Ways hiring contractors goes wrong

March 26, 2020

As a contractor with reasonable time in the game, I have seen plenty of occasions when hiring contractors goes wrong. Oftentimes, everyone involved will be perplexed as to how the project went from high-fives and smiles to everyone mad and the project in a pile of rubble. Putting aside project management pitfalls, I most often see these mistakes, when hiring/engaging with a contractor.

Not understanding that a contractor is not at all like an employee
Interfering in the contractor’s process OR Hiring a contractor that doesn’t have a process
Expecting contractors to work as a team or within a team
Hiring the best OR Hiring the least expensive

In short, I am proposing you consider the decoupling of operations and instead separate consecutive processes, steps, or system components using a buffer.

Not understanding that a contractor is not at all like an employee

First and foremost, a 1099 contractor is a legal designation set by tax law. If you don’t understand the difference between a 1099 contractor and a W2 employee, you can run afoul of the IRS in a hurry. Everyone involved in a contractor/contractee relationship should clearly understand the difference, but this goes double for the contractee as they bear all the risk. Classifying an employee as an independent contractor with no reasonable basis for doing so makes employers liable for employment taxes and additional fines.

The short version is that a contractee is allowed very little control over a contractor. If you want to exert even a moderate amount of control over a resource, you have to hire them as an employee and pony up for the taxes. If you want to leverage contractors, you have to give up a fair amount of control. Those are your legal choices.

Beyond the legal restrictions, there are also a lot of personality differences between a contractor and an employee. These differences often show up in a work values test. Contractors will generally value independence, autonomy, and work-life balance while devaluing security, prestige, and work relationships. Employees will often value and devalue the exact opposites.

The differing work-values mean that managing and motivating contractors is starkly different. While you might use similar motivational tools, you have to understand that you can’t leverage something a contractor does not value. This mismatch between your attempts to motivate a contractor and their lack of interest is frustrating for both parties. The simple solution is to learn the contractor’s work values and leverage those things accordingly.

If you have employees that will interact with a contractor, you have more work to do. While you may understand the difference between a contractor and employee, your employees likely won’t. Employees commonly treat contractors as they would a fellow employee. While this is perfectly appropriate in some regards, such as decorum, in other areas it can turn into a problem quickly.

Before engaging with a contractor, sit down with your employees and explain to them the difference between a contractor and an employee. You have to make it very clear that a contractor is an outside resource that must stand alone and be left alone. In particular, discussions with human resources and any relevant project managers are key. Missteps by these employees can easily land you in hot water with the IRS. HR and project managers are used to dealing with employees and they will treat contractors like employees as a reflex. It is your job to ensure this does not happen.

Once you embrace giving up control and understand the work values of contractors, you are well on your way. I could not stress enough how important it is to understand that contractors are not employees and they must be interacted with differently. This is easily the most common and biggest mistake I encounter.

Interfering in the contractor’s process OR Hiring a contractor that doesn’t have a process

In many ways, contractees should not interfere in their contractors’ process to remain compliant with tax law. Interfering with process is an extension of control and will quickly land you in employer/employee territory from a tax perspective.

Moving past the legal concerns, good contractors are really good at what they do. They have excellent processes and that is part of what you hire them for. Contractors are often specialists brought in to fill a gap within your team. While it can be hard on the ego, you have to admit that you might be out of your depth. Even if a contractor is filling a role within an area of your expertise, you must recognize that good contractors have their own way of working.

Also, consider that inspiration strikes everyone differently. Some people want a lot of structure and hard deadlines. Others want to think about a problem in a pressure-free zone where they are allowed to leverage the most creative solutions. The likelihood of finding resources that follow your exact model of work is so slim you might as well toss the idea out of the window.

If you can’t let go of controlling the process, hire an employee. If you doubt the contractor’s process, hire a different contractor. If you have found an excellent contractor, stay out of the way and judge the results.

On the flip side, hiring a contractor that does not have a well-defined process is a really poor choice. If you must dictate the process, you are likely engaging with an employee masquerading as a contractor. With the rise of the gig economy, I see this a lot. There are a lot of contractors out there with less than 5-10 clients. Not to be harsh, but this is really an employee that dabbles in freelancing. As a contractee, you need to be able to spot a “freelancer-lite”. Hiring this kind of resource can be a pitfall.

Remember, dictating process, requiring regular meetings, providing training, or providing resources to the contractor all breaks tax law. There are exceptions but these are more or less limited to items critical to a certain task, such as providing blueprints. Also, hiring a contractor that has poorly defined processes just doesn’t make much sense. Contractors without a well-defined process are most likely not worth the headache they cause. You are better off hiring an employee, if even on a temporary contract, so you can run the show.

Embrace that good contractors have refined their processes over the years and avoid any that don’t have their processes dialed up to 10.

Expecting contractors to work as a team or within a team

This is a classic mistake I see “virtual firms” make, but I see it from some business owners as well. A group of contractors can produce an excellent outcome, but they probably won’t work well “as a team”.

To start, contractors might never be in the same room as other members of the “team”. Team members may work on a total of one project and that is it. Add in differing time zones, various schedules, differing processes, all the things lost in video conferencing, and you just can’t expect contractors to work like a well-oiled machine. This applies to a group of contractors working on the same project as well as a contractor “fitting into” an established team of your employees.

More or less, you just have to accept that logistics prevent team synergy at a certain level, but that is ok. Due to their work values, contractors often work better independently. Also, remember that contractors are hired guns and often specialists. A group of specialists can do amazing things, but they may not work as a team.

Another common mistake is expecting contractors to learn about others’ processes. As the contractee, this can be tough let go of. Learning a lot about a contractor’s process is great for a contractee, particularly as a part of the vetting and hiring phase. That same effort is primarily a waste the time for contractors. Where applicable, contractors will be accustomed to the general process other contractors will use, but the details will not matter.

