I'm sure it's an adage you've heard before. It's not the cost of pony, but feeding it. Like many FTE roles in organizations nowadays, we need to justify the expense of hiring a role, especially in today's economic environment. On the other hand, in today's rapidly evolving corporate landscape, learning and development have become integral components of organizational success.
To balance meeting the growing demand for effective learning solutions versus the resourcing requirements need to design effective learning in house, companies often grapple with the decision of whether to hire a full-time learning designer or engage the services of a freelance learning designer or a consultancy firm. While the choice may seem daunting, this article aims to shed light on why hiring a freelance learning designer can be more cost-advantageous than recruiting a full-time employee.
The Cost of Hiring and Training a Full-Time Learning Designer
Recruitment Costs
Hiring a full-time learning designer involves a series of expenses right from the recruitment phase. Posting job advertisements, screening resumes, conducting interviews, and coordinating the hiring process all consume time and resources. According to a study by Glassdoor, the average cost per hire in the United States is around $4,000, taking into account expenses like job board fees, background checks, and the time spent by HR professionals.
Salary and Benefits
Once a full-time learning designer is onboard, they become a regular part of the payroll. In addition to the base salary, employers must provide benefits such as health insurance, retirement contributions, and paid time off. The total compensation package for a learning designer can be significantly higher than their base salary, with additional costs like bonuses and stock options, depending on the organization. It's estimated that the average salary for an instructional designer in the United States is estimated to over $85,000 per year in 2021 and job growth is expected to top 10% over the next 10 years.
Training Costs
Learning designers need to stay updated with the latest trends, technologies, and methodologies in the field. Consequently, organizations often invest in training and professional development programs for their employees. According to the Association for Talent Development (ATD), companies spent an average of $1,299 per employee on training and development in 2020. For learning designers, these costs can escalate due to the specialized nature of their work.
Learning Curve
When hiring a full-time learning designer, organizations must also consider the learning curve. New employees typically require time to adapt to the organization's culture, processes, and systems. During this period, their productivity may be lower, which can impact the efficiency of the learning and development function. Combined with the fact that organizations may often rely on learning designers to double as subject matter experts, the first few projects with a new learning designer can be arduous to say the least.
Turnover Costs
Employee turnover can be a significant financial burden for organizations. According to the Work Institute's 2020 Retention Report, the cost of replacing an employee can range from 33% to 200% of their annual salary, depending on their level of expertise and the industry. Learning designers are no exception, and the costs associated with their turnover can be substantial.
The Cost of Learning Designer Turnover
Recruitment Costs (Again)
When a learning designer leaves the organization, the recruitment process begins anew, incurring the same expenses mentioned earlier. The costs of posting job listings, screening applicants, and conducting interviews quickly add up.
Loss of Institutional Knowledge
Experienced learning designers often possess valuable institutional knowledge about an organization's learning and development needs, preferences, and past projects. When they leave, this knowledge goes with them, potentially leading to inefficiencies and project delays.
Reduced Productivity
During the transition period, productivity tends to decline as the team adjusts to the absence of the departed learning designer. This can lead to missed opportunities and project setbacks, further impacting the bottom line.
Training Replacement
The new learning designer will likely require training and orientation, similar to the initial training costs incurred when hiring the departed designer. This represents a double expenditure for the organization.
Why Freelance Learning Designers Are Cost-Advantageous
Flexibility
One of the primary advantages of hiring freelance learning designers is flexibility. Freelancers can be engaged on a project-by-project basis, allowing organizations to scale their learning and development efforts according to their immediate needs. This flexibility reduces overhead costs associated with maintaining a full-time employee, especially during periods of low project activity.
Cost Savings
Freelancers are typically responsible for their own benefits, taxes, and workspace. Organizations do not incur additional expenses for health insurance, retirement plans, or office space. According to the Freelancers Union, hiring freelancers can save businesses up to 30% on labor costs compared to hiring full-time employees.
