Hiring

The Art of Knowing When to Hire and When to Contract

Employees are for important tasks that aren't going away. Hire good contractors when you need to get finished with something in particular.
The Art of Knowing When to Hire and When to Contract
Image credit: Maskot | Getty Images
Guest Writer
Entrepreneur & Startup CEO, CEO of VocaWorks & Truli Technologies
7 min read
Opinions expressed by Entrepreneur contributors are their own.

As any business moves beyond the milestone of hiring that first employee along the path of building out your full-time team, it’s important to strike a balance between bringing on extra help and committing to a new hire. Sometimes what you need is just someone to help with a project with a clear end date. Other times, that project may lead into a new full-time role. Keeping this balance isn’t just important from a morale and culture perspective (the makeup of your company), but from a financial one as well (a poor full-time hire can be costly).  

So, when should you consider hiring full-time?

1. For tasks that generate revenue or decrease liability.

Newer companies are more concerned with bringing in revenue; they are likely to be running lean already, so there may not be as many costs to cut. If you know the person you are bringing on will directly bring in revenue that can help offset a good deal of his/her costs of employment, it makes a lot of sense to hire full-time. You can de-risk this hire by engaging in extensive and thoughtful vetting and screening ahead of time to make sure that this person is a good cultural fit for you as well.

Related: How 'Unconventional' Workers Can Be the Answer to Your Company Culture Woes

2. When you find the exact match.

Hiring full-time makes sense when you have clear roles and goals, you can find someone who fits that role and you or someone on your team has the time to help them get ramped up. This is simple if you’ve followed Michael Gerber’s advice and have a list of all the job descriptions your company may need in the future, with start dates tied to milestones.

If you haven’t done so, you should. This brings order and clear thinking to the chaos of hiring someone to “take the load off so and so.” While you build up to hiring someone for a particular position it is likely that others are carrying at least part of that role as extra work. Despite how it might feel, it’s a good sign when there’s a bit of added stress on a team waiting for a new member, or on a department waiting for a new department to activate.

Additionally, full-time staff have been shown to demonstrate greater dedication and longevity than contractors. Their family and friends are in some ways interested in what you do and may promote your interests as well. They are also an excellent source for finding other new hires.

Related: So, What's a Brand Ambassador and Why Are They Important?

When you should consider contract help? A contractor is ideal when you have a specific project limited by time or a milestone. Additionally, you should consider contract help if you:

1. Are desperate or under pressure.

Under pressure, we often don’t rise to the level of our expectations, but rather fall to the level of our training and knowledge. If we’re considering bringing in a new full-time person, you want to be able to think long-term and strategically. But to deal with short-term pain, a contractor is a good option. You can always choose to go full-time with this person if he/she proves himself in the temporary position. Don’t be paralyzed by the pressure. Get help, and remember that any decision is always statistically smarter than no decision.

Related: The Future Is Freelance: How to Optimize Independent Worker Output

2. Have found an excellent candidate for your company before you have a clear role for him/her.

We’ve all run into exciting and thoughtful people by chance, and we feel like we to have him or her on our team. But they may still have an employer or project at the moment, or you may have just finished a round of hiring and don’t have any clear place for this person. Rather than resorting to “let’s stay in touch,” think creatively about a project that this person could take on while fulfilling their current commitments. It will give you insights into how they work with you and your team and can give you proof that someone isn’t just a show horse.

3. You want to hedge your bets on a new product, service or department.

If everyone knows that a full-time future is contingent upon specific milestones, there’s even more incentive to work and achieve. Those contractors who are looking for a full-time position will often relish the opportunity -- and challenge -- to essentially create their own roles based on their performance. By making this growth contingent on performance, other team members in the company will be assured that this move is about smart growth, not the scaling for scaling’s sake that can often occur.

4. It's a niche skill or a terminal project.

If you are embarking on a technology project that uses cutting-edge or niche skills, it may be difficult to find the right talent or attract them to a full-time position. Contract-based roles help rapidly augment your teams with skills that are hard to find or that carry very high market rates due to high demand. In particular with technology projects, if your project has an expected completion date, use contract labor to carry a project through to success without the need to carry the hires afterward. Note that contract labor is a great way to evaluate the talent during a project, so that if you do have ongoing needs, you have the option of hiring them full-time. 

Related: Think the Gig Economy is of Interest Only to Small Tech Outfits? Big Companies Are Diving in, Too.

Even if you are used to only having full-time staff in your firm, all the trends point to a more blended workforce in the near and long-term future. This isn’t just because of demography and technology. A hybrid approach of blended contractors/full-timers seems to be producing better results in companies of all sizes.  

Make your growth pay.

I’ve been a business owner and worked in recruitment for a long time. I fully understand the challenges involved in bringing on new members of the team, whether they are in a full-time or contractor position. Near-term costs are easier to calculate than long-term benefits. But, as you examine what kind of help to bring on, remember that fiscal health is key to growing any company, and you’ll sometimes have to make your best hiring decisions based on the financial signals you see in your growth curve as it relates to your medium and long-term plans for the company.  

We all sometimes make mistakes in interpreting these forecasts, but don’t ignore that those mistakes are a key part of our learning and make us that much wiser the next time we are confronted with similar decisions. Whatever type of help you bring on, if you’ve kept your fiscal health front and center, you’ve put yourself in an excellent position to succeed.

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