The Emerging Partnership, Part II

CIDM

October 2000


The Emerging Partnership, Part II


CIDMIconNewsletter Katherine Brennan Murphy, Center Associate

The three managers interviewed expressed a stark contrast of views. Steve Murphy is currently working as a contractor but has experience managing contract employees at Digital Equipment Corporation (DEC) and being a manager at a contract agency. Lori Fisher is an information-development manager at IBM’s Santa Teresa Laboratory in Silicon Valley. Byrne Smith at Compaq Computer Corporation instituted a new approach to using contract help in the past few years that has required considerable flexibility and innovation.

Jumpstarting Your Staff-Steve Murphy, Ibis Training and Writing

Steve Murphy has worked on every side in this partnership: functional manager employing contractors, a contractor, and a contract agency manager. When he managed at DEC, he often used contractors to add a skill he didn’t have in his group. So, for example,if he had an immediate need for a new tool, method, or technology, he would bring in a person with that expertise for the project. He found that, after a while, his staff welcomed this person because they had the experience to share. Their expertise enhanced the reputation of the department and gave the “regular” employees an opportunity to develop in areas where they were inexperienced.

Steve grew talent in house but would never place greenhorns in a spot where their inexperience could harm either their careers or their projects. However, he took care to ensure they got the experience because “you’re either going to develop them or lose them.”

Both as a contractor and a contract agency manager, experience and diplomatic manner helped smooth over problems and meet vendor needs. One of the hardest parts for agency employees is that they have no true “home” and they have to be very self-reliant. They also have to be able to walk in, assess the situation and create a solution that meets the client’s cost, schedule, and quality needs. In order for the contractors to be successful, Steve says, they need to be like “commandos” able to hit the ground running. They also have to understand whether their project is tactical or strategic and adjust their approach and time commitments accordingly.

Steve says that there are two ways to effectively use contractors. First, where you have legacy information or information that is not time critical, put contractors to work updating it, especially in cases where the documentation follows structured writing guidelines that are easy to learn. These projects are ones where internal employees won’t grow and you are in danger of losing them.

Second, put contractors on challenging, leading edge projects to protect and instruct internal employees. “You can really leverage these highly skilled and high-energy people, not just for their skills but also for the diversity they add to your staff. In addition to their project work, find ways for them to interact/mentor internal staff members. For example, have them present topics at staff meetings that showcase their background and unique qualifications. These meetings can be incredibly valuable to the internal staff because they open new vistas of career development.”

Steve’s final point was that you get what you pay for. If you think that you are going to pay less for contract help in the short term, you are wrong. Highly qualified candidates make top dollar and they may be, in fact, more expensive per hour than your best writers. However, they can complete the job faster than less experienced and less expensive contractors and they typically get it right the first time. They also provide flexibility and diversity of skill, which augments your internal staff and places your department in an overall stronger position to meet new challenges.

Covering the Peaks-Lori Fisher, IBM

Lori has often had contractors and agencies augmenting her staff but never more than about ten percent. In her view, if you exceed that percentage, managing the contractors and other impacts on full-time staff begin to reduce or eliminate benefits. Her situation is typical of many high-tech organizations. In good times, she can’t hire people fast enough. To ride out the lean times, she avoids overhiring to minimize the need to reduce staff later. She uses contractors and agencies as a hedge.

Lori says that IBM’s philosophy, in general, has been, when reasonably feasible, to grow expertise from within rather than hire advanced skills on a short-term basis. Lori uses contractors or agency people in the way that Peter Block describes as “an extra pair of hands.” Lori states that she “thinks it is shortsighted and risky to rely on contractors for specialized expertise. It is a complex issue that feeds into building and maintaining a strong team and encouraging full-time staff to grow and develop their skills.” Lori also notes that IRS guidelines create practical limitations on the use of contractors and agencies and that IBM has been particularly rigorous in meeting these guidelines.

Lori does differentiate between contract/agency employees and consultants. Bringing in the latter can help your organization get a jump on new technology or trends. However, consultants have a well-defined area of expertise and are generally self managing. Contractors or agency employees require more time and effort in terms of coordination with the rest of the team and sometimes need product-specific training. Lori relies on project leads to help address such needs. The project lead comes up with a project plan and, together with Lori, determines how many resources and which skills are needed. The routine or self-contained tasks are most often performed by contract employees. The team lead has operational control over the project and helps other team members with deliverables and negotiation.

In order to get quality people at short notice, Lori recommends having a close working relationship with your procurement department. The procurement specialists are the ones who write the contract requests and monitor the vendor relationships. Spending time with procurement always pays off in the end because you will be able to get quality support in house faster if the procurement specialist understands your needs.

