IT Employment optimize

Consulting yourself out of a job

A TechRepublic member is looking for advice on how not to lose a client. Get the specifics, read Chip Camden's advice, and then post your words of wisdom.

I recently received an email from a reader (who prefers to remain anonymous), which read in part:

I'm transitioning from a full-time employee to a consultant just this month. I had a meeting with management where I detailed to them (via a 12 page document with charts, cost comparisons, time studies, etc.) that I could work with them under a retainer and provide 99% of what they really used me for as a full-time employee. I'd actually be saving them tens of thousands of dollars as well.

Today I see my prior position listed on a job search site, and I'm told that there will be a temporary retainer arrangement negotiated with me instead of a long-term one. My fear is that they want to find someone new and use the retainer to bring me in and teach them everything I did as an employee (a 10 year brain dump). That's not really good for my business, and it seems a bit unethical to me when I've offered a long-term commitment already.

Is this normal? What would the best course of action be in order to still keep this client but not consult myself out of a job?

How would you advise this consultant to handle the situation?

To my mind, the job listing raises a little red flag, but isn't necessarily a deal-breaker. Depending on the company, they might have headcount that they wish to keep. Perhaps they would hire someone to fill that, yet still keep our consultant on -- presuming they have a budget for that. Or maybe they're just evaluating their options.

The bigger red flag here is the way they used the word "temporary" when referring to his retainer agreement. If that isn't a flashing "EXIT" sign, I don't know what is. It sounds to me like they aren't happy with the idea of having a consultant do this job, for whatever reason. They can only conceive of that arrangement as a transition to hiring another employee.

There's nothing unethical about their behavior, in my book. Announcing a change in your relationship with your employer opens the door for them to make more drastic changes. It would be nice if they were more up-front about it, perhaps.

Of course, there could be a misunderstanding here. Perhaps the client thinks that our consultant is edging his way out of their employ, and they're just trying to cover their bases. A candid discussion of expectations and desires might help resolve this. In that discussion, it might also be a good idea to underscore the reasons why a consultant would be appropriate for this position.

I replied to the consultant, asking him how they responded to his presentation originally. He replied that they seemed relieved to have his offer of a retainer, because they had probably expected him to quit and he would be difficult to replace. It seems to me that the thought of losing him put them into panic mode. Maybe they just need a little stroking to reassure them that he can be there for them just as much as a consultant as he was as an employee.

That said, it makes sense for our consultant to hedge his bets and develop other business as well. You don't want to base all or even most of your business on just one client, because they can pull the rug out from under you, too.

Do you perceive any nuances in this situation that I might have missed? Please leave your advice in the comments.

About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

39 comments
Thykingdomcome
Thykingdomcome

I have an eye on the consulting job and that is why I have resolved even before I finish my polytechnic education that I will work for 3yrs and resign to consult. But I will not expect my former boss to be part or the main client I will start with. There are three (3) things involved 1. Professional or no professional there will be a human face. Delay in payment on the part of clients has a high negative impact on the consultant. And since you have already worked for the company before, you would want to give them sometime and this may affect you financially. 2. The company might be a little secretive What consultant do in my opinion is; understand the needs of the client and build a system to meet those needs. In a case where the company thinks you might sell their ideas and formula to other clients might lead them to give you little information and that can affect the OUTCOME of your service. 3. Don't expect all to be cool as you leave The people you are leaving might not be happy about your decision to leave and might not even want you to succeed. Just as mislyzny put it "I have been self-employed for almost my entire adult life, and I am now more than 50 years old. When I left my last job in the field my boss told me "I don't know what you will do." About 8 years later he introduced me at an event as "a former employee who now competes with me." Funny, he could not imagine finding clients without the university, fraternity and social group contacts he had, I found other clients in other spheres."

michaellashinsky
michaellashinsky

If he is so dependent on his old employer, he should have stayed there, and consulted for others in his spare time.

