Should my Project Manager be Contract or Permanent?

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“Do I use permanent or contractor project managers?”

As somebody who has spent the last twenty five years working as an Independent Contractor (IC) in IT Project management / Quality management, I am often asked, “Should Project Managers be permanent staff or contractors?”

I usually respond with the question, “How do you define a project? – If the word temporary or short term comes to mind, then the resources used on the project will also be temporary and that should also include the PM.”

Base load vs Peak load

I think a neat way to look at it is this: We all understand simple power consumption, especially here in the Middle East where keeping the AC on has become a significant factor in any power company’s role. When you consider any power provision, there is the base load, the level that its supply provision typically doesn’t go below, and then there is a peak load which are the periodic fluctuations in consumer usage. The classic example usually cited is the extra thousands of kettles put on at half –time during a big football or rugby match.

Applying this analogy to our business, there is the ongoing operational effort required to keep the business running – the base load and there are the strategic transformational programmes and projects that will introduce new products and services to our business – the peak loads or increased demand.

How do we best supply this increased demand?

Utility companies deal with it by using additional standby power generating plants or by buying in additional power as required from independent suppliers.

The same applies to your project management requirements. You don’t need an office full of permanent project managers. There is a requirement to have some permanent staff to maintain continuity and to assist the PMO with day to day project management tasks and any ongoing projects. However, there are some aspects that should be considered when planning your project resourcing using permanent staff.

Costs should be grossed up to include tax, pension and NI contributions that the company makes on their behalf. One should also apply a contingent weighting cost for office space, expenses, holiday pay, sick pay, training costs, maternity pay, end of service benefits payments, stock sharing and in some cases, redundancy payments.

When planning, book permanent staff at 50% utilisation since they invariably have day jobs to attend to as well as personal admin, company meetings, time off, and company or compliance initiatives and personal development training.

When defining the project deliverables, remember that permanent staff leave too, so it pays to make knowledge transfer a clearly defined project deliverable.

Companies generally employ IC Project Managers because they are experienced they have proven project management skills and importantly, as an IC, they are easy to get rid of at the end of the project. From an accounting perspective, the whole budget can be tidied up during project closure including any bonus to the team and manager. No end of service benefits calculations, no ongoing accrual of pension rights and no ongoing social security or other tax liabilities.

“But what about technical knowledge?” I hear you say! Project Managers don’t need to be technically qualified to manage a project. In fact PM’s who lack technical knowledge generally do a better job because they don’t get dragged into developing technically elegant solutions, but remain focussed on their job…delivering the project.

Some considerations should you be considering using Independent Contractors

  1. An IC Project Manager will usually try to avoid the company politics, but they do need support from senior managers to ensure that they are empowered and this must be clear to the team. It is a good idea that a significant stakeholder is also the project champion and is seen to be supportive of the PM.
  2. IC’s are in it for the money and they will have a vested interest in extending their contract. That said, they should not deliberately extend a project, otherwise their reputation will be ruined. It’s a small world these days and word travels quickly.
  3. If you are presented with an hourly rate, also agree the working hours and ensure any process for agreeing extended hours working is included in the contract and adhered to.
  4. Ensure that knowledge transfer is a defined project deliverable and time is scheduled for it.
  5. Pay the IC for the work that they do – don’t quibble and penny pinch. You expect them to perform professionally – pay them the same courtesy. If somebody doesn’t pay you on time how quickly do you seek out the reason why? Pay on time according to the contract.
  6. IC’s are businesses. They have to pay expenses and pay wages the same as a larger enterprise, so negotiate a fair rate. Don’t beat them into the ground. You need a PM who is happy to work, not one who is worried how he is going to make ends meet.

If you are considering becoming an Independent Contractor

  1. Don’t do it if you want stability and security and a job title with a hierarchical growth path.
  2. Acquaint yourself with marketing yourself and personal branding.
  3. If you are like me, you can use contracting roles to facilitate travelling and working around the world.
  4. Like any good Project Manager, conduct a risk assessment and be comfortable with the risks and mitigating strategies.

Conclusion

I have been blessed to work with some incredible characters and I have also had my share of the worst. If you are hiring an IC, don’t buy the cheap one, do some research – I have learned that experience is a price that is still very much well worth paying for!

Disclaimer: The views and opinions expressed in this article are mine and do not necessarily reflect the official policy or position of any company that I am associated with.

 

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