Contractors tend to focus instead on things needed to do their job. I don’t care how a designer creates the design. I just need the designs to do my job. The designer does not care how I am going to build their design. They only care that I do so faithfully. The focus on deliverables can create a waterfall environment and that presents challenges for the contractee. Having contractors learn about each others’ process is not the cure.

My best advice regarding contractors working as a team is: just let it go. Groups don’t have to work “as a team” in order to collectively create something great. If you want to maximize efficiency within the group, I’d study Agile Development, The Theory of Constraints, and Lean Manufacturing. Any project management knowledge will help, but these three are my favorite.

Another option – create a shared responsibility matrix. This creates an overlap and agreement on who is responsible for what. For example, let’s consider WCAG (ADA compliance) as it relates to designer and a developer.

Designer: Designs high-contrast visual elements matching WCAG 2.2 AA/AAA limits and identifies purely decorative elements.
Developer: Programs semantic HTML5 milestones (<main>, <nav>), explicit form labels, focus states and programmatically double checks color contrast ratios.
Shared Accountability: Automated and manual testing to ensure universal accessibility.

This same approach of designating shared accountability can be applied to any number of KPI without requiring the individual contractors to “work as a team”.

Lastly, change your perspective away from project management and towards supply chain management. If you stop thinking about contractors as team members and instead as a part of a supply chain, it can be easier to manage.

Hiring the best OR Hiring the least expensive

When hiring a contractor, I often see folks go for the best or the least expensive. You have to understand what you are bargaining for.

Most people understand, if you hire the best, they might be expensive. However, there are a lot of other factors that are less apparent on the surface. For one, timelines might be longer. The best got there because of their dedication to their craft. While not impossible, it is harder to get something done right and done right now. If you want someone’s best, you have to give them the time to do what they do so well.

Also, the best tend to be busy. Certainly, everyone wants to manage projects well, and keep things on time, and moving forward smoothly. That is not always a reality. Consider that you might be a small fish in their pond. The best often have a client roster that is a mile long. They often have relationships that date back years and account for huge sums of money being exchanged. If you are the new kid on the block, you might not have any leverage over motivating the best.

In the same vein, because the best are so busy, they get to pick their clients and projects. The best often have a huge waitlist of folks eager to engage with them. This means the best can be a bit spoiled. Sometimes the best won’t tolerate the same treatment others will. Sometimes you have to be a little nicer and show a little extra appreciation.

Circling back to the idea of inspiration striking, the best know how to tap their brilliance. It can be very had to wait patiently while it appears nothing is happening. The thing is, it is hard, really hard, from the outside, to actually know what progress is or is not being made. A lot of brilliance happens in people’s minds. There is almost no way to measure this. However, if you have hired the best, it is best to trust them. They will let you know if they have hit a roadblock. Otherwise, no news is good news. If you are not up for this, you might not be ready to hire the best.

On the opposite end of the spectrum, people get in trouble because they hire the least expensive contractor. Believe you me, the gig economy is a race to the bottom for many people. The price of certain contractors is literally pennies on the dollar. It can be incredibly tempting to hire the least expensive resource possible.

The basic idea is, “at this price, how can we go wrong?”. The problem here is opportunity cost.

While there are very talented resources that are priced at a bargain, these are certainly the exception. More often than not you end up with a poor result that took way too long and with much more effort from you. Let’s put quality aside because there are some very talented but inexpensive overseas resources. Here, the time difference and language barriers can be nightmares.

Another wrinkle to consider – bad faith actors. In regards to code specifically, it is incredibly common to find inexpensive or even free solutions. Some of these solutions appear to be very good. One must ask the question, why would someone give away or dramatically discount a high-quality item? In the world of code, the answer is often a Trojan horse. Developers can very easily slip in malicious code without you knowing it. Before blindly accepting the gift horse, consider that looking it in the mouth might just be what the doctor orders.

I have seen very inexpensive contractors work out wonderfully. Forewarned is forearmed, inexpensive contractors are a roll of the dice.

In the end, it is not a dead-end road to hire the best or the least expensive, you just have to understand what you are bargaining for. Sometimes the middle road is a bit muddy, as it is well-worn, but sometimes that is for a reason.

Final thoughts

As with anything, educate yourself first.

Secondly, start small. When I engage with a new client, I always like to start with a very small project. This way, we can both decide if we like working together. If things go well, we move on to something more substantial. If you are trying to build a team of contractors, have them tackle a small job, like a team, and evaluate how it went from everyone’s perspective.

Understand that contractor relationships can be as valuable and impactful as employees. Be sure to treat your contractors like contractors and not like employees.

The rules for avoiding project meltdown

1st RULE: Do not harm the business.: Contractors must act in good faith and always put the best interest of the business first.
2nd RULE: DO NOT harm the business.: Business owners – trust the people you hired when they say, “This is not a good idea”.
3rd RULE: If someone says “stop,” or quits, or the project goes stagnant – the project is over.: Projects must have an immediate exit strategy. No deposits. No financial hostages. If the trust dies, the contract dies on the spot.
4th RULE: Only two individuals to a problem, folks.: Do not overgrow the team or the decision makers. The subject matter expert and the decision maker are the two people who actively work a problem.
5th RULE: One project at a time.: Complete projects before moving to the next. Versioning is welcomed because focus must remain on the task at hand.
6th RULE: No ego, no offense.: Everyone in the room should be a top tier professional but approach the project with humility and curiosity.
7th RULE: Projects go on as long as they have to.: Projects go on for as long as they need to. Quality comes first. We ship when the project is done; not at an arbitrary deadline.
8th RULE: If this is your first project with the group, you have to bring your A-game.: No tourists allowed.