TechrepLath
TechrepLath

As a consultant, it is your job to make the client's business work without you, and do that better than before. IF you achieve that you will get more offers from the same or different companies. DO NOT think that a consultant can just go on doing the same job as an employee under a different title and employment status. That to me would be tantamount to tax fraud. I think the reader sending you the email has a totally wrong idea of what a consultant does and should never have traded in his dayjob for a quick buck.

ksimon8fw
ksimon8fw

I don't see where the math adds up. Presumably, the consultant is making a higher rate than when he was a full time employee (or why would he want to make the change). If he leaves and still provides the same level of service at a lower cost, then he's obviously proposing to do the same work in much less time as a consultant than he did as an employee. That begs the question - what in the world were you doing when you were an employee??? Sounds to me like he had a lot of loafing time as an employee. I wouldn't want to hire him back.

steven.robinson
steven.robinson

As a consultant, the best way to gain trust and ensure a long-term business is to make sure you DO work yourself out of the job. If you are transparent, open and go beyond what the client knows what to ask for, you will succeed. In our firm, we have found we get more business (usually at the same client), and at higher strategic levels over time, when we work ourselves out of the job. This means ensuring the process or role can continue after you are gone. Governance, measurement, tracking . . . you should go above and beyond to make sure the "client" has the ability to continue the process in a sustainable way.

thehcasboi
thehcasboi

Dear frustrated and unassured. I would expect you to get wishy and scared about the situation. I would as well. It seems like there is another scenario to be talked about. If this is a rather large or medium sized company it could be as simple as if they do not spend the money they are allotted for salary employees they loose it in the budget. Also they could be scared that you will flee like you fled your position after 10 years. I know it was mentioned but you need to see it from their perspective. What were the conversations you had with your employer. Did you secure a contract before you quit or converted. If you were pursuing this while working for them what would they think while you try and negotiate a sweet deal for your self. As a consultant you could hold things over their head. I have seen this several times where contractors have actually put in safe guards into code and networks that make sure they could not be fired even if they cost the company loads of green. Just sit down with the powers that be to make sure your scenario in your mind is incorrect, communication is more important now that you are a consultant. You need to keep the information flowing even when you have a contract for say 2-3 years they could weasel out anytime. The last bit of information I would like to bestow upon you is that you should definitely pursue additional clients even before knowing what is happening with this contract/position. One last bit of advice, I would have pursued other clients before you go to your current employer (your bread and butter if you will) because you may actually succeed in alienating them instead of making them a client. I hope these words help in some manner with your situation. Regards Charley

reisen55
reisen55

My experience was dreadful when it comes to this story. In 2004, Aon Group announced that it was considering (just that word) outsourcing support with vendors such as CSC and CGI. The internal staff, working our tails off, were assured that it was only a passing fancy of management. That was the first lie. The second came when they narrowed the field down to CSC and CGI - the latter being a firm only 1/10 the size of mighty CSC. Second Lie. In August of 2004, the CTO and the CIO convinced the chairman to sign off a $600 million deal with CSC. It was such a good deal in fact that the CTO and CIO sold all of their Aon stock and quit the very next day. True enough. The internal staff was then fed a mountain of lies by CSC, who told us we had a brilliant career ahead of us, treating us as new employees when we had a solid track record with our old employer, same building and job. It was just weird. For 14 months we slaved away under new management and when CSC overcharged Aon by only $200 million and so CSC (to save the contract) fired all 140 internal staffers. OH we were offered re-employment by Banctec (a truly awful company). This scum outfit made offers to just 40 people, so bad were they that only 10 accepted. Why just 40? To avoid the Federal WARN act that requires 60 days severance if you fire more than 100 staffers at a shot. So, I am jaded here. First, if you are fired or transitioned, you are gone. No matter what lies they tell you, you are history. Believe it. No matter how much you may think your job skill and talent are irreplacable, management doesn't know that. They see an older, overpaid employee when a young, dumb kid or, worse, Bangalore can do the same job (it's only IT, right?) for 1/10 the salary cost. His wonderful attempts to justify his work meant nothing in the long haul. I had the support of VERY SENIOR MANAGEMENT in our local office. ExVP and up. Did not matter. CSC wanted cheaper, BancTec works with cheap so they brought in kids who did not know how to open a Dell desktop, did not know backups, thought Lotus Notes email files could fit on a floppy and, in one case, previously delivered Pizza to homes on his resume. True. I did some work for Aon executives who paid me out of their own pocket, did not last long but it was delightful revenge money. They wanted me back big time but HOW could I invoice Chicago? Would not fly at all. So, while his efforts to justify his work were valid and well presented, possibly too well presented for the pinhead American management that we now have that things Bangalore is all things great and wonderful in IT, he was still doomed. Pardon me for my outsourcing rant.

