Top 3 Questions for Internal vs External Resource Decisions

By: Patrick Quirk

Every organization is constrained by the amount of financial and human resources available. Leaders struggle with how to most effectively allocate these resources across ongoing operational tasks and the implementation of strategic initiatives. These three questions will help you determine when and where to engage external resources and what tasks are best performed by your internal staff.

1. What’s the task/project mean for your customer relationships?

Continuing a trend since 2003, the value of customer relationships has been increasing relative to brands (See HBR for details). Since ~2008, customer relationships have become more valuable than brands and the gap has been increasing.

Consider how important the effort is to your customer relationships:

• If your customer relationships will be significantly impacted, lean towards having your internal staff much more involved, even if external resources are selected for specific roles or tasks.
• If your customer relationships aren’t expected to be significantly impacted, consider using external resources for more of the effort, especially when they can perform the work at a lower cost.

2. Is the knowledge/skillset more readily available externally or internally?

Some skillsets have become commodities. For instance, call center and help-desk type services can often be better performed by outside specialists at relatively low costs to providing those services with internal staff. When using external staff for commoditized skillsets, use internal leaders to own the business processes, especially as they related to your customer relationships, being performed by the outsourced staff.

At times, the knowledge or skillset needed doesn’t exist with your organization. If the skillset is needed as a critical function impacting your customer relationships, consider an alterative to simply outsourcing the work: training. Whether through formal education or hiring a subject matter expert to coach your internal resources, training your staff to develop needed skills and knowledge allows you to build loyalty with your current team while keeping knowledge critical to your customer relationships within your organization.

3. How often do you need the knowledge/skillsets?

When a need is temporary or only utilized sporadically, it is often more efficient and effective to use external expertise on an as needed basis. For example, if you are required to perform annual events such as a compliance audit, external resources who perform such audits all year long are likely to produce higher quality in less time than an internal resource who only performs the audit once a year.

Likewise, executing a strategic initiative often requires new, temporary knowledge or skills to implement. Keep in mind that those you bring in for a temporary endeavor may be experts in their field, but may not understand your culture or customer relationships so it is imperative to have your best people work closely with external experts on strategic initiatives.