Every professional services firm at some point considers the use of contractors. Many view them as necessary to smooth out the difference between demand and supply when demand is higher than what a company could solely provide with their full-time workforce. However, using contractors is not without challenges. In this blog we’ll look at six major challenges, or gaps, that can arise within an organization relating to visibility, knowledge, profitability, communication, compliance and culture.
1. The Visibility Gap
One of the biggest challenges for resource managers working with contractors is understanding their availability. If contractors only work for your company, managers will have some visibility of availability and can better allocate tasks to them. However, if they work for other companies, you are unlikely to have that visibility, and this can delay the staffing of projects as resource managers seek confirmation regarding when they can begin work and how many hours are available each week.
Sarah Edwards, Chief Product Officer of Kantata, noted, “There is the challenge of fragmented services. Where contractors are intermittently used, over a longer period, you need visibility of the contractor schedule, but the contractor will have other work as well.”
The challenge goes beyond availability. If contractors are not using the same platform as internal staff, how do you know their skills or experience? You may have a skill shortage or a problem and not be aware that one of your regular contractors is a perfect fit.
Professional services tools such as Kantata can help address this gap. For example, Private Networks in Kantata OX (formerly Mavenlink) connect the availability of consultants across different organizations.
2. The Knowledge Gap
Using contractors for their specific skills makes sense. However, they are not an official part of your organization, and if they leave, those skills are immediately lost to your organization. However, it is not just the skills they bring to the table that are lost; it is also knowledge of existing customer systems and processes they are involved in. The more they work with specific customers or become ingrained in regular business processes, the larger their share of knowledge becomes, which creates a gap if they leave. Business leaders must be cognizant of this knowledge gap.
Jacqueline Stanley, Director, Delivery and Operations at Hero Digital, advocates that customer-facing workers, such as client services, project managers, copywriters, and designers should be employees. Why? Because even though some dedicated contractors may immerse themselves within your brand, only employees can build a real relationship between the PSO and its clients.
As Stanley notes, “If we’re doing it right, we become an extension of their agency, we become an extension of their marketing team. We understand their work inside and out. If you’re bringing in contractors here and there, they’re not going to build that same relationship. We need those upfront people to keep those relationships with our clients. The contractors are going to be more on the back side.”
3. The Profitability Gap
The problem with using contractors is that they can often reduce your margins. Contractors are often more expensive than the fully loaded cost of internal resources. Therefore, resource managers must understand the skills and profitability of contractors and internal resources to make the correct decision when allocating resources.
In the worst-case scenarios, the resource manager allocates a contractor and leaves an employee on the bench. The project is less profitable, and the business has to soak up the unallocated employee costs. By analyzing the true cost of using a contract worker, determining the project profits of a project, and planning ahead to ensure margins take contract work into around, the profitability gap can be understood and closed.
4. The Communication Gap
PSOs may disseminate information across their employee base using emails and other communication methods. However, contractors often miss out and they are rarely privy to everything related to a project – but in many cases, they should be.
Sarah Edwards noted, “It becomes more of a gap if they can’t collaborate, and they can’t work with the team and don’t have the same level of visibility and input anyone else on the project has. Making sure that you can build those relationships and make the contract resources, ultimately, part of the team, is really important.”
Ultimately the technology your business uses to support professional services should deliver transparency into key information across the project life cycle as required. This does not mean that all costs and profit margins are visible, though there is an argument for that. Other tools, such as Slack, can be opened up to ensure that everyone working on the project is fully engaged and able to collaborate. By closing the communication gap with secure messaging and information sharing, your contractors can be more fully supported in their work.
5. The Compliance Gap
It is important not to forget the difference between employees and contractors. Contractually, customers may view the contractors you use to complete their projects differently from your employees. The terms under which you sign contractors should also deal with liabilities, what the subcontractor is liable for, and what insurance they must hold. Those terms should also reflect the insurance terms your company holds. Professional indemnity and other insurance clauses may exclude work done by contractors. This is a frequently forgotten area.
Data protection is also an area of concern, especially if contractors have access to the personal data of customers or a customer’s client’s data. Does the technology used by the contractor adhere to the same security standards as an employee’s technology? Is the company protected against data protection breaches by a consultant? In the UK and other nations, the status of a contractor can evolve to an employee with further liabilities if the contractor is treated as an employee. These elements create a compliance gap, which each professional services organization must define and close to protect themselves.
6. The Culture Gap
While culture is important for attracting employees and contractors, it is employees who actually help build culture, with business leaders steering that culture in the right direction. As Tom Schoen, CEO & President, BTM Global, notes, “Contractors come in for a specific purpose. They like working with us because they like our culture, but they don’t contribute to it.”
The importance of the culture gap cannot be underestimated, and remote working has ensured less physical interaction between consultants and employees. Business leaders need to consider how to address this. Should contractors be invited into culture-building activities? If so, who should qualify for inclusion? And if contractors are not included, what can be done to strengthen internal team culture without making them feel like complete outsiders? A strong work culture can overcome many of the hurdles created by remote work.
What Next?
Consider your philosophical approach to using contractors. Are they treated like employees? Are they onboarded like employees? Do they work full-time for you or only on specific tasks and then disappear? There is no wrong answer to these questions, as every PSO has different approaches and reasons for taking on contractors.
The key question to ask is whether the solutions used in the business support the model you choose. Does your tech stack equip your business to support the evolving needs of your contractor workforce, or enable you to manage external contract workers and their skills and availability with confidence? If the answer is no, it may be worth looking at purpose-built solutions like the Kantata Cloud for Professional ServicesTM which are specifically designed to address the unique challenges professional services organizations face in bridging the gaps between internal and contract workers. Learn more practical steps to uniting your organization in Kantata’s latest whitepaper, “Mind The Gap: How to Bridge Front & Back Office Systems for Professional Services.”
Kantata takes professional services technology to a new level, giving people-powered businesses the clarity, control, and confidence they need to optimize resource planning and elevate operational performance. Kantata’s purpose-built software is helping over 2,500 professional services organizations of all shapes and sizes in more than 100 countries to focus and optimize their most important asset: their people. By leveraging the Kantata Cloud for Professional Services™, professionals gain access to the information and tools they need to win more business, ensure the right people are always available at the right time, and delight clients with project delivery and outcomes.