kevin.t
kevin.t

Your consultant says he is doing much the same job, in the same location and he wants the protection of a long term guarantee. So effectively in his eyes, he has still not changed his employment status - irrespective of the remuneration agreement. Resign on Friday and consult back on Monday. In the UK this practice is well recognised by the Revenue as a tax dodge and they have enacted suitably punitive legislation. So I would guess that the company is protecting itself, basically saying '...well this guy left and we had a skills gap so we advertised his job. In the meantime we all agreed that he could help cover that gap. We can prove this is only a short term arrangement from our point of view???. My advice is to 1- Forget that you ever produced an Employment vs Consultancy comparison, and don???t ever refer to this in the office or you will find that your engagement is very short term. 2- Start looking for a new client PDQ. Network as much as possible (and even advertise) to prove that you really are a consultant and are willing to take on the risk and responsibilities of that role. If your only client is your old employer, you wont be consulting for long.

Marc Jellinek
Marc Jellinek

It doesn't shock me that the "consultant's" soon-to-be-former employer has posted the job. If you are a contract/consultant with only a single customer, you are, in fact, an employee. So says the IRS. A contractor/consultant MUST have multiple clients in order to maintain their tax status as an independent entity. The contractor just doesn't get benefits, they have to pay their own SSI contributions and have their own health and worker compensation insurance policies. No 401K match (or ability to contribute to one). No disability, no equipment, no training budget. In the US, under Obamacare, you either have a health insurance policy or you pay a $4000 penalty, collected by the IRS. This takes effect in 2014 (I think, may be wrong on the date). If the company/customer has work that needs to be done... even if that work mainly consists of warming a seat and occupying a cube to make management comfortable.... that's the job. A contractor/consultant with other customers or commitments doesn't satisfy that need. So it makes perfect sense that the company would post the job as soon as the former-employee-soon-to-be-consultant announced their intention to leave the company and become a consultant. My choice of words was intentional. The *former employee* announced their intention to *leave the company*. The person has shown no intention of making a long-term commitment to the company; therefore the company has no choice but to find someone who will. I think this person made a decision that was poorly researched (12 page benefit-analysis aside) and even more poorly executed. I hope it works out for them. When working as a consultant/contractor, I regularly create situations where the customer no longer needs my services. I've fulfilled my contract, delivered my deliverables and charged a fair price for what I've provided. At that point, we owe each other nothing. If I want future business, I have to demonstrate an ability to provide future value. I consider withholding information in order to assure myself of future business (refusing to train my customer, not fulfilling my obligation to deliver knowledge transfer) to be unethical. I also consider not being paid for that knowledge transfer to be unethical. An ethical arrangement would be for me to deliver that knowledge and be paid for it; as mutual agreed.

AskMariaTodd
AskMariaTodd

What he did was classic for someone who has not yet distinguished in his mind the differences between selling contract services and "consulting". He would be wise to a) find other clients, and b) review the IRS' independent contractor standards, c) learn basic sales skills associated with either consulting or contracting and determine which group he most closely identifies with, and d) purchase errors and omissions insurance. Dude, welcome to the roller coaster of self-employment! Strap yourself in and hang on for the wild ride...and if you can't cut it, don't wait too long to turn your head to the side and .... err.... yell "Let me off this ride". Gaps in full-time employment these days filled in with "consulting" that don't show a real commitment to consulting won't be looked upon as anything more than "gee, he tries a lot of things but doesn't stick with them for long" from interviewers and decision-makers.

Gisabun
Gisabun

... They may not be happy with his work. Either that he is already overpaid and they are looking for someone cheaper [after all the guys said he's saing the company "tens of thousands"]. Depending on the position, the company could afford to go with someone cheaper. Saying that they'd save tens of thousands wasn't a good idea. If the company want him to transition from a full time employee to a consultant, that alone says this guy's job was in jeopardy since as a consultant, you have limited rights if they dump you [such as no warning of being let go, severance, etc.].

