On a cold Christmas eve of 2007, I was chatting with my roomie who had been a professional contractor in Software Development for years.
And I was in awe with what I was hearing. The dialogue went down something like this:
Me: You charge 500€ per day? You mean they actually pay you 10.000€ a month? That’s about TWICE what I make, and we both do the same job! (thinking, I actually DO a BETTER job)
Him: Yeah, why is it so unbelievable?
Me: Why would they pay you more when they can pay people like me less?
Him: Well, there’s the social insurance, holiday days…
Me: Oh dude cut the cr*p. Even after you cut everything else you net a good 1,8 times what I make!
Him: Sidar, it seems that you need a lecture on why companies hire a freelancer.
That lecture transformed my professional life for years to come
If I didn’t understand why companies hire self-employed consultants over employees in the first place, I’d never dare to become one.
And even if I dared to become an independent consultant, I wouldn’t be successful.
7 reasons companies hire independent consultants
And challenge my then short-sighted, short-term cost-oriented view.
So why do companies choose to pay more and hire independent contractors?
1. Finding high caliber employees is more expensive and time-consuming
7 years ago, I was in charge of a major transformation at a Fortune 500 tech giant.
I was looking at the project P&L and I wasn’t happy with what I had been seeing.
The biggest cost wasn’t the tech, or the equipment. Not even the labor cost: it was by far was the recruitment costs.
And at a second thought, that was understandable.
Imagine you have to fulfill 100 technical positions.
What do you do? You advertise you get in touch with agencies. You get candidates, interview them. You lose more employee time.
And who knows where you’ll be by the time you get those positions fulfilled.
All the while the client is expecting you to deliver.
What’s the cost of a bad hire?
According to this infographic from Resumaay, it can go up to 840.000$.
Eight-hundred-and-forty-thousand whopping dollars!
Hiring independent consultants to do the job is a no-brainer when faced with such a challenge.
2. Firing independents is easier
In all independent contracts, there’s one crucial element: Notice period.
The notice period is usually one month.
It means if you aren’t happy with a freelancer, after 1 month of a hand-over period you can say bye-bye.
For an employee: You have hefty severance packages, longer notices, company politics and in some cases confrontations from trade unions if things don’t turn out so well.
3. The “Outsider Experience”
An independent consultant has likely seen many different but relevant situations in a short amount of time. A company’s employees are usually great at what they do, but often they miss the industry insight and experience.
Hiring a third-eye with a bird view comes with excellent benefits.
4. Tightly Time-bound projects
In that Fortune 500 company I talked about at point 1, we needed 100 technical profiles in the course of 6 months.
Now: that’s a lot of hiring process to chew!
This was the beginning of major cloud transformations so failure to fulfill the positions would come with heavy financial penalties. Let alone the actual cost of losing the client.
The fastest course of action is to hire independent consultants and fill in the gap before the boat sinks.
5. Independence and Self Motivation
Independent Consultants are usually more experienced and can work without significant hand-holding.
A new employee might need coaching, mentoring, or navigating in the organization. An independent consultant who has been through it dozens of times will lose much less time.
6. Overcoming Cultural Obstacles
One of my most reputable clients was a government institution.
They had good and able employees. But at the end of the day, it is uber-hard to motivate someone in such a rigid reward-penalty setting. (no bonus, no promotion, no firing).
However, the work still needs to get done.
How do you get out of this pickle?
Hiring an independent consultant comes to rescue.
Independent consultants are self-motivated because they can be fired with a notice period, and you can still use them as jokers without risking union confrontation. They coach the juniors naturally.
7. Immediate need for specialized skills
Complex projects often require skills that don’t hang on the trees.
Some skillsets are dominated by some specific consultancies (BIG-4, I am looking at you). Some skills cost much more to acquire as an employee.
And sometimes, companies don’t need that skill forever
Take a user experience transformation of a small project for instance. If it is unlikely that the company will ever need the UX professional for other projects,then hiring one doesn’t make sense.
In that case, they go out and hire a freelancer who has done it for companies of similar size. It is an easier path to success.
It is important to grasp why companies hire an independent consultant for a multitude of reasons:
- It will help you acquire more and better clients
- It will help you keep your existing clients
- It will help you become laser-focused on the necessary skills to become a better independent consultant.
Why do companies hire independent consultants?
- Finding high caliber employees is expensive and time consuming
- Hiring and Firing independents is easier
- An outsider experience (having seen multiple companies, multiple skill & industry matrixes)
- Tightly Time-bound projects
- Independence and Self Motivation
- Overcoming Cultural Obstacles
- Specialized skills
Interested in becoming an independent consultant? I wrote a giant guide that has it all, accompanied by an actionable workbook. Download it here 👇👇.