A Fair Way to Lead a Team of Contractors and Full-Time Employees

A large percentage of work in today’s organizations is accomplished through projects that have a discrete beginning and end with a specific outcome — such as creating new products, changing processes, transforming some aspect of the business, or serving a particular client. These projects are staffed by discrete teams that are often cross-functional and also increasingly include Contractor Insurance or gig workers.

As a team leader, it’s easy to assume that all people working together on a project should be treated and managed similarly. But the reality is that full-time employees (FTEs) and contractors have different motivations, expectations and backgrounds. In our experience, when you simply manage everyone in the same way, those differences can be magnified and cause a range of problems.

For example, asking everyone on a project to work over a weekend can fuel resentments if contractors are paid by the hour and FTEs are salaried. Announcing new company benefits to the full team can do the same if they apply to FTEs but not to contractors. Challenging the whole team to work harder or differently may also unexpectedly prompt renewed financial negotiations with those who are on a contract. And encouraging everyone on the team to build strong relationships with a client or customer may mean that the gig worker might seek to be hired by the client directly in the future. (These dynamics are slightly different for contractors who are with the team long-term; here we’ll focus on project-based engagements.)

As a leader, you need to keep the differences between FTEs and contract workers front of mind as you manage a project team — and mitigate them proactively by making sure everyone on the team has the information and context they need to stay on the same page.

Motivations and Opportunities

Understanding the differences between the motivations and opportunities of internal team members and project-based contractors is the first step. Both groups are likely to be intrinsically excited by the challenge of the work itself and want to do a good job. But the reality is that their external motivations are subtly different because of three ways that their work lives differ:

How they are paid: Because FTEs receive salary while contractors are either paid by the hour or on a fixed fee, their sense of urgency and time management may be unconsciously (or consciously) different. If contractors are paid on an hourly basis, they may have an incentive to put in more time than FTEs, who will receive the same paycheck whether they stay late or not; and if contractors have a fixed fee arrangement, they may be motivated to get the work done more quickly than FTEs, whose compensation will be the same no matter when the project is finished. So while they both want to meet deadlines, they may want to do so at a different pace.

It’s also worth noting that FTEs receive benefits as part of their compensation, while most contractors do not. FTEs also are often included in company communications or programs that contractors cannot take part in because of the labor laws protecting them. These differences can result in resentment or confusion on the part of the contractors, who may long to enjoy some of these benefits, or may not be sure about which apply to them.

How they advance in their careers: As part of a larger organization, full-time people who are part of successful project teams will often have multiple opportunities for internal advancement — to other interesting and challenging projects, to different departments in the company, or to higher levels of responsibility. But to be in line for these opportunities, they need to be visible to managers and senior project sponsors. So they will be motivated to have substantive and leading roles in project reviews and other meetings, reducing time in the limelight for contractors. At the same time, however, they will want their contractor colleagues to talk about them positively and validate them in front of their bosses.

For contractors, career advancement means finding new gigs where they can push their technical skills, deal with new or bigger problems, or move into new types of organizations. To achieve this, contractors want referrals and positive references along with “good press” on relevant social media channels. These often can come from team members and the team leader, all of whom can post on social media. High-level referrals to other organizations or to other departments that might need the contractor’s services, however, are more likely to come from senior executive sponsors, so contractors will also want some amount of visibility with them. The challenge is to find the right balance so that internal people get the credit they need, while contractors get the good will that generates referrals.

How secure they feel about their jobs: While FTEs can volunteer for a project, or lobby their way into one, in other cases they may feel that they do not have a choice about whether to participate in the project, what role they play, or how long they stay involved. They may therefore envy the flexibility and freedom of the contractor who is not bound to the organization, its politics, or its requirements for advancement. On the other hand, contractors operate with a certain amount of insecurity. They don’t have the same kind of organizational “home” and salary and are subject to the vagaries of the marketplace. These differences can lead to a sense that the grass is greener on the other side. Contractors might use the project almost as an extended job interview with the intent of being hired into a full-time role. Internal people might want to cozy up to the contractor in the hope of going into business together in the future.