Spook0
Spook0

Having sat on both sides of the desk, the Consultant urge must be coupled with an understanding of exactly what you are selling. If you are selling a result based on your knowledge, that is one thing. Keeping your current employer's business running while you are being replaced can keep you going as a transition but you can not rely on it long term. If you are selling your knowledge, that is another thing entirely. You may be eating your "seed corn." The fact that you document a projected savings really suggest that you are under utilized and are never in a position that requires immediate response. The company is may be paying a slight premium to have immediate access to your skills. The flexibility advantage of being a consultant means that unless a specific time is previously committed, it may be used and committed for another purpose. Many companies are uneasy when the priorities of an outside vendor determine internal operational schedules.

cwarner7_11
cwarner7_11

I, too, have spent much of my working life as an independent consultant, and I have taken what appears to be a slightly different approach that what most people seem to recommend. EVERY contract that I accept, I assume that the goal is for me to train the customer's in-house staff in every aspect of the knowledge I bring to the table. They are paying for the knowledge. Each project usually results in significant documentation, the idea being that anyone with any basic understanding of the issues addressed can pick up the documentation and continue without further support from me. This invariably results in return calls from clients. Apparently, no one wants to read the manuals, but the fact that I produced the manual in the first place gives them confidence that they are getting their money's worth. If you want the customer to really value what you have to offer, you have to let them know exactly what it is you have to offer...

harischandrav
harischandrav

Loyalty is always a two way street. Remember, you are now a consultant. Put your businessman hat on. If they want to pick your brains, you can ask for more or have a chat about it.

holarsen
holarsen

I believe that this, as in so many other situations is depending on how ???needy??? he is.... If he really urgently need the income - then by all means, take whatever is offered - it???s better to have roof over your head while looking for other customers, than having to sit on McDonalds free WiFi, but personally I have turned down consultancy jobs where the order-giver wanted to send their own man with me into an end-customer to learn a specific and specialised area. I've spend a significant number of years learning how to move around in certain specialized environments, and have no intention of giving that knowledge away in a crash-course at normal consultancy rate - thereby sawing of the branch I'm perched on. I know that it will take the order-giver a long time and significant cost to build that knowledge in-house without help and I feel no shame in capitalising on the many years I've spend learning this subject matter. An open, frank discussion with the order-giver cleared the air, and we still have good relations. @Skywlf77 - Sometimes it makes perfect sense to leave a job that potentially leads nowhere for a consultancy role. Being employed has rarely made anyone rich, and while money isn't the only thing you should consider ??? things like the dynamics of a job would be essential for me ??? ???does it lead anywhere interesting???. Just "surviving" in a job until pension would be a killer for me. With regards to commitment ??? I wouldn???t expect anything from neither the former employer nor from other customers. If you get loyalty, great ??? but don???t get disappointed if you don???t ??? at the end of the day it???s a question of cost & quality of the work you are doing - it???s the nature of hiring a (???disposable???) consultant.

beck.joycem
beck.joycem

He told them they could get 99% of what he did for less money and that he was not going to be a full-time, committed-only-to-them, bum-on-seat-9-to-5 asset any more. So they (a) know that the time may come when he'll say "Sorry, can't do that tomorrow, I'm with another client all week" and (b) know that they need to reassess his role - he isn't irreplaceable and maybe they could get someone cheaper. He needs to think like a consultant - welcome a short term source of income wherever it comes from, and make good use of his time to build up his client base while he has some money coming in from them.

access
access

I'd say most companies are more comfortable with a salaried employee than they do with a contract employee. They feel a salaried employee has more invested in the company, and is not as likely to leave. Getting work from a prior employer when starting a consulting business should only be looked at as a jump-start, if you are lucky. It gets you started and keeps you going until you can get other business. You said you were offered a short-term retainer. What exactly does this entail? Was it a set amount per month? Was there a fixed # of hours. Or is the retainer essentially a way to guarentee a minimum # of billable hours?