In the highly volatile Silicon Valley climate, finding people with the right mix of technical skills, tool knowledge, and self-starting attitudes can be difficult. The IBM team leaders pinpoint specific training contractors may need, either on tools or products. However, because of competition and other factors, Lori has not found that the contract agencies are able to provide experienced people who can be productive on day one, which is another reason why she tries to keep the percentage of contract-to-full-time staff at ten percent or lower.

Occasionally, a former contractor or agency person may apply and be hired for a full-time slot at IBM. What is surprising, but probably shouldn’t be, to some former contractor employees about this transition is that contractor employees actually get more time to devote to project work as that is the specific service they provide; some people therefore find it difficult to transition into the expanded responsibilities of a full-time employee (see Giving a self-contained project to an outside agency).

Integrated Vendor Partnership-Byrne Smith, Compaq Computer Corporation

Compaq Computer Corporation changed a number of its strategies in the mid 90s through merging with and acquiring other businesses. On the plus side, the products these acquisitions brought in revitalized the company. On the down side, the influx of new products and markets caused a huge amount of work for the information-development departments inside the company. As Byrne Smith says, it was like “changing a tire at 55 miles per hour.”

Early in 1998, the information-development management team started to do resource and other planning to handle all of the work. The focus was then and still is today on the customer. How could they produce quality, accurate, on-time information products for their customers-often when they are still learning who their new customers are? At the same time, they didn’t want to go through the ramp up/layoff cycles that can be so harmful to staff morale and career growth.

The information-development departments become hybrids-half full-time employees and half contract-agency employees. Byrne and his colleagues worked to identify agencies that specialize in information development. They decided that, ideally, they would develop several strong vendor relationships over a period of time. They were looking for a commitment from the vendor to find and retain people who could easily move in and out of Compaq’s complex setting. Compaq’s commitment was to create a new process that weaves together a fabric of employees and contractors who create outstanding information products. (See Working within IRS guidelines).

Compaq also decided that they wanted a “turn-key” operation, one where they could issue a statement of work and the contract agency would bid on it. Once awarded, the agency manages the project from documentation plan through delivery, including working with internal departments on graphics, localization, and information-product production. Byrne comments that they are engaged in an experiment. To develop information products in the time available and satisfy customers, they could not manage the work by “staffing up” internally.

To create an experiment that internal people could support, information-development managers had to demonstrate the benefits. Byrne and other information-development managers helped people understand that contracting adds stability to their jobs. Additionally, it allows them to increase their leadership, training, and communication skills, making them more versatile and valuable over the long term.

Contracting changed writer and other specialist roles. Employees moved to project management from writing, and the transition has gone well. And, as the experiment unfolds, the parameters have changed. For example, the initial plan was to have three main vendors that bid on every project. In practice, this became unworkable. Now each vendor is matched with a set of product lines and internal project leaders, which allows them to get the in-depth technical and process knowledge they need to offer a “turn-key” solution.

Another change is in the bid/estimating process. Compaq outlines the project scope, and the vendor returns a statement of work. The statement of work is flexible; if the scope changes, so does the statement of work.

As any good manager would, Byrne is looking for ways to streamline the process further and continue to improve time-to-market and other productivity and quality factors. For now, though, he finds the contracting solution keeps the customer at the center of activities, provides stability and opportunity for full-time staff, and increases productivity and consistency through the use of a pool of experienced agencies.

Conclusion

Lori and Byrne are at opposite ends of the spectrum with regard to contract employee use because their organizational structure and goals align with their differing corporate visions and product types. Lori’s employees document large database products whose customers run large information systems departments. The writers need to become deeply expert about the products and the customers to be successful. Byrne’s division at Compaq is producing information products for their industry standard servers and network management software, and their customer base is more diverse, including systems and network administrators. Thus, their information products must be more standard, produced more quickly, and meet the needs of a diverse worldwide audience. Writing skills coupled with project management and tool skills are paramount.

Steve emphasized that you want to hand off those projects that are 1) leading edge or 2) routine, standardized products. He also pointed out that the use of contract agencies needs to be driven from the project and customer requirements-not from the financials. In the great outsourcing onslaught of the late 80s and early 90s, many corporate controllers strove to prove that companies could save large sums of money in the long term by outsourcing functions beyond the company’s core competencies (information development, human resources, clerical). What is, in fact, being shown is that the cost reductions do not last over the long term. You are effectively spending the same money-it is simply divided up differently.

What everyone agrees is that this partnership allows to you gain flexibility and diversity-you can add staff or not to cope with the highs and you do not have to take the whole staff through the troughs of layoff (see A recommendation).

As this model continues to mature, I expect that more organizations might become more hybridized, with project management held internally and the work doled out to vendors. Also, the scarcity of excellent contract workers and dollars they can command should improve the positive visibility of our departments over the next several years as well as the salary levels for our internal staff. CIDMIconNewsletter