Managing Contractors: A Matter of Structure

A thorough understanding between the parties about expectations, good communications and a structured framework in which to work: these are the underpinnings of the structure that must be in place at an entrepreneurial company that aims to retain independent contractors effectively.

At, the company I founded, we’ve used contract labor extensively. As a technology driven company that serves niche markets, we work from a core product to customize solutions for customers. For example, we’ve developed a document delivery package for small delivery companies, and a project management solution for General Electric, both using the same set of core software libraries. For marketing and graphic design tasks on projects such as these, we turn to companies rather than individuals to eliminate some management burden. However, for our programming needs, we rely on individuals, both employees and, increasingly so, contractors.

I’ve realized that I am much more interested in product design and development than in managing a large number of employees, so I’ve favored keeping fewer employees and supplementing more and more with contractors. Also, contractors make sense for a company like ours whose work is largely project based. With the recent dramatic ebbing of the dot-com segment, I’ve become wary about overstaffing. No one wants to be forced to lay off staff.

But contracting work has definite risks which I’ve found need to be mitigated by extensive use of good selection procedures, and sound legal and productivity structures. When retaining individuals who are independent programmers – as more and more tech-driven companies are likely to do these days it’s imperative for the management to build into the company the structures that make these arrangements work.


This is a bit tricky because it is an art rather than a science – concerns the need for what I call an “understanding,” a click between company and contractor that says it’s a go.

This is difficult is to nail down. An employment agency can screen candidates for basic attitude and a skill set but that doesn’t necessarily mean that the candidates have the necessary problem solving skills needed for a particular job or the disposition to positively interact with a particular client in a particular context.

An interview by us is a notch above on the reliability scale yet still fraught with difficulties, some personal on the side of the interviewer and some professional: the person could remind you of a past colleague who was great – or terrible – and you find yourself factoring in your feelings about the past worker when considering the candidate. Or it could be that the candidate is clearly intelligent but doesn’t have the depth in the specific skills that you need for the job.

That is where communication comes in. Having been forced, in essence, to take a leap of faith, the company owner must constantly assess whether the new contractor is advised of the expectations for the job to be done and is given good direction and a reasonable time frame within which to produce. Put another way, when a contractor doesn’t work out, the fault doesn’t necessarily lie with the contractor.


Two types of structure are necessary when dealing with contractors or for that matter, employees: a legal structure and a productivity structure.

Whenever intellectual property is involved, a legal structure for work performed is necessary for the long term health of the company. Although I cringe at the thought of the clock ticking at $200 to $300 an hour, I swallow hard and take the time to review with my attorney the contracts that form the basis of our relationship with contractors, making sure the attorney understands my business needs. This protects the company but also helps the contractor understand their rights and responsibilities when working for the company and avoid misunderstandings. The standard issues are that contractors can’t reveal company information to outsiders, walk off with clients, or compete within a certain subset of the industry for a period of time.

A well managed productivity structure, in which contractors and employees work, is essential for the long term well being of a technology development company. It goes to the heart of our pricing structure, estimates of effort, and long term growth.

Namely, a lot of what programmers produce must work in a system that is understandable by all, rather than just by themselves. It must be designed as a module that can be lifted from one project and placed – with only those adjustments that are commonly understood – into another.

At, we’ve built a well defined framework to allow this to happen. Most of our projects are based on a core set of objects. All work is done with reference to these objects and their functions and possibility customized plug ins for these objects.

Contractors, in turn, are taught to work within that structure, to create modules that can be plugged into an already existing framework. That assures that the code in which they write can be used again for the needs of future clients. Another type of structure is in place to buttress the modular approach, the fact that an in-house software architect oversees the entire process.

Good management that ours products are reliable, as well as reusable and well documented. I wish there were a substitute for the dogged work involved, that of monitoring tasks week by week, or even day by day, and factoring in the reality of a deadline. However, the reality is that a good management effort is the only solution when it comes to proper execution of the client’s requirements.

In our business and in our industry, it would be hard to get away from the practice of relying on contractors – whose skills are such that they can freely market their talents elsewhere. Nor would we want to: a technology driven company benefits from a steady influx of newcomers who bring fresh ideas and enthusiasm to the tasks at hand.

The solution for entrepreneurial companies is to use these workers effectively by structuring the essence of the business, and the specific nature of the work, with an eye toward accommodating the realities involved.

More like this: Talent and HR

You have an idea for a business. Now what?

Kauffman FastTrac can help you clear the path from idea to business start. Access the tools, resources and guides necessary to start and grow your business — anytime, all online, at your own pace.

Try FastTrac

Go mobile with 1MC!

Why limit your boost of community, entrepreneurship, and connections to the live events? Download the free 1 Million Cups app and keep the #1MCnation spirit alive!

Download the 1MC mobile app!

Leave a Reply

Your email address will not be published. Required fields are marked *