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Renting Talent

“Renting Talent”

When to outsource employees, and how to get the most from outsiders.

In today’s age of expediency, just-in-time inventories have given way to just-in-time employees.

Average daily employment of temporary workers has increased about 8% annually for the past five years, according to the American Staffing Association. The contingent work force has been growing for several reasons:

  • Compressed product cycles demand a more flexible labor force.
  • Technology makes it possible for people to work remotely.
  • Working as an independent contractor has gained social acceptance; it’s viewed as a choice, not a last resort.
  • Many workers prefer flexible arrangements and diverse assignments — especially younger workers who want to expand their skills.

Probing the pros and cons

For emerging businesses, contract workers can be a powerful growth tool, saving both time and money.

Less overhead. Even though you might pay an independent contractor a higher hourly salary than a full-time employee, it’s for a finite period. You don’t have to carry them on your payroll and pay taxes, workers’ comp or benefits, which also reduces paper-chase headaches.

Flexibility. Contract workers allow you to ramp up and down more quickly, which can be especially important for seasonal businesses.

Test drive. A temporary assignment gives both employees and employers a chance to look each other over before committing to a permanent arrangement. In fact, "temp to hire" has been a growing trend for the past few years. A try-before-you-buy arrangement, temp employees agree to work for a specific period (usually 30 to 90 days), after which, if prescribed conditions are met, they may become full-timers and start receiving benefits.

Reduced fallout. Because both the employer and contract worker are aware the situation is temporary, it’s much easier to pull the plug without emotional fallout. When a full-timer is terminated, it not only affects the employee, but the business owner and remaining employees as well.

Yet a contingent work force is not nirvana. It’s important to understand some of the inherent stumbling blocks:

Quality. Because the relationship between you and your contract workers is temporary, business owners rarely design a process for evaluating contract workers. Consequently, they may be disappointed by the resulting quality of work. If business owners use a staffing agency, unsatisfactory temps usually can be replaced, but the resulting churn in personnel still disrupts business.

Reduced stability. The ability to quickly sever ties cuts both ways. You might be happy with the contract worker, but he or she may not be happy with you. A disgruntled temporary worker sent by a staffing agency can ask for reassignment; an independent contractor is legally obligated to complete the assignment, but doesn’t have to work for you again.

Outsider mentality. Contract workers typically don’t have the same buy-in to an organization’s culture and values that full-timers do.

Loss of control. This is undoubtedly the most difficult drawback for entrepreneurs. From a legal perspective, employers have less control with independent contractors: They can specify what needs to be done, but not necessarily how to get those results. Loss of control also applies to using temporary workers from staffing agencies. Those agencies have other clients, and your business may not be getting the priority you expect.

When to turn to contractors?

A decade ago, the term "temp" conjured up images of Kelly girls. But today’s contingent work force comprises a wide variety of professionals, including bookkeepers, computer engineers, chemists, attorneys — even executives. Common reasons for hiring contingent workers include:

  • You need specialized skills for a short period of time. Outsourcing allows you to access talent that you don’t have in-house.
  • Some of your jobs carry certain liabilities — one reason most people outsource their security.
  • You have required tasks, but they are distracting you from your core business. For example, if you’re not in a technology-oriented business, you may decide to outsource IT support.

Sometimes a business owner may decide to outsource entire departments, such as payroll or collections. These functions are obviously necessary to the business, but prevent entrepreneurs from focusing on mission-critical activities.

One caveat: Don’t turn a core competency over to an outsider. For example, many experts frown on outsourcing customer service.

Entrepreneur Jim Evanger’s rule of thumb: Don’t use an outsider for anything that touches the customer. "It’s a communications issue. You want your best people talking to customers," says Evanger, co-founder of DOTI, a Palatine, Ill.-based home-furnishings and design company that generates about $4 million in revenues and is expanding nationally through franchises. "Contractors are taking a crash course to learn about your business. They may not be able to answer a question that requires company history, such as, ‘Why do you do things this way?’ "

Evanger relies on contract workers when a project is "results-oriented rather than process-oriented … When I’m more interested in getting from point A to B, rather than how I get to point B."

Haste makes waste

One of the biggest mistakes made with contract workers is not spending enough time on due diligence.

Scrutinize your free-lancers, consultants and temps just as carefully as you would a full-time employee. Besides looking at technical skills, also consider work ethic and personality. Will they fit into your corporate culture? Look at these people as strategic partners.

Request references, and take the time to call them. It’s also wise to conduct a background check, especially for any outsiders who will handle money. You want to see if they have any history of fraud or bad checks.

Check their driving record. If someone has a history of DUIs and an accident occurs on the job, you could be sued for negligent hiring — even if you went through a staffing agency.

Before you sign on with a staffing agency, get referrals from your network and find out what agencies have delivered quality workers. Ask agencies about the background checks they make on employees. If those aren’t satisfactory, consider writing additional requirements into any contract you sign.

Also, spell out your expectations to the staffing agency, and establish remedies in case things don’t go as expected. Put both expectations and corrective measures in writing.

Motivating temps

Treat your temps and independent contractors as insiders as much as possible. Consider pairing your outsourced help with full-timers to alleviate any "us-vs.-them" feelings. Solicit their opinions and feedback. Tip: Conduct exit interviews with your contract workers. Because there isn’t the same kind of friction that exists with a departing full-timer, you’ll get fresh feedback.

Compensation is a big driver because contractors are self-employed. Have some sort of incentive system beyond their flat fee, and establish guidelines for measuring the results of their work.

When you’re using temps from a staffing agency, motivation gets more complicated. Find out how those workers are being rewarded, and see how you might align those systems with your organization. Perhaps you can send a bonus that will be distributed between the agency and employee. Or you may allow temp workers to participate in an insider contest. You can’t override the staffing agency’s pay arrangement; however, it pays to find out how the agency is driving behavior. Then find wa
ys to dovetail with that.

Writer: TJ Becker