Contractor or consultant?

By Fiona Czerniawska

It’s not just a question of glamour (‘consultant’ sounds so much more upmarket, as any hair or sales consultant will tell you), but hard cash: consultants can charge more than contractors.

But the question of how you tell the difference continues to vex clients.  Consultants are supposed to work on projects, rather than open-ended contracts, so they’re tasked with completing something, not simply doing it. Contractors would probably argue that they’re just as focused on delivering results.  Consultants come in teams (it’s one reason why they’re more expensive per capita) so can take a more integrated approach to bigger projects: contractors have to be managed by the client.  Consultants are preceded by their brand, the quality ‘stamp’ which means that they meet an acceptable standard – although many clients say they now vet individual consultants as they would contractors or, indeed, employees.

These are murky waters, made murkier still because consulting firms use contractors much as clients do to deal with peaks of activity or to provide short-term, specialist input which it doesn’t make sense to have in-house on a permanent basis.  And that’s happening more and more: consulting firms are telling us that utilisation levels are high; many are quietly but constantly shedding staff whose skills aren’t in demand; lower margins mean that recruitment usually comes after a large piece of work has been won rather than before it.  Of course, the irony here is that the flexibility clients seek from consultants is being passed on, as lean consulting firms look to the contractor market to provide them with the flexibility they need.  It’s the labour market equivalent of a back-to-back contract.

There are two quite obvious problems with this.  The first is that consulting firms are no better than their clients at flexibility: the consulting firm may add value in many ways, but this is not one of them.  The second, and perhaps more important, problem is that both clients and consultants are making use of the same contractor market.  “We found they were using a lot of contractors on the project, not their own staff,” complained a client we spoke to recently. “If we’d wanted those people we could have gone to the contractor market ourselves.  We don’t need a consulting firm to do it for us.”  Contractors can be hired, even recruited, by clients; ‘consultants’ are supposed to be something different, a rarefied beast who comes trailing clouds of experience in their wake.  But the issue is not simply that consulting firms are trying to pass off contactors as consultants (and charge accordingly); it’s that if a consultant is someone who isn’t readily available in the contractor or recruitment market, then many of the people who are currently working for consulting firms may be in danger of being seen as contractors by their clients.  They’re just not expert, or different, enough to be seen as a scarce resource by people who themselves are former consultants.

Some years ago, when I started writing books about the consulting industry I look at the way in which differences between clients and consultants were being eroded and asked if we were all going to be consultants in the future.  I was wrong: I should have been asking if we were all going to be contractors.