Why companies shouldn't pay contractors hourly

It's not that hourly pay is bad, I used to charge hourly too. It was the way I knew and it was how I thought things worked. Now though I believe there is a better way for companies that hire contractors and other businesses that provide services. And once you know of a better way, then that's the path you should try to go on right?

So why is a flat monthly fee for services better for a company that's bringing on some type of contract worker? Quite simply, because you're then paying for the service you needed and not the number of hours it took someone to provide that service.

These are two entirely different things.

In my line of work, sometimes the absolute best thing I can do for a project is sit down with a VP or the CEO and have a difficult discussion to set a project on the right path again. It may take all of 30 minutes, but it may be where a ton of my value came in for a given week.

Compare this with a PM who simply isn't willing to have a difficult discussion. They'll keep "working" on a project, checking their email, writing up documents, and having hallway discussions that are doing absolutely nothing to fix whatever is broken with a project. Yet, they continue to rack up their hours and the customer pays for it.

What if you're paying someone 40 hours per week for work that someone else could do in 20? Maybe you turned that more efficient person down because their hourly rate was 25% higher. Wait - that doesn't make a lot of sense does it?

The other thing that's nice about paying service providers a flat monthly fee is that it allows you to, if the need arises, negotiate a price based on the service you're going to get - not on an hourly rate.

If you pay contractors for some of your projects, instead of asking yourself "what hourly rate am I willing to pay?" try asking "How much am I willing to pay for this service each month?" $10,000? $5,000? $2,000? $500?

Then, try to get someone to provide that service each month for that dollar amount. There's a good chance you'll find that you can get better service and pay less for it by caring more about the results and less about the hours.

* = Not really

We've all seen the ads, articles and commercials. Something like "Get one month free!*"

Of course, the month isn't free and before we even read whatever foot note we're supposed to read we know that the little star means "actually - not really".

So why do so many companies use this tactic? Does it really work?

If you're writing an ad, or a promotion, or describing something on your website and you find yourself putting a * in the text somewhere I think that's big trouble.

Instead, why not just say "Get one free month when you pay for two months" or "Get $5 off the book as long as you're a member of our book club."

Whatever the purpose or the promotion, it shouldn't be necessary to put that little star in there so much. And, you'll likely find that you're writing is better and the description of your promotion is clearer, more concise, and may even be more effective.

Next time you're inclined to put a * somewhere, just remember it means "not really" and try to describe what it is that you actually want to promote.

First impressions or lasting impressions?

I'm not sure we can worry so much about our first impressions if we want to have lasting impressions. Making a good first impression is great, I just don't think it should be a primary concern on places like a blog.

The problem is that when you write to make a good first impression, you do so at the expense of not creating stronger connections with the people who are already visiting you.

It's a little bit of a challenge to think this way because it's true that on any given day someone new could visit your blog, and whatever article you happened to write is going be their first impression of you. And usually we want to make good first impressions.

I don't think we can have it both ways though.

The alternative is to write in a way where you simply accept that some new visitors will not stick around because you didn't make a great first impression. That's fine. Because what you're doing instead is appreciating the people that have already decided to give you their attention, and strengthening a bond that already exists.

This creates a lasting impression, and when you make a lasting impression with someone they're far more likely to stick with you and be a fan. You may not get as many page views, and you many not have a bunch of mentions on twitter, but I think ultimately it's a much better strategy because the visitors that you do have are likely going to be more passionate about your service or your product.

The opportunity is that most people don't do this.

It's a lot more difficult to measure passion and loyalty than it is to measure page views, clicks, and unique visitors. And since it's easier to measure that's what more people do. They can see the impact some article had, it looks like they're being effective because more people came to their site, and it makes them feel good because there's more immediately tangible evidence of what "worked".

But just because something is easier to measure doesn't mean it's more important. In fact, it's probably the opposite; the harder something is to measure the more valuable it probably is. (I read an article arguing the same thing that I wanted to reference and I can't find it. I'll keep looking.)

I do concern myself with first impressions on my main company website, because part of the reason it exists is to get people to want to learn more about me and my company. My blog however is where I want to make lasting impressions.

Not surprisingly then, I find my blog to be a much bigger asset.

Thirty ideas down, thirty days to go.

Andrew Dubber came out with the last idea in his 30 day series of ideas today, all of which he's given away on his blog for anyone to do with what they want. Fittingly, today's idea was a website where people could give their ideas away for anyone to use. It's another one of my favorites.

