Project Management
June 17, 2021

Subcontracting: To Do or Not To Do

Subcontracting: To Do or Not To Do

That is the question

Way back in February, we gave an update on projected growth of the freelance consulting economy in our blog The State of Freelance Consulting. In April, The New York Times published Welcome to the YOLO economy, confirming the increase in millennial freelancers and expansion of companies willing to hire outside of big, coastal cities giving freelancers more leverage. 

Besides the uncertainty of the pandemic and the growing flexibility of traditional companies, another primary driver is the emergence of peer-to-peer hiring. Freshbooks explain it like this: In this arrangement one person finds a gig bigger than they can handle themselves, so they act as the primary independent contractor and bring in subcontractors. The two parties are often called primary contractors and subcontractors.

Mylance’s Director of Coaching, Austin Bauer, PCC


We connected with Mylance’s Director of Coaching, Austin Bauer, PCC. Austin is a leadership coach and facilitator helping organizations do better work by developing cultures of organizational listening, collaborative learning, internal innovation, and team effectiveness. Since launching the first-ever coaching function at the ad agency, Deutsch LA, Austin has trained and facilitated strategic and leadership workshops for over 2,000 leaders at 65+ companies including YouTube, CBS, Kaiser Permanente, First National Bank, Taco Bell, Edelman, and Omnicom. He has served as strategic advisor for Caveday, a company improving our relationship to work; and verynice, a social impact design consultancy.

Through his experience and work, Austin has been both a prime and subcontractor and we asked him for the pros and cons of subcontracting, the outcomes he has personally seen and if he would do it again.


Subcontractor

Pros

  • Working with a team of other experts / collaboration - This is one of the biggest benefits for me of subcontracting. Learning from and collaborating with others is fun, and means the full burden of a project gets shared. You have people to bounce ideas off.
  • Increased Productivity – If a project needs to get done quickly, working with others is a way to speed things up.
  • Assessment opportunities - You get to work with clients you never would have found on your own, because the person hiring you has their own network, etc. This is how I’ve gotten to work with some really interesting non-profits...I have a client who has strong connections in the nonprofit world, and hires me as a subcontractor to do strategy work for his clients. 
  • Client Management - Unless you are being hired as a project manager or account manager, as a subcontractor you usually aren’t the one ultimately responsible for keeping the client happy; the person hiring you takes on that role of buffer, which means you don’t have to spend the time, energy, and stress of managing the client.
  • Proposal phase - The person hiring you is responsible for the proposal, billing, etc. It’s really nice to have someone handle all this.

Cons

  • Billing - If the end client is late to pay, then the person hiring you likely won’t be able to pay you until THEY get paid first. This can cause delays.
  • Lower Rates - The person hiring you is typically charging more for your services than you are getting paid. This can feel like you ‘could have gotten more,’ but, for me, the lower level of admin/client management work often makes it worth the tradeoff.
  • This isn’t always the case. Sometimes people will bill the client at a ‘pass-through rate,’ meaning they charge their client the same as what I’m getting paid - in that case, the person hiring me makes their profit in other ways.
  • More Complexity - More people means opportunities for communication breakdown, scheduling conflicts, etc

Can you tell me a story specifically of what went really well (or poorly) when you have been hired as a subcontractor?

As mentioned above, I have a client who does a lot of design strategy work for nonprofits, including the American Heart Association. In 2017, he asked me to be a panelist for a workshop with AHA. I showed up for an hour and got a small stipend. A year later, he won a strategy project with another large health nonprofit and asked me to play a large role in that (which was a 5-figure contract for me). A year later, he won ANOTHER strategy project with ANOTHER health nonprofit...and so on a few more times. It’s nice because we 1) trust one another 2) have a good working rhythm 3) make one another better 4) He is able to deliver high quality work and not do ‘all’ the work, while I get to focus on the ‘fun’ stuff without needing to manage the client. It’s been a win/win and each project we get even more efficient and effective.

Is there anything that you should have asked beforehand but didn't?

Not for the case I described above.

With a different person who hired me as a sub, I wish I’d charged a higher rate and done a better job managing expectations. This is the same consideration when working with the end client for any freelance project.

Would you do it again?

Yes, without a doubt

Primary Contractor

Pros

  • More creative thinking by bringing in different perspectives (a lot of times I think ‘I never would have thought to try that’)
  • Work gets done while I work on other stuff, rather than having to do everything myself
  • Optically, the end client sees that you have a ‘team’ which can make them feel very ‘cared for’

Cons

  • It can really eat into profits if you don’t price/scope it right
  • Can require extra admin work to wrangle the subs - I suggest hiring someone to manage the project (at least the admin side)
  • Optically, the end client sees that you have a ‘team’ which can sometimes make them think you’ll be more expensive

Can you tell me a story specifically of what went really well (or poorly) when you have subcontracted others?

I was hired to design and facilitate an executive offsite for an architecture firm. I got a pretty good rate for it and felt it would be a good investment to hire a subcontractor with a complementary skill set and a strength in workshop design. I ended up paying about 40% of the project revenue for this. I ended up hiring a workshop designer and a junior strategist from his team. The main guy helped with workshop design but did not co-facilitate the workshop with me. The junior strategist documented the workshop and wrote a draft of the final analysis. 

Is there anything that you should have asked beforehand but didn't?

The workshop was definitely better for having hired them and I’m glad I did it. However, I wish I had made it mandatory for the main guy to co-facilitate the workshop with me, rather than just help with the design of the offsite. He would have done a better job facilitating the parts that he wrote. The junior strategist was hugely helpful.

Would you do it again?

Yes, with some changes (see above)

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