Engaging Contractors: A Framework to Minimize the Risks and Maximize the Outcome

Problem

“When should you supplement your team with contractors?” was something I was asking myself often. During the course of my career, I frequently needed to hire contractors, both while working at a small startup and at more established companies. Moreover, I've been a contractor myself! Therefore, I can say with certainty that hiring contractors could be the best or the worst decision one can make depending on the approach and goals. Bearing that in mind, I was curious to understand how one should assess its own needs to minimize the risk and maximize the outcome when working with contractors?

Actions taken

Whenever I am considering hiring contractors, I write down my reasoning in a document that I can easily share with my team and my manager so they can challenge my proposal. Eventually, once my proposal is groomed enough, it can be shared with the CFO for budget approval.

 

1. The first thing that I do is clearly state the problem we are facing and the pros and cons of hiring contractors to solve it.

Here are a few common arguments that in the past led me to consider working with contractors and the actions that I’ve taken or I would consider taking:

• Lack of technical skills/knowledge within the team: This is a valid reason to hire a contractor; bring them in,and make sure that they deliver not only the technical work but also help training your team. That will cost you more upfront in terms of money and time, but it’s a good investment on your team.
• Fill a temporary position: This is another valid reason to hire a contractor; if the position becomes permanent, make sure that the person you will eventually hire full-time will have a good amount of hand-off time with the contractor.
• Urgent position to fill, no time to hire or go to the market for hiring: Before hiring a contractor, consider the ramp-up time for that position. If the average ramp-up time is very high (3+ months), it might be worth biting the bullet and focusing on hiring instead. If the budget allows, you could do both in parallel.
• Budget constraints: This is more often than not a weak reason; in general, good contractors are highly sought after and therefore more expensive than you may think. You may still get a good price if you are working with a foreign contractor or consulting company; however, pricing shouldn't be your primary decision factor. The first thing should be the quality and reliability of the service that is provided. To this end, if possible, consult with your network before engaging with contractors that you never worked with before.

 

2. The second step I would take is to assess risk factors. Some of the examples are listed below:

• An ill-defined project: product requirements aren’t ready and approved, so they can’t be clearly communicated to the contractor. Consider postponing the engagement until requirements are clear, documented, and officially approved.
• The piece of technology that is being outsourced is mission-critical. In this case, consider not engaging a contractor.
  

3. Then, one needs to define the success metrics, i.e., establish to measure success. For instance, you could outline the milestones, the desired timeline, and the expected level of quality (e.g., average number of defects for deliverable).

4. The fourth and final step is to outline a plan B, in case that after the trial period, the objectives (success metrics) aren’t met by the contractor.

Once you have 1, 2, 3, and 4 written down, share them with your team for an initial review.

Now it is time to compile a shortlist of contractors that you are considering. Break down their offering using a pros and cons matrix and make a final shortlist of the ones that you intend to move forward in the interview process. It is also important to mention the ones you have discarded in order to highlight your decision process. Also, if your organization does business in highly regulated sectors, there may be security constraints that could impede you from working with some contractors. If so, make sure to loop in your CIO early on.

Once the team approves your plan, it is execution time!

Lessons learned

• It’s important to approach the engagement with a contractor in a structured, documented, and shared way. Particularly important is the buy-in by your team and your manager, especially should there be bumps along the way.
• Remember that engaging contractors doesn’t mean you are outsourcing your responsibilities as a manager; you are still on the hook for the deliverables and their quality. By having a shared plan, it is much easier to show that you took all the necessary steps to minimize risks and maximize the outcome.