How to Avoid Mishaps in Outstaffing

Software development

Introduction – to recall the main characteristics of outstaffing

  1. A person/team of people on the web production staff, but their hours are entirely bought out by the customer company. Most often, it is full-time work on one project. Less often – part-time, in this case, there can be two projects.
  2. The customer usually chooses one developer or a whole team, conducts an interview, or even more than one. This also includes test tasks and even live coding. In general, all circles of hard selection.
  3. The customer’s manager is responsible for backlog formation and task setting. Developers communicate with him directly. The client’s project management system records all commits, reports, and actions.
  4. The function of the contractor is to supplement, strengthen or completely replace the customer’s team. Usually, the need for only one specific feature is closed (for example, frontend development on React.js).
  5. The contractor’s manager is responsible for general accounting and HR support.
  6. The payment format is a retainer (when the client pays a fixed amount per month for the developer/team) or time and material (hours worked multiplied by the rate, ideally with payment for downtime due to the client’s fault).

 Difficulties of outstaffing

In this case, you hire employees based on their skills and many other factors such as nationality, cultural affiliation, religious affiliation, social standards, and stereotypes.

Nationality

If you are hiring a team of outsourcers, you may rightly be wondering if the final product will be suitable for the target audience. The concern that different nationalities often behave and perceive things differently has, in many cases, discouraged outsourcing initiatives.

In the case of outstaffing, you will have to deal with foreign developers and their cultural characteristics for a long time. In this case, information plays a key role. You must know and consider the specifics of your team’s national thinking, traditions, and cultural values to achieve mutual understanding and high productivity.

The only way not to miss the chances of a profitable relationship due to insufficient knowledge of the interlocutor’s culture is to learn the best about his nation. This practice will be an excellent start to a long-term partnership and demonstrate your respect for your partner.

Cultural affiliation

Okay, national identity can be identified with the naked eye, but how to determine cultural identity? Everyone, whether it is a conscious decision or the result of an extended stay in a particular environment, classifies himself as a different culture. Whether it happens naturally or under the influence of circumstances, each person becomes a part of a specific culture. And it is much more challenging to identify this affiliation because there is no clear criterion, such as geographical location. But once you find a suitable characteristic, it will become much more manageable.

Revealing cultural affiliation is quite simple, thanks to the resources available in our time: social networks, films, and books – all this allows you to reveal all the subtleties and trends of modern subcultures.

Still, people value their interests and are happy to tell you about them if you show interest.

Religion

Why should it even matter? It’s simple: religion is one factor that makes up a person’s worldview. It can influence decision-making. Faith is the crucial factor here. This is not just a belief in the existence of higher powers – it is a set of principles and rules reflected in every decision made.

Social standards

The world is diverse not only in ethnic, cultural, and religious terms. Social standards also differ. They say: “The well-fed do not understand the hungry” – it turns out that if the difference in the middle of living is too significant, then there is no way in the world to reach a mutual understanding.

To some extent, outsourcing helps reduce the gap in this regard. Complex projects are suitable for training more qualified specialists who will later share their knowledge and expand the circle of IT enthusiasts. At the same time, outstaffing teams do not face such a difference in the quality of the working environment and wages, as they work under the same conditions as the in-house team.

One of the biggest fears for outsourcers is dealing with a team that is so culturally and physically distant that it becomes almost impossible to communicate with them.

It is essential to strike a balance to work competently with outsourcers and outstaffers. You will not be able to get a competitive product with the lowest possible investment. On the other hand, you won’t be able to plug any cultural rift with money.

Stereotypes

Overcoming national and cultural stereotypes is crucial in building trust between internal and external teams, managers, and outstaffers.

Any manager with foreign experience can spend hours telling funny stories about how business is done in different countries.

Stereotypes appear in the form of hypertrophied images. Their goal is to facilitate thinking, systematize the world and create an overall picture where you are a little better than others. However, business requires equality, neutrality, and respect. Therefore, we get rid of stereotypes and work with start-ups and enterprises from all over the world. Cultural and ethnic differences are not an obstacle to achieving common goals.

Three common mistakes when using outstaffing

Outstaffing of highly qualified personnel

In the case of outstaffing, qualified employees are transferred to another employer (they are enrolled in the staff of the provider company), which, until the expiration of the outstaffing contract, will deal with their registration and support, payment of sickness benefits and vacation pay. Naturally, in such a case, skilled workers will be concerned about their new position. The prospect of moving to another company’s staff can provoke a helpful team’s dismissal. Even if a qualified employee agrees to outstaffing, he may have problems with motivation and loyalty: it is not very pleasant to realize that the employer is trying to solve his problems at your expense and is ready to put you in an ambiguous position for his benefit. Naturally, an employee who comes to work with such thoughts is unlikely to work with complete dedication and fight for his company’s interests as for his own.

Outstaffing of a small number of employees

HR managers do not always know how to use outstaffing to reduce costs properly. It is not uncommon for a Customer to take out only a few employees to maintain a simplified taxation system and stop there. This is not a very smart tactic for two reasons.

  1. Firstly, a customer who does not leave a reserve in his state to recruit new employees will be forced to conclude a new outstaffing agreement every time he recruits new full-time employees. And this, in turn, can distract the personnel department from more critical projects and, in addition, reduces the financial efficiency of outstaffing;
  2. Secondly, many provider companies have a variety of tax benefits, so outstaffing employees allow the customer to reduce tax costs. The more staff outsourced, the greater the savings.

Therefore, by outsourcing many employees, you not only optimize personnel management and retain the right to use a simplified taxation system but can also significantly reduce company costs.

