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Business Leadership

Should I Hire Consultants or Employees?

By July 22, 2017February 20th, 2023No Comments

The decision to hire a consultant or an employee can be difficult.  Each path has different levels of cost, commitment, and risk associated with it.   At Atlas Precision, we spend a lot of time with clients bringing structure to an otherwise chaotic system.  We find that having a basic process in place for any decision making is a good thing.  It helps people make fact based decisions and usually brings about a better result.  This post will give you five ideas to evaluate the consultant versus employee decision.

Is this a Project or Ongoing Operation?

One of the first things to think about is whether your goal is better done as a project or if it represents something that is really an ongoing operation.  Projects are typically going to have a finite timeline to implement.  Once implemented, the nature of things in a project change dramatically, and you go into maintenance mode.  This is often marked by a condition where many people have a low percentage change in their duties or roles.  For these cases, the project should have goals that include education and self-sustainment to assure that the results stick.  Good consultants will be able to come into the organization, help you implement, and train your team to manage the maintenance mode on their own.  They should be working themselves out of a job starting from day one.

By contrast, an ongoing operation is very different.  A new or revamped ongoing operation will usually have some sort of organization structure.  There is often a dedicated leader.  Additionally, there may also be a new-to-the-company function that must be curated on an ongoing basis.  A new business, department, or other other organizational unit is often considered to be an ongoing operation.  Hiring employees is usually best suited for ongoing operations.

It also frequently happens that there is a hybrid situation.  In this case, the implementation is a project, but there is a defined transition to an ongoing operation.  Most of the time, the skills needed to lead the implementation are different than the ones needed for ongoing operations.  A good example of this is an ERP implementation.

General Knowledge or Highly Specialized?

What skills are needed to achieve the goal?  Do you need general business knowledge and leadership?  If the skills you are looking for are portable to other functions in the company, hiring an employee may be a good fit.  Should something unfortunate happen with the goals or tasks the person was hired for, you always have the option to move a good employee into another role where they can be effective.

On the other hand, some goals require a specialist’s knowledge.  In these cases, the knowledge base you are looking for is a niche, or series of niches.  For these types of labor needs, consultants can be a huge benefit, because you are not locked in to just using one person.  You can divide the work among consultants who can collectively deliver what you are looking for.

Can You Fill Their Time?

Is your goal going to require a 40 hour week for an extended period of time?  The last thing you need is to make a hire, and that person be looking for something to do for two days a week.  This is usually bad for the employee and the company.  Resentment and frustration start to set in, and productivity soon starts to drop off.  Making a hire is a commitment.  The commitment is a two way street.  The employee is committing to the company that they will be productive.  Additionally, the company also has to commit to the employee that there will be a supply of meaningful work available.  This should not be taken lightly if you value employee engagement and company culture.

Single Resource or Team?

Are you looking for a single person, or a group of people to achieve the goal.  Similar to the specialized knowledge concept, it is key to know what resources are required.  If  you can find a single person that checks all of the boxes, then hiring could be the right fit.  However, there are often cases when the needs are unknown, or are likely to evolve as you move forward.  When the future is very hazy or the requirements are less clear, consultants can be a good choice.  Good consultants can draw on a network of internal and external resources to achieve the goal.  Additionally, using a consultant might present a lower risk level since you can more easily change from one to another without the difficulty that comes with HR issues.

What is Total Cost of Ownership?

Finally, it is important to think about the all-in cost of a decision.  Hiring commits a company to a permanent fixed-cost.  Even if the new hire doesn’t work out, chances are you will have to replace them.  The other option is to try and divide the work among others, but that almost always leads to a lesser result.  This s because nobody is solely focused on getting the result.  This usually leads to an increase in cost and a decrease in speed.  In my experience, with benefits included, the total cost of an employee is their salary plus about 30 percent.  This cost is incurred on an ongoing basis, so you must make sure that you can keep the person productive.

Consultants will have a higher rate of pay than an employee.  Usually substantially higher.  The offset to this is the number of hours that they spend in your company.  If a consultant can deliver a result in a third of the time by being highly focused on the project, then paying double the hourly rate is not such a bad deal.  This sounds good on the surface, but there is still the issue of assuring productivity.  You cannot afford to pay a consultant’s rate if the productivity is not there.  Time to value is a key component of a consultant’s value proposition.  Hiring a specialist is done because you are willing to pay a premium to get a fast and focused result.

Last Words…

Making the decision between consultant and employee can be a challenge.  No matter the road you choose, getting value is key.  Both choices come with an accountability mechanism, but they are different.  It is important to establish expectations and accountability early to assure that you get the most bang for your buck.  As I mentioned before, if you go with a consultant, make sure that person is trying to work themselves out of a job quickly.  Focus on time to value, and make sure you are getting your money’s worth.   For employees, have a plan for their future.  It is not fair to bring someone onto the payroll without that plan in place.