By Susan Spero
To contract out or not contract out: that is often the question these days! Organizations of all shapes, sizes and industries spend greater percentages of their annual budgets on outside consultants and technicians each year. The results range from cost efficient to astronomical, and from highly successful to painful and disastrous.
Sometimes, an invoice of $2,000 is a fair exchange for coaching a troubled manager, who can then turn around the performance of an entire department. A large national company recently spent $2,000,000 on vendors in a three-year period to design and install a new computer system, and then coach the managers in how to oversee and support the conversion. The project was very stressful and expensive but highly successful.
Another large corporation spent $4 million over four years with an external change agent to change the culture and the strategic direction of the company, and motivate its 3,500 employees to support the new approaches. As a result, hundreds of employees resigned, were laid off or fired. Stock prices plunged, and the morale of the employees that remain is abysmal.
Several years ago, Charles Handy wrote The Age of Unreason. In this delightful book, he predicted many of the trends we see today, regarding how organizations respond differently to change and chaos. In particular, he cited the need to form what he called the “Shamrock Organization”, which maintains a small core of key professionals and technicians who run the business. They then hire temporary and contract labor, based on projects and customer needs. As a result, they keep overhead lower while improving flexibility and customer responsiveness.
One of the factors that increases the likelihood of success with external consultants is to be sure you are seeking help for the right reasons. The six most common situations that drive organizations to hire vendors for technical, organization and personnel projects are:
1. No internal expertise: No one inside the organization has the necessary experience or skill sets to do the work. It may be a specialized technical project, a specific type of planning or facilitation, or some coaching, training or mediation that some of the employees need. In this case, an outside expert may bring in the highest quality support.
2. Temporary need: For a short term or occasional project that is limited in time and scope, it may be more efficient to contract with an external vendor who leaves when the work is complete.
3. “Not a prophet in your own land”: Often, there is a need for the objectivity and credibility of outside perspective. External agents can bring a new outlook , untainted by company history and politics. Even if the consultant is recommending the SAME THINGS as internal managers, s/he often seems “wiser” by virtue of the fact that they come “from somewhere else.” It’s a common, albeit irrational phenomenon.
4. No time: With increasing frequency, people hire vendors to do what no one internally has time to do. Even when people have the SKILLS to do a certain task, they may already be working 60-90 hours a week and running around like their hair is on fire. So adding a special project is not even a consideration. In this case, outside help becomes essential.
5. Cost effective: Sometimes, even when regular employees have the time, skills and credibility for certain duties, it is actually cheaper to contract out for the work. The hiring and benefits costs for full-time staff are often greater than the higher hourly rate a consultant might charge.
6. Procrastination: External agents may even be hired to hold a group accountable for some project they have been putting off or failing to complete. Often, it is not until there is a finite invoice billed to someone’s budget that people get motivated to support or finish a project. There’s nothing quite like paying by the hour to help people get more disciplined and efficient.
6 1/2. Increased Profits and Reduced Tylenol Consumption: Clients tell us that we add value to their company, bring new perspective to their situation, and that we are easy to work with.
Whether the reason to bring in a consultant is skill-based, as in the first three situations, or efficiency-based, as in the last three, it is obviously important to be CLEAR about WHY you are contracting out a project. The second crucial factor for success with external consultants is HOW you CHOOSE the individual or firm to hire.
The selection criteria are similar to those used to hire full-time employees. They generally include:
** Relevant skills, experience and credentials
** Prior knowledge of, or relationship with the people or company** Recommendations and references, preferably from colleagues you know and trust
** Cost of services, relative to what the market will bear in your region, and considering your own budget constraints
** Availability of the contractor, given your timetable, and
** Interpersonal chemistry between the individual[s] who would be conducting the work, and the key players within your organization who would be working directly with the vendor.
This last item is the least rational, the hardest to quantify and sometimes the most important. It is an intuitive type of rapport that you may establish quickly or develop over time with a contractor. Sometimes, employers say that they almost disregarded resumes, references and costs, because they were “on the same page” with the prospective vendor and “knew” they’d be a match. Other people say things like, “Even though he came highly recommended, he didn’t pass my ‘skin crawl’ test: I knew from the start we were looking at trouble!”
Successful vendor selection should incorporate all of these concrete and measurable indices. However, when you get to the final decision, get the reaction of several key players. Also trust your own intuitive “read” of the people and situation.
Give Spero and Co. a call today to discuss your consulting needs. We will help you figure out what your needs are and how we can help. Call us at 303-671-9030 or email us at info@speroandco.biz.
© 2005, Spero & Company Consultants, LLC
Please read our other articles:
Life Would Be So Easy If You’d Just Do Things My Way!
Implementing Change: Lessons Learned from Malcolm Gladwell’s The Tipping Point
POWER THINK: A Tool for Triggering Creativity, Enthusiasm and Solutions!
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© 2005, Spero & Company Consultants, LLC
Spero and Company Consultants, LLC
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Phone: 303-671-9030
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