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How do businesses decide to outsource or hire?

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    Christian Annesley

    Christian Annesley Contributor Full Member

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    For every startup that’s scaling up, one question is hard to avoid: when, how and on what terms should you embrace the transition to employing staff? Here are some perspectives on the conundrum.

    Sure as night follows day, scaling a business means taking on staff. Or does it?

    Many startups get under way with one or two founders at the helm and then things flow from there. But as a company starts to scale, the outsourcing of even sophisticated business functions is more available and navigable today than ever, meaning that having to take on staff is not the inevitability it once was.

    Where does that leave things? We decided to catch up with a number of entrepreneurs to talk about the practicalities and tools to scale up a business in 2017 and about what it means when it comes to the pondering that telling question: to staff or not staff?

    Some want partners, not staff

    Let’s start with those scale-up businesses that choose not to take on staff.

    Caz Taylor, founder of handmade gift business Taylor’d Bundles, says that even as her business has grown she has shied away from recruitment  – and today all her products are still created by 22 collaborators who work for themselves.

    “It means I save on salaries, manage stock more effectively and am able to create bespoke products in a short amount of time, all in the UK.”

    Taylor adds: “I’m comfortable with this partnership model as the business evolves. I outsource all the hosting and web design and development, and I work with a creative director on the branding for the business. I also have enough know-how to reach out across a spectrum of marketing and PR disciplines, and to feel confident that I know when I’m buying quality.”

    Another business whose founders have so far trodden a similar path is The Foraging Fox, a beetroot-ketchup that’s grown fast since launching little more than two years ago.

    The founders, Desiree Parker and Frankie Fox, got off to a flying start with the business after a 2014 fine foods trade show where lots of potential stockists showed enthusiasm in the ketchup, and the pair has pushed ahead since through outsourcing partnerships.

    “We’d been hand-making the ketchup so we knew we couldn’t make it at scale; we also knew we had a window of opportunity to follow through and prove our seriousness,” says Parker.

    So the pair prioritised finding a trusted manufacturer that could scale production of the ketchup for the business start fulfilling orders. Alongside that, there were raw ingredients suppliers to find – and the thorny question of trouble-free fulfilment.

    “We had some money behind us to carry the proposition forward,” says Parker. “But it only worked if we outsourced nearly all functions  and kept the core business nice and lean: just the two of us, as it still is now.”

    How do you approach that challenge of finding partners? Parker and Fox did it by looking for recommendations and working out their priorities before talking in detail to the companies they wanted to target.

    “You have to trust your instincts and your ability to understand and to challenge those you want to work with,” says Parker. “Part of our success in the past two years is certainly down to the picks we made across the board. We are still using the same partners now, which is testament to how smoothly things have gone.”

    The would-be hirer

    Next, let’s look at the question of when to hire.

    Belinda Clark is a marshmallow business based in Southampton that has grown fast in the past 12 months and the founder is now looking hard at the hiring or outsourcing question.

    “As the business has scaled, we’ve been on a journey with how to resource things,” says Clark, the company’s eponymous founder.

    “At one point we had some problems with shelf-life, which are now resolved. But it set me back to the extent that I had to let my one member of staff go and take a part-time job myself to see us through.”

    Since then the business has pushed ahead, with turnover expected to double to £150,000 in the year of trading to April this year, despite Clark being cautious about managing growth.

    “I have lots of supportive people around me and a ‘virtual team’ I can call on for advice who have much more experience in some aspects of the running than I do. It makes a real difference. I have recently taken on a freelance salesperson who is excellent and is starting to make inroads.

    “It is a good fit for now as there is no ongoing commitment, so if cashflow becomes an issue I can cope. But I would hope to take on employees next year, particularly if we can get some investment.”

    When developing staff is best

    Finally, let’s look at a micro-business that does have staff and wants to nurture them.

    Blind Technique is a blinds, awnings and shutters business based in Middlesex. It is a well-established family company with a small staff, and the owner-managers, John Pink and his son Richard Pink, have recently worked with ActionCOACH business coaches to get the company’s staffing on the right footing.

    Richard Pink says: “Our first priority in appraising the business was to build a strong team that I could manage from a distance. We had money we could invest in recruitment and the coach, Jamie Goral, really helped us to create a thorough recruitment process which was a major improvement. But we’re still learning.

    “We now have an idea of the best ratio to balance a new sales hire, which increases orders, with the need to bring more staff into the production team.

    Blind Technique’s directors have also started recording and analysing data in more details – leads, margins and product sales.

    “Among other things, it has made a change to how we agree on commission-based salaries for the sales team – and we’ve restructured our product pricing. We’ve also started recording more insightful information for our sales team. For instance, if we know that a customer is having an extension built on their home, we will be able to call them as it nears completion.”

    Alongside smarter recruitment, the company has also started outsourcing some new areas of focus to experts.

    “We now have a bookkeeper and someone to cover HR, including health and safety. This is really important as a lot of larger contracts require you to carry out risk assessments. With this help at our fingertips we can now bid for bigger projects.”

    The final piece in the puzzle, for now, has been introducing process and accountability in the right way, adds Pink.

    “Our heads of departments are now in charge of their own sets of KPIs, feeding those down through their teams. People are more satisfied with their jobs knowing what is expected of them.”

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  2. Edd Dutton

    Edd Dutton UKBF Contributor Free Member

    31 10
    Thanks for sharing! @Glen Wheeler, worth read.
     
    Last edited: Jan 12, 2017
    Posted: Jan 12, 2017 By: Edd Dutton Member since: Dec 13, 2016
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    ChrisGoodfellow likes this.
  3. davisbusiness

    davisbusiness UKBF Newcomer Free Member

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    But you can also outsource.
     
    Posted: Jan 13, 2017 By: davisbusiness Member since: Dec 23, 2016
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