Recruiting in-house skilled personnel can be time consuming, especially when there’s a certain level of seniority required (middle/senior-level specialists). Also in some cases this approach may not be the most reasonable for your organization. Such examples are when your business demand is regarding a temporal project, or when you’re planning periods of high activity and growth, that can’t be handled properly in-house.
In this case it’d be wise to use a hiring model called Staff augmentation (also known as agency contracting, contracting service, staff leasing). In this article we cover the main specifics of Staff augmentation and outsourcing services as strategies to increase the capacity of your organization.
DEFINITION OF STAFF AUGMENTATION
Staff augmentation is the employment of temporary staff to fill specific skills gaps in your organization. These workers are called “Agency Contractors (AC)” and they’re employees of your company via third party – a contracting Agency which provides you talents. In comparison consultants, freelancers, and contractors are never part of the official staff of your company.
WHEN STAFF AUGMENTATION MODEL IS APPLIED
There can be many reasons for choosing a Staff augmentation approach. Here‘re some of the most common scenarios:
- Increased capacity due to spiked demand of your business
- Specialized skills needed for a while by your organization
- Change in strategy of your company requiring more agile approach in terms of core skills & faster project execution
- Bridge to hire capacity while hiring permanent team in-house
As we’ve mentioned staff augmentation is a solution for companies who temporarily need additional personnel to augment their capacity. Your company may need outside specialists during seasonal surges, periods of high activity or growth. In other cases staff augmentation could be part of your company’s strategy to improve the in-house team productivity as well as fill gaps in their workforce when the demand exceeds supply. Also you may use staff augmentation by hiring an external contractor to fill in for current employees who are on leave or need assistance with special projects.
Whenever your organization plans to use the staff augmentation model (Agency Contracting) to add or reduce staff, it’d need the services of Contracting Agency. The role of the agency is to ensure fluency of the whole process in terms of recruitment, administration, legal consultancy and security for all parties.
HOW STAFF AUGMENTATION WORKS IN BULGARIA
In Bulgaria, Staff augmentation is governed by the Agency contracting regulation. This is predefined legal framework for how the Staffing service can be ensured, guiding the relations and interactions between customer, provider and employee.
Agency contracting is the only legal and safe frame for staff augmentation service in Bulgaria. More about the AC Operations, structure and customer- provider relations you can read here.
STAFF AUGMENTATION DIFFERENTIATION FROM OUTSOURCING
The main difference between Staff Augmentation and Outsourcing services is in the management process: an outsourcing vendor creates milestones and manages the whole process by themselves. A staff augmentation vendor just provides some human force/ resources that your business leader should manage. Also as a customer you keep the control over the recruitment (selection decisions) and people management (on daily basis).
Now let’s have a look at things from Outsourcing perspective.
WHAT IS OUTSOURCING SERVICE
Outsourcing is when companies need to execute a whole IT or NON-IT project by using the resources of a third-party provider. Delegating the entire project or specific tasks of it is outsourced mostly overseas.
WHEN ARE OUTSOURCING SERVICES USED
Most common scenarios for using outsourcing are:
- Better use of external resources
Companies want their in-house employees to focus more on other productive tasks, so they delegate some of their business processes to an outsourcing company.
- Accelerate business processes
Sometimes outsourcing is needed to accelerate business processes that are routine or time-consuming.
- Share risks
Delegating a part of non-focus functionality by outsourcing it to a third-party vendor, with the purpose of giving away the responsibility and related risks. Outsourcing projects to foreign professionals instead of assembling a local in-house team is much easier, often cheaper and faster.
- Access to overseas skills
For getting access to skills that are not available as per the need locally.
OUTSOURCING CHARACTERISTICS VS. STAFF AUGMENTATION
As mentioned previously, one of the main differentiators between Staff Augmentation and Outsourcing service is the management line. In outsourcing services, Outsourcing agencies take more responsibility for the final result and quality of the project. In outsourcing, it is important for both companies to operate based on mutual trust so as to ensure a fruitful partnership. The better the outsourcing agency understands the peculiarities of the client company, the better the project would turn out.
Pretty common set up is “project based outsourcing”, or simply delegating quite narrow and specific tasks to the third-party.
For example in terms of “project based outsourcing” general specifics of the outsourcing services are:
- Reduced management overhead from customer side
The outsourcing agency works independently. The client company is mostly just focused on the end result of such a project rather than nit-picking tiny details.
- Shared responsibility with vendor
The vendor is responsible for the entire project, agreed deliverables and quality assurance as well as for resources availability.
- Transfer certain level of control
Outsourcing requires you to give up most of the control over the workflow of the project.
SIMILARITIES BETWEEN STAFF AUGMENTATION & OUTSOURCING SERVICES
Outsourcing and Staff augmentation share some similarities, mostly in these few general fields:
- Both involve bringing skilled resources outside of the company
- Both allow cost savings, BUT via totally different approaches
- Both allow flexibility (shrink or grow), BUT again via completely different approaches, work structure and ways
Simply said, Staff Augmentation refers actually to required SKILLS (hiring specialist for a specific time). Outsourcing services refer to TASKS required to be done (either hiring whole team or company to do it for you).
Outsourcing services include also:
- Resources and performance management
- Delivery management
- Risk management, etc.
Both staff augmentation and Outsourcing services are different from alternative models like Managed services and freelancing.
Based on job scope, complexity, delivery expectations, engagement model and SLA/ KPI structure between customer and provider, we can distinguish service models:
- Staff Augmentation (Agency Contracting)
- Outsourcing Service (outsource tasks, activities, process, project)
- Managed Services
N.B. Compared to Staff augmentation, Managed services have even more similarities with Outsourcing. However, while an outsourcing agency works per project or task execution (break & fix for example), a managed services partner provides support and consultation on a continuous basis, bringing value added, know-how, optimizations and efficiency improvements. More about the definitions and differences of Managed service and outsourcing read here.
Staff augmentation is a flexible contracting strategy that allows you to hire temporarily talent on global level and meet the needs of your business. Some of the main drivers for this model are the lack of sufficient personnel or skills in-house that are required for a successful project completion. The advantage with Staff augmentation (agency contracting) is that the client always has control over the entire project, as well as the selection of right ACs (agency contractors) to do the job.
Staff augmentation helps you deal with talent shortage, so it is one of the most efficient and popular ways of handling very short, unexpected projects, when business needs ultra-fast results under limited budgets. However, the benefits of staff augmentation tend to fade away with the length of the project. The longer and more complex your project is, the more efficient and beneficial solution is partnering with a outsourcing and/or managed service provider.
Does your organization plan to include Staff augmentation /Agency Contracting in next year’s business strategy? If so don’t hesitate to contact us. We’d be happy to help with the process.