Using external consultants to save time and money

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  • Recruiting staff can be a painful experience because there is a dearth of highly qualified and competent professionals, and more often than not organizations end up hiring the least bad applicant and not the best.
  • Further, to manage ad-hoc overflow of work companies need temporary staffing, but finding qualified candidates who are ready to work for a short term is even more difficult than finding full time employees.
  • A viable solution to these issues might be to hire external consultants on short or long-term contracts. These consultants are specialists at recruiting, and eventually prove to be a cost-effective options as they help organizations mitigate the opportunity cost risk.

I was formerly a senior manager for a service company in the UAE and I discovered that recruiting staff was a painful experience as there are were always plenty of people seeking work, or alternative jobs in many instances, but there was a dearth of highly qualified and competent professionals. Any job advertised would have many applicants but it took a long time sifting through the CVs and at the end of the process you might have 5 people at most to interview as most applicants didn’t even meet the advertised job specs. And even after short-listing two or three candidates it felt more like a case of hiring the “least bad” applicant rather than the best.

Although my recruiting experience are limited to Dubai I believe the problems I suffered are common to managers throughout the Middle East region.  I have concluded that hiring professional staff in this region is a long-winded process and not everyone recruited will be a best fit for the role in mind. And with experienced professionals coming at a premium cost it can be an expensive hiring mistake should the successful candidate ultimately need replacing.

In addition companies often have temporary staffing needs for special projects or to solve work overflow issues. But finding experienced professionals who are prepared to work for a company on a short-term basis is even more difficult than hiring them long-term.

One solution to these issues might be to hire external consultants on short or long-term contracts. There are several benefits to this option including:  

Contracts can be time limited: Although some consultants work on indefinite long-term contracts it is more usual for contracts to be time limited although often with an option to extend by mutual agreement. So if the contractor is not performing as expected, or is no longer needed, then the extension option will not be taken up. Most contractors work on annually renewable contracts but it is not for special projects a 3 month or 6 month contract might be more appropriate. (For one organization I worked on 3 month renewable contracts for over a year). By contrast very few employees would agree to a one year renewable contract and it might even be a breach of the relevant Labour Code to offer same in some jurisdictions. And I know by experience that initially good employees can experience dramatic performance deteriorations during the time that they are employed for various reasons.

Contracts can be terminated relatively easily: If a contractor is not even meeting basic requirements, or is creating some other business problem, then it is possible to terminate the contract even before the renewal date subject to meeting the notice period. Most annual renewable contracts will have a one to three month notice period. And there is no grievance process even if the consultant believes his contract has been terminated unfairly. So he can have no legal complaint if the termination complied with the terms of the contract. By comparison any manager knows just how difficult it is to fire an employee and there is always the risk of a wrongful dismissal case even if the employee was non-performing. (I have worked with companies that settled out of court with former employees claiming wrongful dismissal, rather than endure the expense of fighting the case, even when the companies concerned felt they were fully justified in the termination).

Consultants are already technically trained, are reliable and can work unsupervised: Many consultants are older people with long experience in their relevant industry and most such contractors have been managers so are used to motivating employees without the need to be motivated themselves. (Indeed in some industries it is common for persons who have reached mandatory retirement age to be hired back as consultants almost immediately after the retirement party).  These consultants understand the need to meet deadlines and other targets and have the motivation to know that their contracts can easily be terminated if they fail to perform as required.

Consultants have their own resources: External consultants can often work from home and will usually have their own fully equipped offices meaning that they don’t require valuable desk space or equipment that can be reserved to the company’s own employees. Nevertheless most consultants are willing to work from the company’s offices when required to. In my own experience I spend a lot of time working at home but also work on assignment sitting at an office desk each day but almost always in a different country to my home country. (The company usually pays my travel and living costs in such case).

Consultants can reduce employment costs: Most consultants do not receive employee benefits such as paid vacation and sick pay. And they are not eligible, in most cases, for the company’s health insurance and pension programs. So these are cost savings in themselves. It is also the case, (but not always), that consultants will accept hourly pay rates that are below that of a full-time employee for the equivalent position. (Consultants who work from home will usually require a lower fee than those that are expected to work from a company office). In addition consultants are often also prepared to accept retainer fees, which means that the company can retain their services for a very low fee, and then pay them at the regular hourly rates when the consultant’s services are actually needed. In my case I offer a substantial discount on my hourly rates if a company pays me a retainer fee.

There are other benefits to retaining external consultants including the fact that a retained consultant can eventually become a full-time employee if it is mutually beneficial to all concerned.  And there are a few downsides such as no perceived loyalty to the retaining company although I doubt that many full-time employees have much loyalty to the companies that employ them for the first few years of their employment. 

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