How to Manage Outside Offsite Contractors

The contractors have finally dialed in, 15-minutes late, for the status meeting.  They act as if nothing is wrong, "Hello everyone, how is it going?"  Your team looks frustrated, back in college they only waited 10-min for full PhD's!  "Fine, fine," you say calmly, "how are things there?"  "Fine, going good," they reply.  "Uhh, can you be more specific, this is the update meeting after all...".  Twenty minutes later they hang up, and you have NO IDEA the status, quality, or needs of the contractor.  What went wrong?  This is not going well!


As CEO, I spend a lot of my energy making sure that my management team is WELL ARMED to manage effectively.  By manage, I mean: ensure that tasks and objectives are met on schedule and that all tools and materials are available when needed.  


The problem is, when a contractor is NOT in the same office, you rarely know when they are lacking tools or needed materials.  It is equally difficult to get exposure to the progress vs. schedule, and damn near impossible to make sure the objectives are met.  MANY MANAGERS struggle with this with employees, let alone offiste contractors.


Here are some of the tips I train my managers (and employees who often do manager jobs) in dealing with contractors:
1. MOST IMPORTANTLY: don't pay hourly.
* Hourly is the wrong incentive for your contractors!  Pay based on objectives and milestones.
* If you must pay hourly, be sure to specify how many hours per week/etc. that the contractor may work on the project.
* If you must pay hourly, be sure to get an estimate first.. and provide a penalty if they go over the estimate (makes it almost not hourly).


2. Have a GOOD CONTRACT that includes both a carrot and a stick.  
*  Include in the contract a "Bonus" for early delivery, but also include a "Penalty" if quality problems exist post-delivery.
*  My penalty is usually they have to fix the problem in 2 days or we will deduct 5% from the total.
*  A good bonus would be 10%.  (contractors aren't use to this, so it can be quite motivating!)


3. Whenever possible only contract out something that is a "complete job".
* The Job MUST have a finite end-point and delivery metric.
* It must be FULLY specified IN THE CONTRACT.
* It cannot rely on multiple inputs or outside team members.


4. Build in "DELIVERED" milestones to the Contract.
* At least 1 per month or so... a nice stopping point with delivery of the 'unfinished' product. (ideally in a testable state).
* Along the way, you will see progress when a delivered milestone is given to you.


5. Make certain all tools and needed materials are given at the start.


6. DON'T MAKE CHANGES!
* If there is a change you HAVE to make... don't.  Just let the contractor finish, then do a change as a separate contract.


If you can follow the above, you don't need the weekly meeting, just a quick call or email if they miss a milestone!
Best of all, they are MOTIVATED to do it on-time and high quality.
AND you can track their progress via the milestones.