Consultants vs. Contractors

Ah, the two C words of the Services world. Alike, but not. Not exactly as violent a confrontation as say Piranhas vs. Tourists (or Services vs. Products), but in today’s freelance economy, it’s important to know the differences.tropical-jungle-1572054-639x852

The simple answer is: Consultants advise, Contractors do. Perhaps not unsurprisingly, the complex answer is, well, complex. This can get even more complicated by regional differences in terminology, and by branding—sometimes “consultant” sounds more prestigious than “contractor.”

Consultants:

Generally, consultants provide advice to company management, be it business advice or technical advice or whatever. This can be very general advice or can be the result of a very deep, narrow investigation. For consultants to be effective, they need to have extensive training and experience. There is the odd breed of high paid management consultants that tend to be fresh-baked MBAs, who prove the exception to this rule.   Consultant engagements can vary from a few hours to many months at 120% time. And sometimes consultants can transition into a contracting role, or even into employees. While consultants are often paid by the hour, they also can be paid by the job.  Some consultants are freelance, some work for firms big or small.

Contractors:

Generally, contractors are brought in to complete a specific task, which could range from designing a circuit to writing a set of processes to conducting an audit. Typically these tasks are closed-ended, but at the end of the task of course there may be opportunities for follow on engagements. While contractors can also be paid by the hour or by the task, they tend to have much more concrete deliverables than consultants. Contractors typically have multiple customers, either time sliced or sequentially (see below for a massive exception).

Note that there is, unfortunately, plenty of abuse of the term contractor, typically as an attempt to skirt employment laws, whereby the contractor acts very much like an employee—often even sitting in the same office as bonafide employees, doing the same work—but paid in a different manner. There are entire industries devoted to doing this body-shop work legally—think temp agencies for engineers and the like—as well as many companies and individual freelancers who play fast and loose with the law. We avoid this like the plague.

Some of both:

There is a blurry line between the two areas. For example, at Zebulon Solutions we do a lot of contracting, ranging from product design to supply chain development to validation testing. We quote by the hour, by the task, and / or by the month, depending on many factors. We also do consulting, typically in the operations and engineering management spaces. We provide advice on managing supply chains, design processes, and outsourcing strategies.  And in many cases we mix the two: for example, we are doing extensive supply chain research for a growing energy industry client (consulting), but we have also gotten our fingernails dirty checking drawings and setting up long lead time buys (contracting). For another client in the consumer space, we started out as a consultant reviewing their design for manufacturability (consulting), but then transitioned into a design role (contracting). And sometimes it goes the other way: we did some contract design work for an instrumentation company last year that led into a current engineering management consulting role.

That said, we know the difference.

5 Tips when hiring Consultants or Contractors:

  1. Know the difference.
  2. Stay on the right side of the law. If you want a contractor to act like an employee, that’s a red flag.
  3. Vet your contractor or consultant. If they work for a firm, vet the firm. While there is a place in the market for occasional or moonlighting consultants or contractors, make sure you go in with your eyes open.
  4. Work up a Statement of Work (SOW) detailing what is to be done, what the deliverables are, and what the schedule is. The SOW should also spell out assumptions and exclusions.
  5. Plan for contingencies—even with a great contractor or consultant and a well-written SOW, change happens. Typically, contractors and consultants are used on tough problems—I’ve been told many times “if this was easy we wouldn’t need you”—but oftentimes finding answers to tough problems is, well, tough.

Chuck

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