External Consultancy or In-House Training?

Important factors to consider when deciding whether to appoint an external consultancy or up-skill through in-house training

Whether to appoint an external consultancy or up-skill through in-house training is a question we’re often asked when we deliver training and coaching. Which is best… where do I invest… how do I know the team will or can deliver?

Here will provide an overview of some key considerations before deciding where to invest for your business growth:

Introduction:

Businesses seeking growth are often confronted with a pivotal decision – whether to engage external consultancies or invest in in-house training. The theoretical underpinnings of this decision involve a nuanced exploration of strategic advantages and considerations. This article aims to delve into the depth of theoretical constructs surrounding outsourcing and in-house training to guide organisations in their strategic decision-making.

Expertise and Experience:

Outsourcing (Consultancy): Drawing from the resource-based view (RBV) theory, external consultancies function as repositories of external knowledge and expertise. Their diverse industry engagements provide a valuable pool of tacit and explicit knowledge, contributing to a comprehensive understanding of market dynamics. The RBV framework suggests that leveraging external expertise can lead to sustained competitive advantage.

In-House Training: Grounded in the dynamic capabilities theory, investing in in-house training aligns with the notion of developing internal capabilities to adapt to changing environments. This theory posits that organisations possessing the ability to learn, integrate, and reconfigure their resources internally are better positioned for long-term success.

• Consideration: The strategic decision hinges on the organisation’s orientation – whether to prioritise the immediate external insights offered by consultancies or to foster long-term internal capabilities through in-house training.

Cost Considerations:

Outsourcing (Consultancy): Transaction cost economics suggests that outsourcing to consultancies can be a cost-effective solution. By externalising the strategic refinement process, organisations may reduce the complexities and costs associated with in-house talent acquisition, training, and retention.

In-House Training: Long-term cost efficiencies are embedded in the concept of organisational learning. The learning curve associated with in-house training, although demanding upfront investment, aligns with the principle of developing enduring internal capabilities.

• Consideration: Organisations must conduct a cost-benefit analysis, weighing the immediate financial implications of outsourcing against the potential long-term savings and value creation through in-house training.

Time Efficiency:

Outsourcing (Consultancy): Drawing from the resource dependence theory, external consultancies offer swift and efficient processes by leveraging their existing frameworks. This aligns with the idea that dependencies on external resources can expedite strategic decision-making.

In-House Training: The temporal aspects associated with in-house training resonate with the learning curve theory. The gradual accumulation of knowledge and practical experience requires a longer timeframe but contributes to sustainable, internally driven strategic capabilities.

• Consideration: Organisations must evaluate their urgency for strategic refinement, deciding between the immediate impact offered by outsourcing and the longer-term benefits of in-house training and development.

Customisation and Organisational Alignment:

Outsourcing (Consultancy): The agency theory underscores the potential misalignment between external agents (consultancies) and organisational objectives. Balancing the need for unbiased insights with the challenge of aligning external strategies with internal culture requires careful consideration.

In-House Training: Grounded in organisational culture theory, in-house teams possess an inherent understanding of the company’s culture. This familiarity fosters a more tailored approach to strategic refinement, aligning with the organisation’s ethos.

• Consideration: The choice involves a delicate equilibrium between the need for external perspectives and the importance of alignment with organisational culture.

Flexibility and Adaptability:

Outsourcing (Consultancy): The institutional theory suggests that external consultancies, as institutional agents, are adaptable to changes in the external environment. Their capacity to quickly pivot aligns with the institutional logic that effective organisations must adapt to external pressures.

In-House Training: The concept of absorptive capacity posits that in-house teams can develop the ability to assimilate external knowledge and adapt to changing trends. The speed of this adaptation, however, depends on the organisation’s commitment to continuous learning.

• Consideration: The decision rests on the organisation’s position within its industry – whether rapid adaptability offered by consultancies is crucial or if in-house teams can evolve at a pace commensurate with the industry’s dynamics.

Conclusion:

Consultancies and in-house training (for up-skilling) both have their merits, and the decision often depends on the specific needs and context of a business. The organisation’s resource base, cost considerations, time preferences, alignment with organisational culture, and adaptability requirements form the underpinnings that shape this strategic choice.

Summary:

Consultancies:

• Rapid Insights: Consultancies can provide quick and targeted insights due to their external perspective and broad industry experience.
• Specialised Expertise: They often bring specialised expertise that may not be readily available within the organisation.
• Immediate Impact: Consultancies can lead to immediate impact in terms of strategy refinement and execution.

In-House Training (Up-skilling):

• Long-Term Investment: Developing in-house capabilities through up-skilling is a long-term investment that can pay off over time.
• Internal Alignment: In-house teams inherently understand the organisational culture, ensuring a more aligned approach to strategic decisions.
• Sustainable Knowledge: Building internal expertise ensures that the knowledge stays within the organisation, contributing to its long-term resilience.