‘Temp’ Executives Supply Key Skills at Critical Times

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For most of the 20th century, contract workers have occupied the lowest rung on the corporate ladder.

“Temps,” as they were called, were usually clerks, administrative personnel or blue-collar workers called to fill in during emergencies, illnesses or “the busy season.”

Increasingly, companies looking for human resources in a professional, managerial and/or technical capacity are hiring consultants to do the job. Today, high-level executives, accountants and attorneys are all being hired on a contract basis.

Even the CEO, COO or CFO of a multinational conglomerate can be a contract worker.

This trend shows no signs of reversing. Between 1980 and 1994, the Bureau of Labor Statistics reported that the number of Americans working on a contract basis grew from less than 600,000 to 2.25 million. It is projected that this figure will climb past 3.5 million in the next five years or so.

Traditionally, the top decision-makers in a company are long-term employees who have worked their way through the ranks, or junior family members ascending to a higher position. Lately, however, there’s been an increased need for dynamic executives who can turn around a failing company, jump-start a new division or Internet company, or helm some other major undertaking. Thus, the search for top executive talent has shifted outside the company, rather than staying within.

Many company founders aren’t willing or able or both to launch IPOs or otherwise obtain the necessary working capital. Meanwhile, a tidal wave of start-up companies in the tech sector has created unprecedented demand for interim contract executives.

There are two obvious benefits: it saves time and money.

Taking a trial run

A recent influx of interim staffing firms now makes hiring contract executive workers simpler and more cost-effective than it was before.

In the normal course of events, employers will develop a close relationship with the most reputable and dependable staffing firms. If a high-ranking position must be filled, it’s no longer necessary for the company to conduct an expensive, time-consuming extended search, since a qualified candidate is only a phone call away.

This arrangement also gives both sides a chance to become acquainted. Frequently, contract executives are hired on a probationary basis. If things don’t work out, the company and the executive can part ways without the usual acrimony. And if the executive and the company are a good match, the executive can stay on for the completion of the project or become a full-time employee.

Hiring contract executives also enables companies to add skilled workers for special projects or peak seasons without carrying the cost year-round. This is especially important to companies with a cyclical nature and start-up companies requiring seasoned veterans.

Younger “whiz kids” frequently don’t have the vision needed in executive management positions. Similarly, a merger or a new acquisition may spur a company to hire a contract executive with expertise and experience in a specific industry or discipline.

The money saved is considerable. It’s estimated that an executive contract worker costs 30 percent to 50 percent less than hiring a regular full-time worker. There are no payroll taxes or expensive fringe benefits to inflate the actual out-of-pocket costs, and the company is spared the time and expense of running job placement ads and suffering through a lengthy interview process.

And many executives prefer to be contract workers rather than full-time employees. In the past, the traditional “9-to-5 job” offered employees a high level of security and a chance for advancement beyond a weekly paycheck and the usual perks.

But these days, very few executive jobs fall into the 9-to-5 category, especially if they expect to make a mark in the company. More likely, executives will come in early, stay late and spend at least part of their weekends on business matters.

Insecure world

In addition, executives can no longer expect the job security offered by traditional full-time employment. Consolidations, mergers, layoffs and downsizing are all facts of life for executives, no matter how large or small the company.

As a result, the country’s best and brightest are considering alternative work situations as a way to address financial freedom, family values, job satisfaction and lifestyle issues.

Being a contract worker may enable them to earn a higher hourly rate compared to current executive positions available, yet still sleep soundly at night. For a CEO pulling down $200 an hour, the annual compensation can approach or even exceed $500,000 a year.

One reason often cited for a switch to executive contract employment is the flexibility. Parents can pursue more activities with their children, spouses can spend more time with their mates, and adults are able to tend to elderly relatives.

In addition, executives particularly those who are operating on the management level can be invigorated by new challenges requiring creativity or technical expertise. This is another reason why contract executives are often attracted to start-up companies.

Finally, contract executive staffing appeals to longtime employees seeking a change in their lifestyle. They may not be ready to retire at an early age, but neither do they want to make the same commitment they have made in the past.

Mel Poteshman is president and chief executive of Poteshman Executive Solutions. He can be reached at [email protected].

Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact James Klein at (213) 743-1759 with feedback and topic suggestions.

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