mslizny
mslizny

I have been self-employed for almost my entire adult life, and I am now more than 50 years old. When I left my last job in the field my boss told me "I don't know what you will do." About 8 years later he introduced me at an event as "a former employee who now competes with me." Funny, he could not imagine finding clients without the university, fraternity and social group contacts he had, I found other clients in other spheres. I agree with those who have already stated that once you leave a company as an employee there is no guarantee that they will use your services as a consultant. Have a lawyer look at that agreement, does it specify minimum hours of work? Likely it does not. We can not survive by assuming that we will get someone's business, it isn't work until they actually give us a project and we receive that first invoice payment. As a consultant we find clients (sometimes through contacts), get work and bill, and get paid. I would not resist being paid to train someone else to do a job, it is something to be paid for, and paid work is what we live on. I work as a trainer and consultant, I do not insist that our company must do the work that needs to be done if the client just wants us to train and leave. Since you have at least seen what is going on, it is time for you to ask yourself "Do I want another company job somewhere else or do I really want to work as a consultant?" Remember that the people you have been working with, and signed the agreement with could be downsized out of the company, or get sick tomorrow and you will have to introduce yourself to some new person if you expect to continue to consult for your previous employer. While the advertisement for someone to fill your old position is a shock to you right now, these are the facts of life outside the company fence. Consultants learn to find work, do it well and get more work. It is not an employment situation that suits everyone, it may not be how you want to work for the rest of your life. Liz

SkyWlf77
SkyWlf77

...but in doing so, I didn't place ANY bets whatsoever on my previous employer giving me any business at all. I find it extremely odd that anyone would basically quit a position to go self-employed and yet still expect their employer to use their services, especially in an economy that provides thousands of applicants for a single position. I did end up doing a small amount of consulting for my former employer, but it was minimal. I mostly work with individuals rather than businesses and I prefer it that way. I keep my rates very low to ensure that everyone has access to a consultant when they need one and I've turned down several large company jobs because I didn't want the headache. I'll continue on this way until I finish my two Bachelor's Degrees and change careers. I would never, ever have left my employer expecting that same employer to keep me self-employed. It just doesn't make sense.

Sterling chip Camden
Sterling chip Camden

... can be tricky if the desire isn't mutual. Have you ever made that shift with an employer? My first big client was formerly an employer, but our decision was mutual and amicable -- and more for logistical reasons than anything else.

apotheon
apotheon

If the purpose of hiring the consultant was not to get the company free of the need for the consultant, the best option would be a regular employee. Hmm. That seems familiar, somehow. (. . . not that I care about tax fraud so much, apart from the fact government doesn't like it very much; most taxes are onerous, self-defeating, and generally a bad idea as implemented.)

Sterling chip Camden
Sterling chip Camden

... but I imagine the cost savings are in things like benefits, FICA, vacation/sick leave and so forth. However, your point is still valid. Seems to me like he may not be charging enough as a consultant if it saves them that much.

Sterling chip Camden
Sterling chip Camden

Working as if you will be let go tomorrow while caring about what happens to the client afterwards actually makes for a longer-term relationship than trying to make yourself indispensable. Right on.

Sterling chip Camden
Sterling chip Camden

It's called "statutory employee" status, and the burden is placed almost entirely on the employer for any violation.

Sterling chip Camden
Sterling chip Camden

Most consultants work on contract. Contractor is a type of employment relationship, consultant is more about what kind of work you perform. But I get the distinction you're drawing. A lot of folks who call themselves consultants are really just employees without benefits. A consultant provides a true outside perspective, which requires more independence and definitely more than one client.

Sterling chip Camden
Sterling chip Camden

They'd ask my client, "Why is one of your most important people a non-employee?" It made them uneasy about the supposed fragility of our relationship, and required that we explain my commitment to them.

Sterling chip Camden
Sterling chip Camden

In my line of work (software development) I find that educating my client is one of the most important aspects of what I do, and that trying to keep a "secret sauce" to myself is self-defeating. Making others better doesn't necessarily take anything away from you or your marketability.

Sterling chip Camden
Sterling chip Camden

... if all this isn't a hopeful ploy to get him to come back to employee status?

Sterling chip Camden
Sterling chip Camden

Being independent brings a lot more changes than some people expect. It's a different kind of arrangement altogether. I agree with you about taking the training work, or whatever work they have for you. Ego can cause problems for employees, but it has absolutely no place in consulting. We have to focus on what problems we can best solve for the client, and be willing to surrender expectations of future business. It will come, if we do today's job well, but maybe not in the form we expect.

