The decision regarding what type of workforce a firm should have is a key issue in deciding how firms structure their workforces. Both internal teams (employees of the firm) and external teams (contracted or project-based workers) have unique strengths and weaknesses and depend on the firm’s needs. The purpose of this article is to weigh the pros and cons of each type of team so that managers and organizations can make an educated decision based on their needs.
Advantages of Using External Teams:
Firms can use external teams for short-term tasks or projects to provide specialized skills or expertise that cannot be found within the organization.
- Lower Cost: Firms can hire external teams at a lower cost than hiring internal employees because the firm does not have to pay for long term salaries, benefits and training.
- Expertise: Companies can access experts and specialists through contractors.
- Flexibility: Hiring external teams provides companies with the flexibility to increase resources to meet growing demands in a timely manner.
Companies that utilize external teams are able to obtain experienced workers as needed while lowering the costs associated with committing to long-term employee obligations.
Disadvantages of Using External Teams:
Even though external teams can provide specialized skills and expertise, there are some potential problems that firms need to consider.
- Communication Issues: Contractors may have difficulty understanding the details of the business or have communication difficulties if they are working remotely or have competing priorities.
- Loyalty/Retention: Contractors are generally less loyal to the firm than internal employees and less likely to feel invested in the firm’s mission.
- Availability/Limited Time: Contractors may be working for several clients at one time and may have limited time or prioritize other projects.
Firms that use contractors or temporary help can gain from the contractor’s skills and expertise; however, the firm must manage the risks of communication, loyalty and availability.
Disadvantages of Using Internal Teams:
While internal teams allow for greater control, there are also disadvantages to internal teams that must be considered.
- Higher Costs: Maintaining internal teams can be costly (salaries, benefits and training).
- Limited Expertise: Internal teams may not have the same level of specialized skills as contractors.
- Scales More Slowly: It may take longer for a firm to add employees and train them, slowing the firm’s ability to grow or add new products quickly.
Internal teams are costly to develop and maintain and take time to recruit, but provide long-term stability and control over the business process.
Conclusion
Whether to use internal teams or external teams to perform a function for the firm depends on the firm’s current needs, financial constraints and future plans. While external teams offer flexible, specialized skills and cost savings, they require close management to mitigate communication and loyalty issues. On the other hand, internal teams provide the firm with long-term stability, strong cultural ties and greater control over the firm’s processes, but at a greater cost. A firm’s decision to choose one option over the other depends on evaluating the strengths and limitations of both options and choosing the method that meets the firm’s overall goals and objectives most effectively.
