Many organizations have adopted a rental model in filling professional positions that require extensive knowledge and experience, as well as in-depth training to get up to speed on the particular projects that these contract/temporary professionals will be working to complete.
The current model of employment looks more like an inventory model (just-in-time) than a well-thought-out business model. It is certainly not a quintessential leader model.
The pros look attractive to organizations from a short-sighted upfront monetary point of view.
Organizations don’t have to deal with the financial and physical overhead of a competitive salary, benefits, a permanent workspace and equipment, and payroll costs (most contract/temporary employees are either paid through a staffing agency that handles payroll or via a 1099 that makes the employee responsible for their own taxes at the end of the year) that a full-time employee incurs.
So, in the short-term, organizations, at least on paper, look like they’re saving a lot of money using contract/temporary employees. Profits are higher. The board of directors is happy. The shareholders are happy. The executive officers are happy.
But the cons, which affect the long run, will eventually make everybody unhappy, and if this current trend lasts several decades, many of these organizations will not exist.
Why?
Whether an organization hires a permanent employee or a contract/temporary employee, the same upfront investments have to be made. Because they don’t get translated in monetary terms, they don’t get factored into the cost of having a predominantly constantly-changing contract/temporary workforce.
One of those upfront investments is training. For professional positions, the training can be quite extensive (or it should be – too often the training is haphazard and poor, with the contract/temporary employees thrown in and left to fend for themselves, which causes delays, errors, missed deadlines, and project failures).
Generally, organizations do the same kinds of projects over and over. The details change, but the scope and type of projects is the same.
Typically, contract/temporary employees are hired for a single project and then they are gone and all the knowledge and training they have goes with them.
This means a new batch of contract/temporary employees must be hired for the next project and the same investment in training made all over again.
Only to walk out the door when the project is over, meaning this cycle happens over and over and over again.
This is an undocumented cost, but it is huge in the long run. Projects are affected dramatically in terms of productivity and milestone/deadline timeliness, as well as in terms of quality of service.
The net effect is the projects don’t get completed on time, they don’t have a consistent standard of quality, and customers end up unhappy because they don’t get what they paid for.
This con is lost business both in existing customers who go elsewhere and new customers who don’t show up because they’ve heard quality and service is inconsistent at best and bad at worst.
The long-term con of hiring contract/temporary employees on a project basis instead of hiring full-time, permanent employees is that eventually there will be no customers and the organization will be forced to close.
The secondary long-term impact (con) of an organization closing is that everyone who is a full-time, permanent employee, from the corner offices to the cubes, will no longer have a job. Additionally, shareholders will lose their investments. And the board of directors won’t have anybody to direct.
Quintessential leaders understand that people – not money or things – are an organization’s most valuable resource. They can – and will – make or break an organization.
Therefore, quintessential leaders know people are the most important investment that an organization can make in the long run, so they invest in full-time permanent professional employees to ensure that a quality and lasting infrastructure is in place to provide consistent, quality, and constantly-increased value-added products and services to existing and new customers.
Money comes and goes. Things work and then they don’t. These can be easily and seamlessly addressed and replaced with very little impact on operations.
However, it doesn’t work that way with people.
People alone can increase the worth, the quality, the reputation of an organization. People have experience and knowledge and are able to add to those to bring even more worth to an organization.
When people are a revolving-door commodity, as in the case of most organizations now, increased experience and knowledge walk out with each project, and each next project is basically like starting all over again.
But this cycle gets repeated again and again with the contract/temporary professional employee hiring model.
It makes no sense to use an inventory model as a business model, especially when the cons (and actual costs) far outweigh the pros in the long run.
It is more evidence that there are very few quintessential leaders in decision-making positions in most organizations.
Because if there were, we would not see the contract/temporary professional employee model that most organizations are using, because they’d have the vision to realize what the long-term costs and outcomes would be.
What kind of professional employee model do you and your organization use?
Do you know the investment costs and the long-term costs of the model you use?
Is talent, knowledge, and experience walking out the door every time projects are completed?
It’s time to carefully consider these things.
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The Quintessential Leader 