Build, Buy, Borrow or Redeploy: Planning Your Talent Choices
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When organizations determine a need for specific talent, they have three options to meet that need:
Build,
buy, or
borrow.
Build means that we will develop the talent we need internally. Buy means that we will recruit permanent employees from the outside market. Borrow means that we will hire temporary contractors or freelancers.
How do you determine which of these options is best for you or whether you will need a combination of these options? The most important considerations are cost and timing. What will it cost to build, buy or borrow talent and how soon do we need the talent up and running in our workforce?
The template shown below (header shown) is a tool which will give you a head start on calculating the cost of each option. There’s also a bonus tool included at the end of the template in cases where downsizing in necessary.
Build-Buy-Borrow Template Header
Let’s examine the three options to see how we can assign a cost to each one.
Build Talent
The advantage to building talent is that it can create a non-traditional career path option for existing employees. In addition, existing employees already know how your company works and have established a valuable internal network for getting things done.
The disadvantage of this option is that training employees for this role may take longer than you can afford to wait which is why it’s crucial to know how many additional people you need in this job role and when you need them to be up to speed in this role.
The first thing we should do is determine the amount of supply we have of people who can be trained for this role. In this template, we list the roles that we can migrate into the role of Quality Engineer. In this example, the company has determined that they can transition the role of Quality Technician into the role of Quality Engineer with some educational training.
The company has 50 people in this role and the company has estimated that about 25% of their Quality Technicians are interested in migrating into the Engineer role. Therefore, the number of employees that are truly available for this option is 12-13.
The template has a space on the right to document how long you estimate it will take to develop a Technician into a new role.
The next section is about cost. I have listed a series of training categories as examples. Here, we enter an estimate for the cost per student for any training options we plan to use. Any associated travel costs or other costs should be added to the cost of training. What I’ve listed here are examples, so you will need to think about any additional cost categories that will occur if you train employees into a new role.
Once we have this information, the template will calculate the total cost to train each of our available employees. This total cost is the cost of our BUILD option.
Cost Estimation Table
BUY Talent
To buy talent means that we will recruit employees from the external labour market. The advantage to this option is that it can be much faster than the BUILD option depending on typical recruitment times for the role you’re analysing. The disadvantages are that it often comes at a higher cost, newer employees tend to turn over more than longer tenure employees and these employees have to develop an internal network within your company. Developing a good internal network can take years.
To calculate the cost of this option, I use a rule of thumb for the cost to hire. This rule of thumb estimates the cost to hire as a percentage of an employee’s annual salary (template not shown here). As the complexity of a role increases, so does the multiplication factor in front of the annual salary. For example, if a clerical role earns $50,000 per year, our rule of thumb estimates that the cost to hire is 50% of that or $25,000. However, for a technical role, our rule of thumb estimates that an annual salary of $110,000 will produce a cost to hire of rough $137,500.
The next component of our cost is the cost of benefits. What percentage is the cost of benefits relative tp an employee’s annual salary? This value will vary by country, so you’ll need to do your homework on the best value to use in your calculation.
Adding our two cost components together gives us an estimate for the total cost to hire if we recruit the number of employees we need. Since new employees sometimes require training, this template has a drop-down option to reveal an additional line where you can add a training cost.
Like our BUILD option, we need to have a time component. How long will it take us to acquire the talent we need if we choose the BUY option?
Borrow Talent
Our final option is to borrow talent. This means we will utilize temporary talent such as hourly workers or freelancers rather than hiring permanent employees. The advantage of this is workers of this type can often be found on the open market faster than onboarding an employee and you can easily flex the size of this workforce downward to respond to market and economic changes.
The disadvantage of this option is that these workers do not have an internal network to leverage and any network they develop will be lost when you conclude your contract with them.
For the cost of this section, we would estimate the contract costs for temporary workers in this job role.
Making a Strategic Decision
In this final section, we make our decision by asking a few questions:
How do the costs of each option compare?
Which options will get people in place when you need them?
Will you need to combine more than one strategy to meet your headcount needs for this role in time?
Summary
This template provides guidance for a structured way to determine whether you should build, buy or borrow talent. The exact components that you add to each cost section will vary by job role but this template should set you on a good path for talent decision making.
Bonus Content
We’ve spoken about how to make a talent decision when headcount in a specific job role is increasing, but what do you do with headcount in a role where your needs are decreasing?
To help with that decision, I’ve added a tab to the template to document the roles that may become partially or fully redundant. Here, we consider the cost of retraining staff into new roles and compare it to the cost of severance packages. Additionally, we may have the option to reduce that headcount over time using natural attrition.