Reducing Performance Risk

TASA ID: 1565

The Use of "On Demand" Management Consulting Services as an Alternative to Staff Augmentation Contracting

THE RISE OF STAFF AUGMENTATION CONTRACTING

Since the US payroll tax changes of the 1980's, many organizations have embraced the use of temporary "staff augmentation" contractors in lieu of adding permanent employees.

Advantages include:

• AGILITY Immediate access to proven skills at competitive market rates
• FLEXIBILITY Immediate release of the staff augmentation contractor when the assignment is complete
• PRODUCTIVITY Avoid the cost, delay and reduced productivity experienced during the "learning curve" associated with training in-house staff
• COSTS Avoid the employment costs associated with acquiring employees and providing benefits such as profit sharing, holidays, vacations, sick leave, pensions & training
• SIMPLIFIED HR Staff augmentation contracting agencies and vendor management services provide most if not all of the functions provided by traditional in-house Human Relations (HR) organizations, allowing the internal HR organization to focus on improving the productivity and excellence of the long term "operating" employees

THE DOWNSIDE OF STAFF AUGMENTATION CONTRACTING

The use of staff augmentation contractors is not without its own set of problems, however:

• PERFORMANCE RISK Since the staff augmentation contractor is only contractually responsible for "showing up" and "filling in a timesheet," the hiring organization accepts virtually all of the risk that the objectives identified for the assignment will be met. In most cases, the organization remains responsible for determining and managing the contractor's activities.
• CONFLICT OF INTEREST Since the staff augmentation contractor is paid for "time spent,"there is a natural tendency to "pad" time reported and/or "enhance" scope to extend the assignment.
• REDUCED INCENTIVES While the staff augmentation contractor will attempt to maintain and extend the contract through reasonable performance, the lack of the traditional employment benefits provides little incentive to perform above and beyond the minimal requirements.
• DIVERSIONS Concerns with finding the next assignment can divert valuable staff augmentation contractor time and attention from the current assignment

ALTERNATIVES TO STAFF AUGMENTATION CONTRACTING

With the rapid growth of the staff augmentation industry, the traditional role of the "expert consultant" has all but morphed into that of a "temporary employee." Prior to the rise of Staff Augmentation Contractors, consultants were valued for the special "Subject Matter Expertise (SME)" gained by serving multiple clients:

• Expertise was traditionally provided on a Professional Basis, typically chargeable by the quarter hour. Just as Lawyers are rarely hired for 40 hours per week for months on end, Professional Management Consultants were engaged to achieve a specified RESULT.

The following are examples of the types of "On Demand" Professional Services that may effectively be used in lieu of staff augmentation contractors:

1.  Subject Matter Expert Professional Services by the quarter-hour Clients pay a small monthly retainer in return for a periodic review of their effectiveness and a guaranteed level of SME availability to meet those "suddenly important" problems that often threaten operations. When an issue arises that is beyond the competence of existing resources, the SME facilitates team selection and implementation of effective solutions to:

• Clearly define the situation
• Identify and characterize viable and proven alternatives
• Assist in obtaining the concurrence and support of all stakeholders
• Architect and plan the implementation of the selected solution
• Monitor, oversee and support the implementation team as the solution is implemented

SME Professional Services can provide the Client the comfort of knowing that competent high level skills are available when needed without a big up-front investment. The monthly operations reviews can provide an important independent assessment of all operations and activities, thus avoiding big problems that may develop in the absence of high level on-site resources.

2.  Fixed Price Deliverables While any organization needs competent in-house staff to ensure the continuing integrity of its operations, in-house staffs typically do not have the skills, experience or the time to provide significant new solutions to meet the user's evolving requirements.

When a requirement that is beyond the skills and/or resources available arises, the consultant assists the Client in reviewing the requirements and considering alternatives WITHOUT CHARGE. Then a FIXED PRICE CONTRACT is negotiated for the delivery of the specified RESULTS. The Client pays a refundable 20% to initiate work, another 60% when the RESULTS are delivered and the final 20% when the deliverable is ACCEPTED by the Client. With an employee, staff augmentation contractor, or consultant, the Client assumes all of the performance RISK - the employee/contractor/consultant is only contractually responsible for showing up and submitting a timesheet. With a FIXED PRICE DELVERABLE, the vendor assumes all the RISK.

3. Management Coach to work directly with individual Suppliers, Stakeholders and Participants to expand their understanding of the challenges and to facilitate their development of successful strategies and tactics.

4. Relationship Management to help the organization and its customers better achieve the Governance, Collaboration and process changes needed to improve effectiveness and Return On Investment (ROI).

5. Independent Project Risk Assessments (IPRA) Almost every organization has at least one "troubled project." If the existing project team knew how to remedy the difficulties - they already would have! The IPRA is designed to provide the objectivity, risk assessment and client communications expertise needed to return "troubled projects" to effectiveness and productivity. IPRAs are undertaken when one or more of the following management risks are observed ... or suspected:

• LOSS OF OBJECTIVITY As projects are conceived and launched, even the most professional management staffs find their objectivity diminished. It is hard, maybe even impossible, to "audit oneself." Effective progress assessment, status reporting and project management may be at risk if objectivity is lacking.
• INADEQUATE RISK MANAGEMENT The political pressure to comply with initial project scope, objectives, deliverables and schedule often causes Risk Management, Risk Containment and Risk Mitigation Plans, if they exist, to be abandoned - or severely curtailed. In the rush to expend all available resources to achieve the initial vision, unacceptable risks may be undertaken.
• INEFFECTIVE CLIENT COMMUNICATIONS Inter-organizational complexities often restrain, rather than enhance the open flow of ideas, opportunities, synergies and issues that Communications Plans are supposed to facilitate. Inadequate or degraded communications can lead to unfulfilled "client" expectations, and may even result in a pervasive perception that the management of the project has failed. Even where most of the original objectives are largely met, inadequate client communications can diminish the acceptance and effectiveness of the result. The client's continuing support in this and future endeavors may be at risk.

Effective risk management is the first responsibility of any executive charged with project oversight. An independent risk assessment consultant can aid in the evaluation of project management effectiveness. Only an independent risk assessment consultant, devoid of any ties to the organization or its projects, can inject the objectivity, risk management focus and client communications expertise needed to identify and mitigate risk.

Typically, IPRAs are performed on a fixed price basis, with a series of interviews with stakeholders and project team members, followed by a facilitated project assessment meeting, and a follow-up confidential IPRA report. The objective of the IPRA is not to find fault or assign blame, but rather to enhance theeffectiveness of the project as perceived by its clients, stakeholders & the various internal and external partner participants. 

This article discusses issues of general interest and does not give any specific legal, medical, or business advice pertaining to any specific circumstances. Before acting upon any of its information, you should obtain appropriate advice from a lawyer or other qualified professional.

This article may not be duplicated, altered, distributed, saved, incorporated into another document or website, or otherwise modified without the permission of the author, who will be contacted by TASA