in house teams a quality, responsiveness and flexibility advantage.

At the end, no one solution is going to solve all your talent needs. I hope this information is going to be helpful in figuring which model or mix of models to consider to build not just an absolute but comparative advantage over your competition. If I can give you one tip, it would be to first lay out your strategic plan and then tailor solutions that will meet the goals of that plan. Outsourcing/freelancing are not a strategy but tools to meet a goal. If you like to read why that is so, I wrote another article called "We are wrong about what Outsourcing is all about" that explains this point in more detail. If outsourcing/freelancing are indeed potential solutions, then I am here to help. I would be happy to help you develop a tailored Strategic Talent Management plan that would be best suited to your organization. We could look at all 4 models and processes to find a custom solution for you. Feel free to contact me via LinkedIn or by email at suhayl.rouag@jobsity.com if you have comments, suggestions, or would like to get your free consultation on how to implement a Strategic Talent Management plan.

Suhayl Rouag heads business development for Jobsity, a nearshore software development support firm based in United States with offices in Ecuador and Colombia. Specializing in helping companies leverage Python, Ruby on Rails, Angular, ReactJS, Javascript, Drupal, and more.