Sunday, 13 June 2010 00:00

Outsourcing: Hiring Individual Resources

Rate this item
(1 Vote)

Cousin Itt, from the Addams Family

The most common form of outsourcing is to hire resources through a staff augmentation firm. Staff augmentation firms, better known by their less polite nicknames of headhunters or pimps, provide anyone from project managers to developers and testers to fulfill a projects' temporarily needs. These firms match your requirements, based on level of experience in a skill or trade, or talent in dealing in specific situations such as overseas deployments, military contracts, etc., to the people in their database. The challenge remains in getting the correct person, who can ramp-up quickly and integrate into the team.

Expectations for Staffing Firms

Staff augmentation companies are a great place for buying commodity skills, such as testers. Their turnaround time for finding resources is quick and their rates are very aggressive. For specialized skills, they can provide board search capabilities and find resources that are otherwise difficult to locate. Specialized skills take longer and require that the desired person's attributes be well defined.

Headhunter or Direct, a Cost Issue

Case Study: Beating the System

The problem that plagues every project manager is staffing. The game is:

  1. Make a list of the skills needed
  2. Hand that into the resource manager
  3. The resource manager looks at the list of people inside the organization and selects resources that he or she feels is a close enough fit
  4. If they cannot find one, Human Resources (HR) will send the request to staff augmentation firm for bidding
  5. HR will not let the staff augmentation company talk to the project manager
  6. The project manager and team wade through dozens of résumés that are not qualified or have the communication skills of Cousin Itt

The solution is to write a thorough requisition with an accurate job description and skill requirements. Too often, this task is seen as drudgery and the requestor leaves too much up the reader to understand. They say Java or .NET or they have company acronyms and forget to add a level of detail. Have the project's core team make sure the requisitions are correct.

Remove requirements that are not needed. Obvious, you say? Not so. I have worked at more than one shop where every requisition had to have "Experience with RUP required" and they never used RUP. They had bought it and management was in the dark about the fact that it was unused. This can be quite a battle; however, staffing firms will filter good people out based on this requirement.

I have had many situations where staffing firms could not find people. I once covertly bypassed HR, went directly to two of the firms, and sent them edited versions of the requisitions. I removed all the requirements that were not needed and made sure there were no company acronyms. I then previewed dozens of résumés prior to them being submitted. The feedback from reviewing the résumés, gave the staffing firms a better idea of what was needed. The officially submitted résumés were very high quality. I then coached my team on writing better requisitions. Eventually, I went to HR and told them why they were seeing better submissions. We then collaborated on changing the hiring process.

Using headhunters will add between twenty-five and fifty percent to the cost of the resource. Good placement firms you can trust will provide value in screening potential resources. However, multiple vendors should be used in order to have a complete inventory of qualified candidates. Do not let a single poor list of potential candidates disqualify a vendor, sometimes their inventories are biased to a specific set of skills.

For many high-end resources with specific skill requirements, such as program and project managers, the cost of using a placement company is prohibitive. Additionally, the type of resource needed, are usually part of consulting companies that do not use placement firms.

General economic conditions drastically affect rates. In slow times, headhunter fees will decrease since fewer people are being hired. Many companies stop using them because they want to save the staffing fees, this makes the placement firms even more competitive. The reciprocal is also true. In good times, companies have money to spent and rely on placement firms; rates go up. As resources become scarce, companies cannot find the correct resource themselves and turn to headhunters even more. Rates go up further. This is simple supply and demand.

Assignment and Level of Protection

The assignment for the resource should be clearly defined. Many contract positions drag on over multiple assignments and the resource starts to qualify as an employee. Insure new statements of work are created for each assignment. In the US, the length of the engagement raises concerns for the company's liability with the Internal Revenue Service (IRS), the primary funding source for the US government. After too long a tenure, the IRS will rule a contractor an employee. For this reason, many companies have an eleven- to fifteen-month automatic termination clause in contracts. Make certain either the placement firm or the consultant a) provides government forms (a W9 in the US) to show that they are properly registered to pay taxes; b) is responsible for all taxes; c) has proper liability insurance.

When to Convert a Contractor to an Employee

All contracts should clearly define the intentions, requirements, and obligations to convert a contractor to an employee. If the intent of the placement is to determine if the contractor is an appropriate fit to be an employee, the contract should indicate that. Many contractors prefer being contractors; they have no intention of becoming anyone's employee. If the resource does not want to be considered to be hired, that should be identified at the beginning of the engagement. As mentioned in other articles, setting expectation is critical.

Hiring temporary labor from a placement company almost always incurs a finder's fee based annual salary. The contract should have both the requirements, such as when to notify of intent or non-intent to hire, and the obligations, how much the hiring fee will be. These should be boilerplate statements in all contracts. Always leave the options open to hiring a contractor.

Payment Options

As opposed to common belief, not all contractors are hourly. The same options are available for paying resources as there are for projects—time and materials, fixed price, fixed price incentive, cost plus, etc. These should be used to match the type of work required. The most common is to have people working on an hourly basis. However, nothing says that programmers could not be paid a low hourly rate, with an incentive for early release of a tested product. This will incentivize them to test properly, refrain from adding non-essential features, and meet the schedule. Project manager rates could be fixed price with incentives for on-time completion. Recovery managers could be paid for how much money they return from a project recovery. The correct payment options can drastically change the project's performance.