JLogan3o13
JLogan3o13

@SkyWlf77, I also found myself shaking my head at this consultant's thought process. In my opinion, if you are relying on a contract with your former full time employer for the lion's share of your consulting dollars, you are not ready to go into consulting.

Sterling chip Camden
Sterling chip Camden

Lots of little customers means none of them can sink you. Higher risks sometimes have higher rewards, though. Becoming an important part of a client's business can pay off handsomely, even though it can sometimes wake you up in the middle of the night wondering what you would do if they suddenly went away.

apotheon
apotheon

It may be that the other 1% of stuff that he can't cover as a consultant could be absorbed by other, already existing jobs in the company without much of a hiccup. Making that happen, though, might perforce cause the justification for keeping his job in-house to evaporate, essentially mandating (for reasonable decision making) a choice between outsourcing the 99% or keeping the extra employee and extra expense.

apotheon
apotheon

A lot of consultants and contractors (and would-be consultants and contractors) end up getting screwed by the reluctance to hire consultants and contractors created by such regulations. Laws and other governmentally enforced regulations are merciless and do not differentiate between cases that should actually be controlled and cases that just happen to coincide in some details with those that should be controlled, but themselves are actually harmless -- or actually helpful -- if left alone and allowed to flourish. Ultimately, the real problem is not too little regulation: it's too much in the wrong places.

SkyWlf77
SkyWlf77

I'm not in it for the money. I'm not out to become the next Koch Brother or even the next owner of a $200,000 home and two new cars. My main goal in anything that I do is to be happy with what I do. I want to do a job that I enjoy, live a life that matches my environmental and personal morals, and make sure that my children and wife are taken care of. As long as I manage to do that, I will be happy and don't need a massive income. I see some IT Techs complaining because they cannot find a job at $40K/year or more and I am very glad I don't need that high of an income and have to stress about finding work that met that income requirement. The stress level required to find a particular income level job or to keep a certain customer because they are the main source of your income just isn't my style. We live a simple life and it works very well :)

apotheon
apotheon

Pretty much every single Congressional response to "Hey, that guy's not playing fair!" in the business world is to invent regulations that make it as difficult as they can get away with making it for anyone to start a small business in that field of endeavor. . . . and subsequently wonder why the economy just keeps getting more messy.

Sterling chip Camden
Sterling chip Camden

... and creating lots of collateral damage. Some employers and contractors did take advantage of contractor status to avoid paying taxes. But instead of devising ways to enforce existing law, Congress tried to legislate the problem away by making it hard to justify that status at all.

apotheon
apotheon

In the last half a year, give or take, we've: * lost about $1500 per month in expected income * spent about $4000 on unexpected automobile expenses * spent over $2000 on emergency pet care . . . in addition to the usual expected-unexpected expenses. When that sort of confluence of bad financial luck is not an unreasonable scenario for "bad luck in the coming year", it's tough to justify a household income of less than $50K per year even if you aren't paying off any loans. That alone is 15% of income if you're only making $50K, and things could easily go worse than that in a really bad year. No . . . it's much better to aim for a six figure household income. Even living modestly, if you need two cars and have pets and/or children you're going to need the ability to build (and, when the worst happens, rebuild) savings reasonably quickly.

SkyWlf77
SkyWlf77

...and continued because it worked. My wife and I were both laid off at the same time when my entire Department (I was the Manager and she was Data Entry) was outsourced to India. In one fell swoop, we had to adjust from two incomes to none. We were forced to re-evaluate our priorities and, let me tell you, some of them were REALLY off-base. Once we realized how much money we were unnecessarily spending, we took it to the next level and re-evaluated everything. A lot of people can't live the way we do. They can't handle only eating out once every two months, limiting themselves to only 100 miles per month (over and above work) on their vehicle, only owning 8 outfits per person and a maximum of 2 pairs of shoes each, and many of the other cutbacks we've made. It's not easy at first, but it does get easier. It's also amazing at the freedom you feel once you've made the changes, when you aren't stressed about money all the time, when you aren't tethered to your current job just because you can't afford to leave it. It's life-changing. It's not for everyone.

Sterling chip Camden
Sterling chip Camden

(and I'm not being sarcastic). I often wish I could eliminate all the things that require me to make more money than my father ever dreamed of making.