Transfer of employees to an affiliated company

Employees of large companies can face this tricky aspect of outstaffing. The relationship of interdependence (affiliation) between the customer and the provider company can give the tax inspectorate grounds for initiating legal proceedings to qualify outstaffing as an attempt to evade tax payments.

Suppose an HR manager or HR director working in a large company with many divisions and inadvertently initiating outstaffing misses the fact that an interdependent relationship has been established between his company and the provider company. In that case, this can lead to severe problems. Therefore, we recommend that employees of large companies always pay attention to this point when ordering outstaffing services.

How to Avoid Mishaps in Outstaffing

A detailed description of the goal and the project

When looking for an outstaffing team for your project, don’t be lazy to explain the details. A situation when a contractor receives a laconic request in the form of «Need frontend development on React» — perhaps a good start to an acquaintance, but it happens that all the introductions from the client end on this.

Approach “money in the morning” (CV, test assignment, technical interview) and “chairs in the evening” (detailed description of the project, deadlines, details of the technological stack) does not allow the contractor to understand your requirements and select suitable candidates. A developer who understands what he has to deal with will be able to refresh his memory on the necessary topics before the start of the project, study the documentation, and onboarding will be faster and more efficient.

If your contractor is not interested in qualitatively removing the requirements at the start, you may become overwhelmed by dozens of irrelevant CVs. Or, even worse, you choose the developer you liked, and you get rejected — because there is a significant demand for specialists, and you choose not only you but also you.

Choice of the team

Customers often approach interviewing candidates responsibly — perhaps, even more thoroughly than recruiting employees. But overly inflated requirements lead to the customer hardly missing a single candidate out of 20 suitable CVs. How can we not allow it?

The interview must be adequate for the project tasks. If the team passes a critical few developers at the next stage of your funnel, maybe it’s not the developers? Try to clarify the entry requirements to get more relevant CVs, or slightly loosen the nuts and bolts on the team — this way, you will increase conversion and save your resources on selecting candidates with qualifications sufficient for the project (if the task is still to hire, and not to create visibility of work).

If you were not doing the first joint project with the contractor and went through fire and water together, don’t be afraid to listen to his opinion. Maybe the developer’s excitement did not allow him to open up in interviews. The contractor knows the qualities and abilities of his employees better than you do after a few hours of interviews. Therefore, if a candidate has not formally passed your team but a contractor persistently asks to give him a chance, do not refuse it.

Another recommendation – be sure to give feedback after the interview. This will allow you to complement your requirements, and subsequent candidates are more likely to work out, as the contractor will know what is especially important to you.

The motivation of the outstaffing employees

Outstaff employees are usually even more motivated than the in-house team, as they are determined to achieve a specific result in a relatively short distance – for example, completing a project in 3-4 months.

But if you leave your employees the most exciting tasks and connect outstaffers only when everything is on fire or broken, a decrease in motivation and even burnout can happen. How to avoid this?

Keep the promises you made to the developers – treat them in this matter like your employees. Everything you say in an interview should not be at odds with reality. For example, if you need to work with large volumes of legacy code from three years ago, do not hesitate to say so – they also work with such tasks, but a person must understand what awaits him.

Don’t be afraid to give outstaffers more freedom and serious-level tasks. Keep a balance between refactoring and developing features that will allow the developer to become better. Working “on the table” also does not motivate anyone – if you worked on a part that did not go into production, it offends and demotivates – even if the work was paid.

Do not encourage overwork, even if the employee takes the initiative and is passionate about the project. Better a long and stable job with flat performance than bursts of productivity interspersed with dips in performance and motivation.

Communication, clear expectations, and trust in outstaffers

Outstaffing implies that the client takes responsibility for loading the developer who sits in someone else’s office, even in another city. At the same time, every working hour is paid. A natural desire to have complete control over the process and to spend funds rationally.

Here is the standard work procedure for the outstaff: a team performs tasks on a backlog formed by a customer. A developer tracks the time spent on each task. Reporting is submitted at the end of the month; payment is made after approval. Its size depends on the labor cost; the customer can see how many hours were spent on which task and compare it with the history of the commit (portion) code.

On very long projects, the rates of specialists can grow as wages rise. Therefore, outstaffing should be treated as an HR process, not as a purchase of goods. The chain here is straightforward: you will not index the rate – the supplier will not be able to increase his employee’s salary – the employee will quit, and you will lose him. Therefore, if you plan to work over a very long distance, pay attention to whether this clause is spelled out in the contract.

Another aspect of trust is data confidentiality. It feels like it’s always easier to save privacy within a command. But with the right approach to the organization of the outstaffing process, the same results can be achieved without any problem.

Distribute to the outstaffer all the control mechanisms adopted in the command. Bureaucratize the process of transfer of confidential data, its storage, and disposal. Use specialized software for secure employee connection (for example, Citrix).

In large organizations, where data privacy is paramount (for example, in banks), a security service and proprietary software usually allow remote connection. As a rule, this does not cause any critical complications, and the contractor has no reason not to meet and ignore your safety regulations.

Conclusion – what’s the use of outstaffing for a web production and the client

Outstaff culture is still being developed; customers and contractors build rules for practical work. But the demand for this service is growing at an incredible speed — so we need to form cultural interactions as quickly as possible.

The advantages of outstaffing for web production:

  1. Long and well-predictable load of developers. It can be calculated; it is easy to manage.
  2. The team gets versatile experience.
  3. One cannot get stuck with an incorrect fixed price estimate because the work is not according to such a model.

Here are the benefits for the client:

  1. The ability to quickly build up IT expertise. Focus on the product goal, not the HR routine.
  2. Deep integration of a specialist into your team.
  3. Rapid scaling of the team in both directions: strengthen if necessary, stop cooperation at the end of the project – and no one will be fired.