Termination Clauses

All contacts need a clause for termination without cause. Temporary resources need to be a good fit. If for any reason they do not work out, replace them quickly. There should be a two-week notice condition—they should be treated honorably. If, on the rare case, there is a reason for termination (i.e. the contractor breaks the law or company policies) immediate termination without any financial obligations is appropriate.

What Are Your Experiences?

What have you experienced? If you are a contractor, or have hired contractors, tell us what you have found:

  1. Have you had a horrible experience?
  2. Do you have a trick to ensure you get the right people?
  3. How do you know when to turn down an engagement?


Note: This is the first in a series of articles on outsourcing that will appear over the summer of 2010. If you are interested in an in-depth study of the subject, Todd will be teaching a class at various universities and colleges. For more information check out the course description and find a college or university near you.

Read 7431 times

Related items

  • Filling Execution Gaps: Building Success-Focused Organizations

    Executives define vision, strategy, and goals to advance the business. Projects enable companies to meet those goals. Between strategy and projects, there is a lot of work to be done—work that lays the foundation for project and operational success. Through experience and research, six common gaps exist in organizations that inhibit project success—an absence of common understanding, disengaged executive sponsors, misalignment with goals, poor change management, ineffective governance, and lackluster leadership.

  • Get Recognized as a Leader: Four Core Leadership Actions

    Leaders make decisions. This requires a core set of actions to gather the best information, hear out the concerns of others, and making a decision that everyone will follow—even if there is not unanimous agreement with the decision. Although there are hundreds of actions leaders must take, there are four core actions that all great leaders do—listening, dialog and discussion, selling a vision, and eliminating blame. This session will discuss those actions in a roundtable format that we call a "What Would You Do?" session. In these sessions, the presenter acts as a moderator spending 10 to 15 minutes per topic working with the audience talking about what the action is, how to best do it, and hearing from the group on how they have carried out the action. This brings significant audience interaction, involvement, and broader education. 

  • Process Mapping

    Process is at the core of any business. It makes work predictable, repeatable, and transferable. Without it we cannot scale our businesses. However, process can be a bane to making progress. Processes that work for a $10 million company have difficulties supporting a $30 million company. Trying to scale them to a $300 million company will not only fail but not address the issues that larger companies have that were never dreamt of in a smaller organization. Processes need to be discarded, revamped, and built—all of that without creating an overburdening bureaucracy.

    Anytime you need to go someplace, you first have to know where you are. Processes are never static and your company's current state is probably far from where you think it is. Hence, the first step is mapping out you company's current state followed by defining the future state. This is more than a logical map of the process; it must also include physical maps. Whether your process is solely to provide a service (say, website development) or physical (say, manufacturing) there are logistical issues that complicate the process flow. Without fully understanding those nuances, future state processes will not reach the desired efficiencies.

    For more information about process mapping fill out the form to the left and we will get in touch with you.

  • Success vs Culture

    The other day a Latvian student contacted me for my views the connection between culture and success criteria—an important and intriguing topic. After working in Taiwan, Singapore, Korea, Japan, Israel, United States, and Canada, I wear many scars of both blatant and subtle cultural violations. I also know that within a culture one person's success is often another person's failure. So, after dispelling concerns about clicking on some random email link, I completed her survey (please feel free to take it yourself). In the process, I struck up a friendship with the student, Kristine Briežkalne, who is studying at Riga International School of Economics and Business Administration . She has some interesting views and presented me with a Venn diagram showing four frames to a project (business, client, project management, and growth perspectives) and how they intersected. As the diagram is part of her Master's thesis, I will let you ponder the how to label the overlapping areas (an eye-opening exercise).

  • Kill The White Knight

    There is a reason we hesitate to teach classes on fixing failing projects. Many a cynic feels that we simply do not want to teach our trade, however, our reason is far nobler—we should be teaching prevention rather trying to create white knights to save the day. It is the same philosophy as building a fence at the cliff's edge rather than an emergency room at its base. Our language is replete with idioms telling us to look past the symptoms and address problems at their root cause. 'An ounce of prevention versus a pound of cure' or 'a stitch in time saves nine.' Please, feel free to supply your own in the comments. Unfortunately, most of our businesses loathe this philosophy, waiting to address an issue until it is irrefutably broken.

Leave a comment

Filling Execution Gaps

Available Worldwide

Filling Exectution Gaps cover

Filling Execution Gaps is available worldwide. Below are some options.


PG DirectLogo
Limited Time Price $20.99
Amazon logo
Book or Kindle
Flag of the United States Canadian Flag Flag of the United Kingdom Irish Flag Deutsche Flagge
Drapeau Français Bandiera Italiana PRC flag
Japanese flag
Bandera de España
Flag of India
Bandera de México
Bandeira do Brasil
Flag of Australia
Vlag van Nederland
DeG Press Logo
Barnes and Noble Logo
Books a Million Logo
Booktopia Logo
Worldwide: Many other
book sellers worldwide.

Rescue The Problem Project

Internationally acclaimed

Image of RPP

For a signed and personalized copy in the US visit the our eCommerce website.

Amazon logo
Buy it in the United States Buy it in Canada Buy it in the United Kingdom
Buy it in Ireland Buy it in Germany Buy it in France
Buy it in Italy Buy it in the PRC
Buy it in Japan
Book sellers worldwide.

Other's References

More Info on Project Recovery

Tell me More!

Please send me more information
on fixing a failing project.

Upcoming Events