Understand your team members

Begin by getting these differences out on the table. Have explicit one-on-one or small group discussions with your own people and then with contractors about what they want to get out of the project personally, what they want to learn, how they see their participation fitting into their careers, and what success would look like for them at the end of the effort.

Naturally, don’t expect either group to fully share their aspirations, or to even know what they want. But at least open up the dialogue so that you get a sense of the differences and can provide some guidance on behaviors that might not be appropriate (like contractors selling follow-on services independently, or FTEs withholding critical information from contractors)—while still finding ways to help them achieve their goals.

For example, after this kind of discussion, one leader we worked with paired up a few contractors with internal people to help strengthen their technical capabilities. This helped the contractors who wanted to develop longer-term relationships with the company, and it gave the internal people a chance to grow their expertise. This process also broke down the sense of us-versus-them between the two groups.

Team-building and alignment

Leaders who create teams of people with different motivations, opportunities, and backgrounds need to focus particularly strongly on team building and alignment. (And that’s true more than ever in a virtual environment.) Contractors or gig workers who are brought in just for a particular project, in addition to not knowing their new colleagues, are likely to be in the dark about the organizational, political, or strategic context of the project, and may even have different conceptions of what the project is supposed to accomplish and why. And neither group will fully understand the differences that will have been identified in your discussions with FTEs and contractors.

Given these gaps in understanding, you can’t just assemble the team, make some introductions, identify who is from the company and who is from the outside, and then launch in to work together. Instead, deliberately work to ensure that the whole team is on the same page about the project’s goals, its organizational context, the players involved, what’s been done before, what the possible barriers are, and so on.

For example, for a pharmaceutical research project we observed, the leader launched the effort with a weeklong bootcamp for both internal and external team members that included extensive orientation about the project’s challenging scientific issues as well as its strategic importance and the capabilities and roles of everyone on the team. This got everyone on the same page from the beginning. (And while the internal people were initially skeptical about spending time on topics that they were already familiar with, most of them felt that they got a much better understanding of the most critical questions that needed to be addressed, and how they could best address them.)

Alignment at the beginning of a project needs to be reinforced through ongoing efforts to build the team. In the pharmaceutical case, for example, the leader organized both professionally-oriented events–like periodic opportunities for internal and external scientists to present some of their work to each other—and social events where the whole team could get to know each other better.

Ground rules

As you bring the team together and launch the work, create and enforce explicit agreements and ground rules of behavior for both contractors and internal project team members. For example, what information will be shared and with whom, how often, and in what formats? When will the team meet and with what agendas? What tools and facilities are provided to everyone? Who gets facetime with the senior executives or clients? Will team members and contractors present themselves as part of the same organization or as people coming from different places?

In answering these questions, consider two simple guidelines. First, follow the risk. When you deploy either an FTE or a contractor on a project, that person is your agent in the field; they should be given as much information, tools and access as possible to be effective. But if certain information or tools are sufficiently proprietary or delicate enough that they can’t be shared outside of FTEs, it may make sense to withhold information or wall off part of the project. Still, if the technical expertise of the contractor is essential to success, then the risk of poor quality from having a less-skilled internal person do the work might outweigh the exposure to proprietary information or tools.

The second guideline is to avoid making a two-class system, even if different rules do apply to each group. This can undermine team performance and create tension and resentment. If you do need to limit exposure to executives to internal people, make sure that they give due credit to their contractor colleagues. Similarly, if the team is co-located at a company site, give contractors access to cafeterias, gyms, and employee parking lots if possible. The marginal cost of providing these benefits is minimal and is more than made up for in team development.

In the event that you do need to exclude contractors from company meetings or special trips, or treat them differently because of labor laws, make it clear to them why you need to do this. Finally, work with all of your team members to help them better understand the advantages, disadvantages, and tradeoffs of being a contractor or full-time employee — and that both are necessary for achieving the kind of project success that everyone desires.

Putting together the best talent from your own organization, and from the outside, would appear to be a straightforward strategy for project success — but it only works if you realize that internal and external team members may need to be managed differently.