Consultants, Contractors and Employees: Where are we heading?

Often, I hear the screams of pain when we turn to external consultants or contractors to get work completed. It's a delicate situation – sometimes employees feel like they are being betrayed that you're going external. Quite honestly, there's a learning curve and additional expense to going external. There are advantages, though.

I love this plaque from Despair:

Humor aside, consultants and contractors recognize the fact that if they do not perform, they will not return. Period. It's a single opportunity to instill confidence in the client in order to get additional work. As well, there are none of the other issues associated with employees – vacation, benefits, reviews, mentoring, training costs, politics, etc.

Employees are a long-term investment. This may sound impersonal, but it's a lot like buying a house or renting an apartment. The house requires so much more attention that will hopefully pay off in the long run. But is it really paying off? If you have turnover where folks aren't staying for more than a few years, are you getting your return on investment?

Consultants and contractors also have keen sense of customer service. You are their customer and their absolute goal is to please you. Sometimes this isn't the case with employees. Employees have expectations for their employers – sometimes stronger than vice-versa.

As health care benefits rise and employee turnover continues to be a problem, I'm surprised that we don't utilize contractors and consultants more and more to execute our work. That's a little sad in some ways, but it definitely separates the wheat from the chaff. I think it really takes an incredibly strong organization to build a base of employees that are so fantastic that you need never look external for skill – and you pay enough that you never have to worry about them leaving. Does such a company exist?



  1. 1

    Unfortunately Doug, there are not too many companies that exist that like, at least I don’t know of them. I think sometimes a company needs to mix things up a bit and get external help, employees can sometimes let a lot of other issues get in the way of their performance like pay, career development, and Health care to name a few. Like you said sometimes the long term investment doesn’t pay of.

  2. 2

    What companies often fail to see is that they give out the new and exciting projects to consultants while sticking their current employees with the maintenance work. This is counter to the idea that employees are long-term investments. Part of what I liked about being a consultant is that there was a very good chance that every project would expose me to new things.

    As for consultants being cut loose if they don’t perform, that often doesn’t happen soon enough. So they end up doing nothing and while still getting paid. This breeds resentment amongst employees.

  3. 3

    From an employee perspective, I think sometimes you have to look beyond the numbers as to what keeps an employee around.

    A few years ago I worked as an independent contractor for a political consulting firm. I bought my own health insurance and didn’t have a retirement plan. I viewed the job as my “foot in the door” to politics. It didn’t work out that way. But I don’t regret it. In fact, I loved working there. My boss trusted me, didn’t look over my shoulder. Legally he couldn’t determine which hours I worked (then again in politics you work 24/7).

    Now I work as an employee for an SEM agency. I turned down the health insurance b/c my husband’s was better and the company is a startup so there are just hardly any benefits. My salary is 5k less than what I’ve made the past few years. But you know what? I love the job. My coworkers are great and there’s very little drama. We have flex time which is awesome b/c raising kids is crazy with school and everything.

    I won’t deny that money is TIGHT. But the thought of going back to a more traditional work environment – well, I really can’t even fathom it – for any amount of money. B/c I’m happy. And you just can’t write that into a paycheck.

  4. 4

    Some people assume that if it takes one woman 9 months to have a baby, they can hire an additional 8 female consultants and somehow produce the child in one month.

    Sometimes, it just doesn?t work as well as expected.

  5. 5

    As a consultant, I think it is great. Yes, it is not as stable, but it allows more freedom, and I get to choose my boss. I have to buy my own benefits (which isn’t that bad – I am in Canada but I understand it is more expensive in other places).

    I also think it depends on the role. I am a website consultant. Most people need a redesign every few years then get jr. resources to maintain. So it works. Other roles need full-time. I am thinking of my financial advisor – would not want him to be a contractor or a revolving door of different guys. Some roles need that stability.

  6. 6

    I agree with the generalization that in many cases, a consultant will be more driven and provide better customer service than internal employees. Low performing employees are often that way because they’re not doing the work they love and are best at, aren’t rewarded if they perform or aren’t penalized if they underperform. (Sure, there are a million more reasons, but I’m generalizing here).

    But consulting relationships could be placed in those ruts too. I think the advantage is that by default, you hire a consultant to do a specific thing that presumably he/she is great at and loves to do it. And there’s a direct reward/penalty for the job done … there’s no way you’re going to dock an employee’s pay for a product that shipped late. And employees generally know they have a job no matter what … if the product ships on time they can look forward to a 4% raise, whereas the consultant looks forward to more work down the road or a nice maintenance contract.

    There are definitely a lot of bad consultants out there, and my gut feel is that it’s as hard to find a great consultant as it is to find a great employee. I think if you find a great one of either, you go with it. And if you’re stuck with a bad one of either, you have to move on.

    Great post Doug … a lot to think about, and something that’s on my mind a lot since many of my clients are in a position where they’re trying to figure out if they hire me as a consultant or hire someone else as an employee.

  7. 7

    Very interesting post. As a Virtual Assistant, I’m more contractor with just a pinch of consultant. One thing that is frustrating for us is the mindset of employers who want an employee, but want to pay them as a contractor in order to avoid taxes. Sorry, but you don’t get to have your cake and eat it, too. As a business owner, I’m not an employee. If a client wants me to act like one (accept barked out orders, be there at their beck and call, paid peanuts), then they’re just going to have to pay me like an employee, which means it has to be worth my while, time-wise, pay-wise, benefits-wise and expense-wise (yes, employees get their equipment paid for and expenses reimbursed). If they don’t want to do that, then they need to start accepting the fact that contractors are not a way to avoid following the law, and that there are necessarily going to be trade-offs such as the fact that as business owners, contractors are going to charge professional rates that reflect their skill, knowledge and value, and that will sustain their business profitably.

What do you think?

This site uses Akismet to reduce spam. Learn how your comment data is processed.