In-house vs. Agency: What tech startups can learn from the biggest question of the corporate world

From the birth of management consulting in the aftermath of the 1921 Depression to the golden era of advertising in the 1950s, followed by strategy, IT, and accounting consultants in the three decades that followed, large corporation leaders have, for a long time, had options on human resource, with external expertise sometimes a competition to internal competence, and other times a complement.

However, the trend of firm/agency adoption has been trailed by criticism as consultants debate, among other things, the decision to… yes, hire consultants, leaving business leaders with a lot to think about, and sometimes the confusion on which approach to take. While there are similarities in their dilemmas, tech startup founders do not have as much luxury and are by nature, designed to achieve more with less. Perhaps the most difficult of the questions is on what is truly more, or less.

Startup founders understandably tend towards the desire to have as much as possible done internally, especially on verticals like brand, marketing, advertising, and media (or one could just say ‘marketing’, for ease). This desire is inspired by, among other factors, 1. the need to be agile; 2. the need to be understood; 3. the need to be lean; 4. the need to invest in internal competence; and 5. the need for control.

There are a few downsides to keep in mind, however, but we will (subsequently) discuss alternative approaches to maximizing the pros.

1. Restricted flow of ideas due to the monotony of challenge in-house.
2. Rigidity of human resource as you cannot just “change hands to switch things up”, like you could ask of an agency to switch people working on your account (or even change the agency altogether).
3. Difficulty of attracting top talent as a good percentage are more likely to choose being in the company of their like-minds for exchange of ideas, among other things.

While a lot of these ring true, the motivations for internal teams remain strong, and rightly so. Below are a few things startup founders surely want to ponder upon as they work towards success with these objectives while avoiding some of the issues raised above.

On operations — the need to be agile

Startups are rightly concerned about the speed and flexibility they can expect from agencies.

Beyond clearly discussing these expectations, which is very important, it helps to design a system where the agency professionals devoted to the project are clearly known and there is a communication system that is transparent, with collaborators from both sides being able to interact through platforms that make new teams out of the collaboration. Think about it like a Joint Task Force.

On quality — the need to be understood

Founders trust their ability to get their teams on board with the bigger picture, values and more. They are sometimes unsure how to extend this for external teams.

First, it is important to remember that while the internal perspective may be the most important, it is only one side to the full view. Agencies are able to see the company from without and escape the trappings of confirmation biases, and a lot more.

As a collaboration appears like a better balance of perspectives, it helps to ensure that there are key internal stakeholders on the project team, with at least one of them being well versed in the field of expertise being outsourced. They help to provide that “from-within” influence. Usually, there is a co-founder or top executive deeply involved in these conversations, as they set the direction for major decisions.

On budget — the need to be lean

Needless to state that startups need to cut costs and spend wisely to extend their runways.

Many startups decide to go fully in-house as a way to cut costs but the only way that results in lower costs is if they set up teams with people with far lower capacities compared to agency professionals. It’s either that or they are breaking the bank to match up, as they make up for the tendency of this top talent to prefer teams of their peers, if pay was the same. There is hardly any true saving of costs in this regard, especially when you also add how agencies are able to spread their payroll across multiple clients and hence be relatively cheaper in fees for the client.

A better way to save money is to combine an internal team of a few seasoned experts, some mid-level talents or interns with an experienced team (external) that is tasked with setting the foundation and helping to fully onboard (or sometimes train) the internal team. A continuous but cheaper path to continuity may involve the internal team doing the day-to-day work while using the guardianship of the external agency.

On talent — the need to invest in internal competence

Startups are thinking about breaking that bank as a long-term investment in talent development

While this is a great approach when there is the budget for it, perhaps the best gift for an in-house team is to not close them up, no matter high the quality of talent within, but to rather open them up to the exchange of ideas achievable with collaboration from external teams who readily come with more diversity in experience.

On trust — the need for control (or commitment)

Many startup founders have experienced being treated as “one of many clients”, feeling helpless and being unable to control timeline and delivery issues.

The thought here is to simply shop carefully, and speak to other startup founders who have worked with agencies to determine which ones have the best systems that ensure that despite the inability to directly manage the condition of things, as external engagements go, they can be trusted to commit to the goals of the clients. This calls for a thorough process of choosing the agencies and firms to work with, but just like hiring staff, the work is always hard but worth it.

One more place to look at is in the contracts and SLAs, ensuring that expectations are clearly stated as well as clear systems to check and review the progress of work week in week out, or bi-monthly.

There are hardly any definite answers, surely not from from the traditional “corporate world”. What we have to work with are lessons and talking points to thoroughly think around as each team find its own fit.

In the end, it may be more about how best to combine both than which side to commit to.

(Victor Fatanmi is the Managing Partner at FourthCanvas, a brand strategy and design agency focused on African tech ecosystems).