Outsource to a contractor vs. hire a full-time FTE?

There are pros and cons to every resource management decision. Here are 4 points to consider when deciding to tap into external expertise through advisory work instead of hiring a full-time employee for a certain "job to be done":

1. Outsource non-customer facing tasks that require costly, highly specialized expertise. Consistently focusing resources on core activities that directly benefit your customers and contribute to a sustainable competitive advantage is critical for long-term firm value creation. It's more strategic to maintain these core functions in-house. On the other hand, developing in-house expertise for special transactions (like carve-outs, capital market transactions, post-merger integrations, technical accounting advice, etc.) and transformational initiatives within support functions such as Finance, HR, and Legal can be a costly long-term commitment. Hiring full-time, highly experienced experts for projects that aren't core to your business diverts resources away from your primary activities, potentially weakening your competitive edge. By outsourcing these specialized project needs to expert advisors, you access practical insights, comprehensive frameworks, and valuable tools that can benefit your team long after the collaboration ends.

2. Outsource to balance out the capacity of your most competent internal resources. Often, highly competent internal resources are spread thin, pulled into every strategically important project. This overstretching poses a risk of burning them out and potentially losing that talent. Consider bringing in a highly skilled and competent resource temporarily to support your top performers on special projects. Independent advisors offer the flexibility to scale based on immediate needs without the burden of long-term financial commitments. This agility is particularly useful when adapting to uncertain situations or rapidly shifting priorities.

3. Outsource occasionally to bring in fresh perspectives without the risk of hiring someone who doesn't align perfectly with company culture. Occasional outsourcing lets companies introduce fresh ideas, new methodologies, and innovative strategies. A new perspective can offer solutions that might be overlooked by internal teams, especially if they're entrenched in "this is how we've always done it" thinking. Hiring a full-time employee, however, comes with the risk of cultural misalignment. Every new hire has a 50/50 chance of success. By choosing short-term outsourcing, businesses can enjoy the advantages of diverse expertise without the long-term commitment or potential discord associated with a permanent hire who might not fully integrate into company`s unique culture. This approach ensures a constant stream of new insights while maintaining the company's foundational culture and values.

4. Outsource for maximum productive output. Recent research suggests that the average person is at peak productivity for only about 3-4 hours a day. This figure can dip to 2-3 hours for roles demanding intense mental concentration and content creation. Given this, a full-time knowledge worker might spend a significant portion of their day on tasks that don't yield tangible results. Engaging an advisor ensures you're billed only for specific content creation and deliverables, maximizing ROI and reducing downtime.

In conclusion, a manager's primary responsibility is to sift through a lengthy list of "jobs to be done" and strategically allocate internal resources to optimize results for the firm. While some tasks are best kept in-house, certain projects might benefit from the expertise of external consultants. Transactions and transformational endeavors within supporting roles stand out as prime candidates for external collaboration, ensuring you don't overextend your current team. Top reasons to outsource include cost-effectiveness, capacity management, and the infusion of fresh ideas and perspectives.