Specialized Expertise
Freelance learning designers often bring diverse experience to the table, having worked with various organizations across different industries. This means they can offer fresh perspectives and innovative solutions to learning and development challenges without the need for extensive training.
Reduced Learning Curve
Freelancers are accustomed to adapting quickly to new environments and can hit the ground running on projects. This reduces the learning curve associated with new hires, allowing for faster project execution and potentially higher productivity.
Lower Turnover Risk
Freelancers typically have more control over their work arrangements, which can lead to higher job satisfaction and reduced turnover rates. Organizations do not have to worry about the costs and disruptions associated with employee turnover when working with freelancers.
So really freelancers can lower costs, while producing a comparable and even better quality product in less time. Now obviously, there are cons to adopting a strategy like this.
The Cost of Not Developing Internal Expertise
While outsourcing to freelance learning designers or consultancy firms offers cost advantages, organizations that cannot develop internal expertise may incur additional internal costs:
Loss of a Tactical Advantage
Organizations that rely solely on external talent miss the opportunity to develop in-house capabilities and expertise. This can result in a loss of a tactical advantage, as competitors with strong internal teams may outperform them in the long run.
Limited Customization
External freelancers or consultancies may not fully understand the intricacies of an organization's culture, goals, and objectives. This can lead to less customized learning solutions, which may not align perfectly with the organization's needs.
Reduced Agility
In a rapidly changing business environment, organizations that cannot adapt and develop internal expertise may struggle to pivot quickly and address emerging learning and development challenges.
The Simple Strategy for Outsourcing Learning Design
From a strategy perspective, what we are talking about is pretty straightforward? First start with the question, does my organization or my department have enough demand for learning design to justify an FTE?
If the answer to this question is no, then the answer is simple. Find a reliable source of learning design talent outside of your organization.
Now if you do have enough demand for your own FTE's then the strategy should be a bit more nuanced. Here we really want to think about two dimensions.
Is learning design essential for your organization's success? Here we like to think about academic institutions, executive education shops, and any industry where agility is a key success factor.
Is learning design a core operational function? Here we link to think about the issue of what happens when learning design is done poorly. Does it cause a disruption to day-to-day operations?
By mapping each of these variables on a handy dandy 2x2 matrix, we get the following.
When we consider organization who have both a low importance score for both the importance of learning design to strategy and to daily operations, we get a fairly simple strategy - outsource at the lowest possible cost. Here we simply want to get the base amount of learning to our learners at the lowest possible cost.
Organizations with either a high score in either of the two dimensions should also consider outsourcing, but on dimensions other than cost. If the learning design function at your organization is essential for the day-to-day operations, you'll want to find a partner who is highly responsive and who can get to know your organization, it's values and preferences for learning design.
For organizations where learning design is important to strategy, here we should be thinking about quality. If you need the great executive education, work to find a great learning design organization who specializes in executive education.
Now if your organization has high scores on both, then you should be working to build a high performing learning design function in your organization. That isn't to say you shouldn't pursue any sort of outsourcing, but it should be used in a way that compliments your existing internal function.
To wrap up, in today's business landscape, organizations must carefully consider the financial implications of hiring full-time employees versus engaging freelance learning designers or consultancy firms. While the initial attraction of a full-time employee may seem appealing, the long-term costs, including recruitment, training, and turnover, can be substantial.
On the other hand, freelance learning designers offer a cost-advantageous solution that provides flexibility, specialized expertise, and reduced turnover risk. By tapping into external talent when needed and focusing on developing internal expertise strategically, organizations can achieve a balanced approach to learning and development that maximizes cost-efficiency and effectiveness.
Making a well-informed decision about whether to hire full-time learning designers or engage freelancers can lead to significant cost savings and better alignment with organizational goals. Embracing a mix of internal development and external partnerships can help organizations thrive in an ever-evolving learning and development landscape.
We've got you covered at Onward Learning Solutions. We can help by being one of your outsource providers and at the very least, be your advisory partner to help making tough decisions about your organization's learning and development function.
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