How many contractors do you have in your organization? What is your ratio of contractors to employees? Are your contractors deployed strategically and adding value to your organization or are they inefficient and poorly managed?
The use of contractors in the workplace has been a hotly debated topic for literally hundreds of years. The earliest article I was able to find was chapter 12 from Machiavelli’s “The Prince” which he wrote in 1513.
Machiavelli had some pretty harsh words for contractors and those who hired them and there is some truth and relevance in today’s world to what he wrote. However, contrary to his thoughts, contractors can, and do, add a lot of value to an organization when they are deployed and managed correctly.
The following things need to be considered by an organization when using contractors;
- If the organization cares about its employees and treats them properly, employees will generally represent the organization professionally. This results in a strong brand, repeat business and business referrals.
- Even if the organization treats contractors professionally, contractors will generally be looking for their next project or job. They typically will not be focused on the well-being of the organization that hired them. This is not a bad thing. It is just a fact that needs to be understood when using contractors.
- In general, employees should be in leadership roles with contractors reporting to them and not the other way around.
- Because contractors are generally in business for themselves and not in business to represent your organization, you will want to carefully consider whether you put contractors in leadership roles or customer facing roles. You need to set clear expectations and hire the right contractor if they will be leading employees or in a customer facing role. In general, contractors should only be placed in a leadership role as a temporary solution with a defined end date and a clear succession plan.
- Depending on tax laws that govern your organization, there may be a very distinct difference between contractors and employees. If you treat contractors like employees and get audited, you may be liable for taxes, benefits and fines. Be very clear on the laws that distinguish contractors from employees and make sure you treat contractors as contractors.
- Employees will see how contractors are treated and compensated. If it is perceived that there is not enough of a “benefit” to being an employee, you will see an exodus of employees as they leave to become contractors.
- Contractors should be used to supplement your workforce rather than to be your workforce. See my past post Protean Corporation for more details. This gives the business flexibility in both growth periods and in downturns. Too many contractors and your organization may become disjointed and dysfunctional. Not enough contractors and you may not be able to staff projects or roles as quickly as needed.
- Contractors should be brought in to fill short term expertise gaps. Where possible, part of the contractor’s role should be to train employees in this area of expertise before their contracts expire.
- Contractors are typically more expensive than an employee because they have established a high level of expertise in some area. If your contractors are not providing this higher level of expertise and performance for your organization, their continued use should be re-evaluated.
The bottom line: Employees are like the “flesh and blood” of your organization and contractors are like an “exoskeleton”. When the exoskeleton is directed by the employees and used correctly, the benefit to the organization can be enormous. However, if the exoskeleton is not used correctly or is left to operate on its own, the effects could be quite damaging and will be minimally positive at best.