Smart entrepreneurs would rather buy than make, whenever doing so gives their customers the best deal. From the internal entrepreneur’s point of view, every outsourcing contractor and vendor is considered a resource, not a competitor.
In an extended-staffing strategy, external service providers are treated as part of the internal group that offers the same skills and products.
To make extended staffing work effectively, every internal entrepreneur cultivates contacts with outside vendors and contractors within his or her area of expertise. Standing contracts may be arranged to permit rapid acquisition of help when demands warrant. In fact, regular contractors may even be pre-trained in the firm’s technologies and business processes so that they’re prepared to go right to work when needed.
Whenever peaks in demand occur, entrepreneurs acquire resources (funded by their customers) rather than lose the business. This way, they are never resource constrained. The only limit to an entrepreneur’s capabilities is the customers’ ability to pay for the work they need.
Staff doesn't limit its use of vendors and contractors to peaks in demand. In the interest of offering their customers the best possible deal and maintaining their preferred-vendor status, internal entrepreneurs should be the first to offer vendor products as alternatives to internally-produced products and services.
Of course, since vendors and contractors are extensions of their staff, internal service organizations add value by carefully selecting suppliers. They're the ones who are the best qualified to judge the competence of vendors in their field of expertise. And they know that their reputation rides on the success of their key suppliers.
An important consideration in selecting a vendor is deciding the most appropriate type of relationship (to be explored in a future column!). Each type of relationship has its advantages and risks. Internal staff adds value by selecting the right relationship.
Once hired, entrepreneurs manage vendors and contractors as if they were part of the group. Corporate boundaries are irrelevant once the purchase decision is made. Internal staff assigns tasks, manages projects to internal quality standards, and retains accountability for the vendor’s work. (In government, this is done through management of statements of work, not personal service contracts or day-to-day management of contractors; but the point remains.)
From the clients’ points of view, outside contractors appear the same as their internal counterparts. The fact that their paycheck is written by a different company doesn't change the nature of their work or their relationships with others on project teams.
Project funding must be sufficient to pay for the added value of internal staff managing contractors. In other words, when bidding projects that will utilize vendors and contractors, entrepreneurs add a small mark-up to the external expenses to cover their own time. They use this extra money to buy a bit of extra help from contractors, whom they use to off-load internal staff from other projects so that they can manage the contractors.
In fact, once a client agrees to fund a project, staff can use their money in a variety of ways to match project requirements with resources. Internal staff should focus on projects that require their unique skills and knowledge. Staff should also be assigned projects which provide learning opportunities that will benefit their careers, while contractors should be given the more mundane tasks.
What if a new project is most appropriate for internal staff, but everybody is busy with other assignments? Clients generally do not care who does the work, as long as someone they know and trust manages both projects and the promised deliverables are achieved. Staff can use the funds provided to do the new project to hire contractors, and then assign the contractors to other projects to offload staff to do the new project. This ensures an optimal use of internal and external resources.
All of the right things will happen, automatically day after day, if staff develops an entrepreneurial culture that proactively bids every deal and manages vendors as part of their staff.
As I mentioned earlier, when acquiring help from a vendor, the firm must make a decision about the type of customer-supplier relationship. Extended staffing alternatives include the following four types of relationships, each with advantages and risks:
- Product vendors.
- Temporary employees.
- Project employees.
- Long-term contract employees (“perma-temps”).
In the next column, I'll discuss when, depending on circumstances, each of these relationships might be optimal.
Learn more about the "entrepreneurial culture" here:
4 Dimensions To Managing Your Service Provider
4 Advantages to Outsourcing
How Executives Paralyze the Effectiveness of Their IT Teams
Wresting Control of Priorities from Your Internal IT Team
Why Your IT Team Needs a Full-time Internal Consultant
How To Get Your IT Staff to Give You Service Like Your Service Provider