Consultant vs. Employee vs. Contractor

An Easy Decision with the Right Criteria

 

“A criterion is a factor on which you judge or decide something.”

from Collins Dictionary

 

In a community chat room, I saw this question posted recently:

“I am looking to put together some guidelines and process around when to hire a consultant vs. contractor vs. an employee -- has anyone done this before/have any guidance?”

I think this is a very interesting question. What are the criteria to consider? Since there might be differences depending on the functional area of the individual, let me walk you through my thinking for sales; so:

“…when to hire a Sales Management Consultant vs. a Fractional or Interim Sales Leader vs. a W2 VP of Sales?”

Sales Management Consultants advise and recommend. Their offering includes helping businesses define sales goals, analyzing data, recommending territory assignments, coordinating training programs, and many other topics.

As a consultant, as the “one who gives professional advice,” their role often does not include implementation or working within the client’s team. And when consultants are employed by large consulting organizations, they are ultimately responsible and accountable to the consultancy. 

 

The recruiting process for a full-time VP of Sales is going to take six months, cost $50-70k, and statistically speaking, their tenure is between 12 and 18 months.

The recruiting typically starts when an internal or external recruiter is being given a job description and starts the process of posting, active outreach, screening, and interviewing. This process can take a very long time!

Most executive search firms charge a percentage fee. On average, retained executive search firms charge 33% of first-year total cash compensation (base salary + bonus). Even if you get a “deal” at 20 or 25%, you can do the math on a $200k+ total cash compensation. It is an expensive undertaking.

The numbers on tenure for the sales leader vary just a little bit. They range from “less than a year” to “24 months.” The two common denominators are (1) the tenure of the VP of Sales is only half that of all other executives, and (2) the younger the company, the shorter the tenure. Sayings like “You’ve Got to Get Past the Carcass of Your First VP of Sales” or “It’s The Second VP of Sales When You Really Start Selling” are around for a reason.

 

A Fractional or Interim Sales Leader becomes a full member of the management team of the client company for the duration of the Interim Leadership assignment. As independent experts, they will operate as part of your team rather than as an employee of an external organization.

Interim Sales Leaders tend to be seemingly over-qualified for the assignment so that they are immediately effective. Fractionals bring those much-needed talents at less than the cost of a full-time hire. Engaging the VP of Sales as a fractional contractor instead cuts that investment significantly, to the point that the opportunity cost becomes the only factor to consider.

 

Each option comes with its obvious pros and cons. I believe the decision of which route to pursue starts with (1) what the person is asked to accomplish and (2) what the environment looks like they will operate in.

During our client discovery calls, as we assess if and how a Fractional or Interim Sales Leader could help to address a client’s challenges, we review a list of topics. I believe that this list will also help to address the question "consultant vs. employee vs. contractor":

  • Leads: source, volume, quality, value, nurturing

  • Pipeline: volume, stages, quality, conversion

  • Marketing: strategy, people, programs, spend

  • Collateral: website, demo, hand-out, testimonial, case study

  • Products/Services: type, maturity

  • Messaging: script, versions

  • Markets: targets, ICPs, verticals, ranking

  • Personas: decision makers, influencers

  • Sales Process: end-to-end, documented, implemented

  • Type of Sale: length, DMs, complexity, key triggers

  • Deal structure: size, duration, recurring, renewal

  • Sales Team: size, structure, source, background, compensation, turn-over

  • Sales Hiring: past experiences

  • CRM: users, usage, end-to-end, integration, other systems

  • Competition: direct, indirect

  • Success: revenue, number of clients

  • Goals: 3/6/12 months, revenue, number of clients

These data points are then the foundation to establish the guideline around (1) past experience required, (2) degree of specialization required, and (3) time required for the hire.

In a simplistic way, I see these three scenarios:

  • For a one-off project, use a Sales Management Consultant.

  • If less specialization and a lot of time are required, a full-time VP of Sales is ideal.

  • For a high degree of specialization and less-than-full-time requirement, go with a Fractional or Interim Sales Leader.

If you would like to explore the question for your business, please reach out, and we will set up a time for a discovery call.

 

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Best Practice, Start-up, Sales, Interim and FractionalHenning SchwinumVendux LLCconsulting, contractor, employee, decision, fractional, interim