Increase Return on Investment Using Contractors

By John Dahlberg |

Updated Thursday, July 14, 2016


There are a variety of dynamics and nuances with different marketplaces, but the three components that investments share are: Acquisition, Enablement, and Management. Our first post on human capital detailed the acquisition process, while our most recent post a few weeks ago dove into enablement. Today, we conclude our series with the final dimension: management. We will discuss how to increase your return on investment when engaging independent contractors. 

Define the Value of Independent Contractors

In any investment, a key objective is to maximize value. Within financial markets, metrics such as Return on Investment (ROI) and Risk/Reward ratios, among others, are used as gauges of performance. At the macro level, money flows from asset to asset as investors attempt to maximize returns while balancing the tolerance for risk. Overall, this process helps to define current value, distilled down to price, based on the collective perspective of market participants. As a retail investor, there’s not a lot that can be done to proactively influence the returns of major assets such as stocks, commodities, Treasuries, etc. There are certainly a group of active shareholders, such as hedge fund managers and investment banks, that can influence certain behaviors of companies, but overall the market itself is the primary influence on defining the value of financial assets.

Defining value in the Human Capital market, however, is a bit more complicated than simply looking at a few numbers.  Getting the most out of talent requires attention to a wide range of factors, ranging from skill sets to work preferences to cultural fit, to name a few. In addition, as mentioned previously, Human Capital is a matching market, and while a lot of attention is spent on acquiring the right match, defining an ongoing value for both the workforce and the engaging organization is required for keeping a match healthy. Unlike the limited influence typical investors have in the financial markets, hiring organizations have a great deal of influence in affecting the returns of their talent.

1. Let People Work the Way They Want

Achieving this value centers around a few themes. The first is to let people work the way they want. Enterprises need to have a work engagement structure that is flexible to the needs of their independent talent, which are primarily autonomy and control in their work product. Giving contractors this freedom keeps the project “wheels in motion,” and all associated parties happy with the working environment.

2. Define Projects

Secondly, enterprises and engagement managers should focus on defining projects and work products as attractive experiences and building blocks for independent professionals to complement their list of experiences and expand their network. 

To take it a step further, managers must “pitch” themselves to the desired independent talent as a Client of Choice. Keeping in mind that finding and attracting a new resource is usually an expensive effort, one strategy that many enterprises are adopting for engaging valued independent talent is to implement Freelancer Management Systems (FMS) and private talent pools to help create what is commonly referred to as a “private talent network,” which provides that mutually exclusive access to top-tier independent contractor talent. One such platform on this spectrum is MBO’s marketplace, our online consultant marketplace.

3. Identify Skilled Independent Contractors

Third, those who manage and oversee independent contractor talent must understand that independents work across a portfolio of accounts. Similar to an investor seeking to spread risk and reward across different asset classes, independents can (and generally do) work with a diverse client base in order to build their business in the manner that suits them. Working with them to understand what their true specialty is – the one that connects all of the diverse clients together—is critical.

4. Measure Return on Investment

Lastly, in working with getting the most out of talent, it’s important to shake off the “cost driven” mentality that too many organizations fall into the habit of focusing on. In financial markets, particularly equities such as stocks, value ultimately centers on earnings, which measures what is produced after taking into account both expense and revenue. A similar view should be taken on talent within the enterprise to evaluate the contribution of talent to the organization, although this is more involved than looking at an income statement.  

As Managed Service Provider (MSP) and Vendor Management System (VMS) programs have matured, a great deal of “statistically relevant” data has been gathered to help companies manage costs. While rate cards, rate guidance, and related market analytics tools can help with managing to the general trends (i.e. averages) in labor markets, they can often obfuscate the value an independent contractor can bring to the table, especially if it is a niche skill set.

Connecting the Three Dots

It’s been fun to explore some similarities and differences between the Human Capital and financial markets in this blog series. To wrap up, here are a few summary points on the three components of investment markets:

Acquisition—While there is a common emphasis on technology and marketing on purchasing events, Human Capital is fundamentally a matching market that requires a sophisticated approach to develop effective strategies.

Enablement—Financial markets have, for the most part, developed very efficient, technology-driven solutions for deploying assets. This is not the case when it comes to onboarding talent, and most enterprises have opportunities to streamline in this area. One strategy for accelerating “time to productivity” is to revisit a one-size-fits-all approach to onboarding and simplifying the engagement process for independent talent.

Management—As discussed in this article, the key to managing independent professionals is to place a focus on value. This involves engaging in well-aligned work arrangements, defining attractive projects and opportunities, and recognizing the unique skills and value that independent talent provides.

The MBO Partners Enterprise Solutions team works with clients to make the most of an organization’s management of their independent contractor talent and to increase their return on investment when using contractors. Talk to us today to learn more about the work we’ve been doing to help your business succeed.

John Dahlberg, VP Solutions Design, leads the Solutions Design and Delivery Team in its integration and delivery of MBO’s comprehensive suite of independent workforce engagement solutions to enterprise clients and strategic partners.