What's great about Andrew's ideas isn't just that he did what he said he was going to do, but the way that he wrote about them. He made a real commitment to writing thought out posts about his ideas each and every day. Hopefully you've been keeping up, but if not, you should really check all of them out.

And now, because he executed on his project, there's all this other stuff going on that I wanted to share. As you may know, I am executing on his 5th idea, the 30 day numberless calendar. It's going to be a website where people can put their calendars, and if they want, also share what they're doing.

Originally, there were twelve people that joined my project space when I opened it. The only commit people had to make was that they'd write one blog post a week about it. Other than that, they could do as much or as little as they wanted with the project. Exactly half have opted to say in, and half have opted to bow out.

To understand why I asked for that commitment, you need look no further than Joan Lee's blog post titled Diligence. Joan is one of the people that decided to stay in the project.

There are no hard feelings at all by the way with people that chose not to keep going. We all have things we need to do, priorities change, and sometimes we just lose interest. It happens.

But, I knew it was going to be important for me to know who really was in to the project and who wasn't.

Deb Walsh started a facebook page for the project for anyone that wants to join, and has put up a new website at OneBeforeMidnight.com (it's still being built) where she's publishing sound tracks with her on the piano for a 30 day project. If the first one is any indication of what's to come, we're in for a treat.

Cheryl Sterling has been writing about a 30 day project of portraits, and in our project space she mentioned she has paints ready to go. The anticipation is killing me.

Simon Fowler came up with the great little visual to explain the whole first follower thing, and has been thinking about what he's going to do. It sounds like he's decided though that any project is going to make him better at something he's doing already.

Aaron Brown has decided to do 30 days of gardening. He blogs at Moot Pt. where you can also check out some of his music.

And DJ Phillips, another musician, one of the funnier people I've met lately, is going to be doing something with his music.

I'm really happy that I'm working on this project, and having these people along side working on their own projects is really awesome. So thanks to Derek and Andrew for getting this thing started, and you should have some cool stuff to look at come May first.

We're always the hardest on ourselves

One of the many things I like about writing regularly on my blog is the feedback that I'll at times get from some people. It can really help me see how other people are interpreting what I'm writing and how I can communicate better.

Last week I wrote about my new pricing model and some of the challenges that come with it, and a few people sent me some emails and IM's. A couple folks just asked what happened, others told me they thought it was great that I was sticking to my new approach and trying to be innovative, and still others told me that basically they thought I was nuts and making a mistake.

The feedback has had me thinking a lot about how we can be really hard on ourselves, and maybe sometimes unnecessarily so.

When I first started my business I had a two month project that started and ended in about the expected timeframe. When it was over I started another, and that continued for a while. Then I worked on another, and so on.

In the three and a half years since starting Ideal Project Group I've formed great relationships with a number of companies, built a mobile application, created a new service to build websites for small businesses, started a community to test applications for the Android operating system, and began producing a monthly podcast.

My point is, my company is probably in better shape than it ever was the first year or two I was in business. And after all, part of the goal of my new approach is to get paid a smaller amount of money by a larger number of clients. So then why do I feel compelled to write something like "hanging by a thread" when I'm encountering a challenge that in many ways I expected to face at some point?

I think it's because we're always the hardest on ourselves. At least this can be true for me, and it hits me in two ways. First, I tend not to look at where my business is and where it came from, but where it is and where I'd like it to be. These are two entirely different perspectives of course and certainly impact my view of things.

Couple this with the fact that if all I'm doing is talking about the positive things happening with my business, but none of the challenges, I feel like I'm lying by omission. That would only be sharing one part of the story, and I think it would be a disservice to anyone reading this blog. So I'm regularly asking myself whether I'm sharing enough - am I being as open as I should be? Of course that's usually followed by the question - Am I being too open?

What I've realized though is that I'm probably just being hard on myself. I could just have easily changed the title of my post to "Laying the new foundation" and that would have changed the tone entirely. And maybe that would have been a better way to talk about it. I don't really know, but I'm not going to beat myself up over it.

The other thing that's become clear though is that I do need to do a much better job of explaining why I have moved to my new pricing model, and why I think it's better for everyone. I haven't done that quite as well as I should so I'll be making a point of talking a bit more about how it benefits my customers as well as my overall business strategy, and give more reasons as to why I think it's where the future lies for service companies.

In the meantime, I'll try not to be too hard on myself for not having done so already.