Updated: Feb 2, 2020
Over the last 20 years there has been a growing trend for organizations to simply hiring in a consultant or contractor. In jobs that I've held I've seen this growing trend in action. In the last full time position I worked only 1 out of 5 in the Engineering department were actual staff. Along with seeing this trend I have taken note to some resulting issues as well. These critical issues really surfaced and came to light in a recent contracting job. The dangers were apparent and vast.
This trend is really easy to explain. Some of the benefits to hiring consultants appear to be:
1. Companies do not have to commit to an employee
2. You don't have to pay benefits when you know you will not retain them.
3. Only short term help is seen as needed.
4. The company doesn't have stable income
5. We don't have to manage the employee to the same degree
6. Can turn support on and off like a water faucet
7. Avoid labor laws and reduce liability
8. It's easier
9. Organizational work flexibility
I was listening to Seth Godin on YouTube. I recall he mentioned that the average life span of a company used to be a good 75 years but is currently only 15. I'm not sure where he obtained his information but I have to believe this. When I look at past work experiences I am seeing greater instability in companies in general. Big organizations that I thought would be immune and solid have closed. Further, in starting a company the cost of hiring is great and paying a contractor for less hours may be more efficient financially. While this is great for a small company starting out, can it be detrimental to a large organization? Maybe!
You might be asking the question of why and how at this point. If it is good for a small company why would it not also be good for a large organization? As a matter of fact, in talking with one senior IT professional recently he cited that his organization is recognizing this danger and the trend is reversing. He works for a very large hospital healthcare system. He helps to build their IT infrastructure and systems that keep them going. This is a prime area for hiring in of contractors.
I once took a contract at a bank where they requested my help with development of some quality systems. 1/3 of the staff were contractors. Then one day 1/3 of the contractors were gone and that included me.
Here are the dangers of this growing trend?
1. There is potential financial instability for the contractor. The individual is unable to commit to purchase of a home because they don't know where their next job will be or when it will come. Finances are not stable. This hurts the individual and GDP.
2. Key staff members lose the ability to grow and handle important responsibilities and projects that can move their career forward. In other words you need to be a contractor to do growth projects. This can cause resentment in staff.
3. Lack of system ownership. The contractors are just there to do a job and they really don't care if they are working within a broken system and/or are actually breaking it.
4. Contractors have developed new systems but regular staff are not helping. I recall one contractor acknowledging this and asking who will maintain what they were creating. The real answer was probably no one because no one knew what was being done. This was highly dangerous from a compliance standpoint.
5. Because contractors are not as familiar with other ancillary procedures they forget about them and key tasks are not completed. They may have been trained but they just don't remember.
6. They work more leisurely
7. Not managed as diligently as a regular employee
8. Contractors are not accepted by regular staff. They are treated like disposable help and treated poorly. They are treated like they are stupid and incapable. There is a mentality that they are not one of us.
9. Misclassification of workers as independent contractors
It can be said that there are pros and cons to everything we do in life. However, from what I've seen in my career both working as an employee and contractor/consultant I no longer recommend it. There can be high risks for the organization from a financial standpoint and I am not referring to the higher cost of the worker. You risk.
1. Product recalls
2. Product rework
3. Compliance failures
4. Angry employees
5. Disengaged employees
6. Reduced staff company loyalty
7. Lengthened time to get a job done
That is just to name a few. As my friend told me in our conversation, his organization is now beginning to recognize these risks and are returning to instead hire on as a regular staff member.
It's best to consider the long term risks in your decision as to if you will hire a new staff member or a consultant/contractor.
EM Colorado can help you to assess these risks.
Photo provided by WIX