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
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.
Its 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 someones budget that people get motivated to
support or finish a project. Theres 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
** 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
** 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 theyd be a match. Other people say
things like, Even though he came highly recommended, he didnt
pass my skin crawl test: I knew from the start we were looking
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 email@example.com.
2005, Spero & Company Consultants, LLC
Please read our other articles:
Be So Easy If Youd Just Do Things My Way!
Change: Lessons Learned from Malcolm Gladwell’s The Tipping
THINK: A Tool for Triggering Creativity, Enthusiasm and Solutions!