As promised in the previous article, we are going to touch on very sensitive topics and having to do with recruiting and team building activities, especially in Central and Eastern Europe.
Today, we are going to discuss the issue of hiring contractors, including the pros and cons.
Let’s start with the negatives. Often you hear complaints about contractors, including their lack of team attitude, lack of product knowledge, and overall loss of intellectual property when there is a constant change of team members and temporary contractors.
Yet, the contractor market is booming. Why is that and why are so many companies hiring contractors?
THE BOOMING CONTRACTOR MARKET
I worked as a contractor at the beginning of my career and then switched to being an entrepreneur. I started by helping new and established businesses build their teams and products. In the second half of my career, I have seen a lot of change in the contracting industry.
First off, the contractor market is booming. For engineers it’s very tempting to switch to contracting as soon as they develop a reputation in the market, and have enough skills to sell themselves.
In addition, an engineer can make 4x the amount of money as a contractor as opposed to being a full-time employee. As a professional contractor, you can make up to 120 EU an hour in Germany and even more in Switzerland.
So what is wrong with contracting?
Well, nothing for the contractor, but what about the product and business owner?
For some business owners, usually for those who are not coming from an engineering background, it’s easy to hire contractors. Even considering the high prices, they see benefits in doing so.
WHY BUSINESS OWNERS HIRE CONTRACTORS
Let’s understand why business owners come to the decision to hire contractors.
Business owners switch to using contractors because of two simple reasons:
- They have projects they want to save time and money on, and they want to avoid full-time employment.
- They can’t find qualified full-time engineers on short notice, or at all.
For the first reason, using contractors does work for the short-term. Business owners want to have their product delivered fast, but don’t feel the need to build an in-house team.
Another reason business owners use contractors is that they treat developers just like in any other industry where the workforce can be scaled up or down based on demand. Instead of spending money on recruiting, hiring and training, they can scale their team quickly by hiring contractors.
On top of that, there is labor legislation in Germany and some western European countries, where you can’t just fire people without providing 3 month’s notice.
For a non-IT person, hiring contractors makes total sense. But there are several questions you need to ask yourself before making a quick decision.
- What if your product needs new features after the first delivery?
- What if you onboard new engineers and the guy who developed the product is already working for another customer?
- What if you have issues in the production environment, and the contractor has finished his job?
- What about intellectual property?
- What if a contractor never develops a business attitude during his working contract?
- What if the contractor does not take ownership over the product or develop a team attitude?
These are the questions that none of my non-tech-savvy customers were able to answer. And, depending on my role in the company, I took several action steps to address them, but we will address those in future articles.
THE SHORT-TERM MINDSET
Usually, contractors have a short-term mindset since their contract is limited in time. They want to address the project in the best and most effective way, but knowing they will not work for the same customer for more than 6 months causes them to be short-sighted and not care about further product evolution.
Even worse, some corporations in Germany have adopted a rule where they can’t work with the same contractor for more than 6 months. Ask any CTO, and they will tell you this is the worst decision that could have been made, and very harmful for the team or product itself.
After that time period companies usually onboard another contractor, and this process repeats itself every 6 months. New engineers have to deal with legacy code from past engineers, which can lead to poor decisions and a poor quality of code and product. Often, contractors with a limited contract do not care about the business side of the product. If something happens with a product at midnight on Christmas, and the business starts to lose money, no one will log in to the production server environment and fix the deployment or pick up the phone because of two reasons.
- Contractors just do not care as much. They receive no benefit from doing that.
- In Europe, paying overtime is kind of taboo and managers strictly follow the guideline that contractors should not charge more than their standard hours.
ISSUES FOR THE BUSINESS OWNER
One big issue that business owners do not understand is intellectual property. Intellectual property is not only the source code that has been handed over, but also the product knowledge and business attitude which disappears as soon as a contractor changes his or her customer.
Even worse is if the code was delivered in a way that does not suit the product or further development. These all lead to direct failure in your business. Now think twice, do you really want to do that?
Business owners are required to build development teams, and they have to do that with tough deadlines. In order to meet their deadlines, their only option is to hire contractors. This means they have to agree to all conditions that come with that choice.
High price on the market – Contractors typically charge 4x the price of a full-time employee
Location of work choice – They can often choose to work from a home office or work half a week from a location that is not your office.
Intellectual Property – As soon as they change jobs you can forget about any intellectual property or keeping your internal workings a secret.
You are at their mercy – Once a contractor is embedded in your team it is easy for them to charge sky-high prices because your business depends on the application they built.
Keeping them around is hard – What is even more challenging is that recruiters will constantly be hitting up that developer with better offers. Be prepared to pay high prices, or they will jump ship to a better offer.
They don’t develop a team attitude – Since they came into the project with the focus of just working with you for this one contract, they rarely develop a team attitude and a desire to work with you longer term.
DELIVERING A SUCCESSFUL PRODUCT
All these issues, no matter if the product was delivered or not, greatly harm the quality and ROI of the product. Digital businesses are constantly evolving. They are like living animals and need constant nurturing and support from dedicated engineering teams. Issues can arise on the fly, at midnight or on public holidays. Business does not wait.
I have one big piece of advice for business owners.
If you make money on a digital product, you have to invest in and educate your teams, and use highly-qualified professionals to recruit and train these in-house dedicated teams. There is no other option. I always prefer to build my own team for the companies I operate, or build dedicated teams, for my customers, that are passionate about the product they are building.
Another frustrating aspect for the engineering team is when business owners and CFO’s try to measure every hour spent on product delivery and productivity. Anyone who has ever written a single line of code knows that sometimes shit happens, and you just need to step back from the problem for a bit to figure out the best path forward.
Managing developers is not the same as managing every other type of an employee.
Ownership and business attitude, paired with a dedicated team, brings product and business success. Of course, it should be orchestrated by experienced industry leads and companies that know how to achieve this.
- Develandoo Company Culture