Are you contracting or consulting?

As a recruiter early in my career, I used to use these two words as if they meant the same thing. Over time, I have come to understand that they do not, particularly from a consulting firm’s point of view.

Neither is better than the other. Both create value for clients. Both can be good busines. But they are different propositions and have different trade-offs.

The distinction is not always clear. A consultant can work on a time-and-materials basis, execute tasks and operate under significant client direction. A contractor can provide strategic advice, exercise judgement and transfer knowledge.

There are no hard and fast rules. Here are some signals to help understand what the client is really buying, how the work will be delivered and who carries the risk.

The primary deliverable?

• If the client expects the firm to provide a strategic recommendation, a roadmap or a transformed operating model, it is likely to be consulting.
• If the output is primarily extra hands on deck, such as hours spent assisting an existing team, it leans more towards contracting.

Who directs and controls the day-to-day work?

• If the consulting firm’s engagement manager or principal sets the methodology, pace of work and direction of the team’s activities, it is more likely to be consulting.
• If the client’s managers dictate the daily priorities and manage task delegation, the engagement is more likely to be contracting.

Who carries the risk for the outcome?

• If the firm is held to a performance standard and takes on the risk of delivering the agreed outcome, it leans towards consulting.
• If the client assumes most of the risk for the project’s success because they direct the team’s actions, the engagement leans towards contracting.

Engagement pricing?

Pricing alone does not determine the nature of the engagement, but it can reveal where the delivery risk sits.

• If it is priced using fixed fees, value-based pricing or project milestones, it may lean towards consulting.
• If the pricing model is primarily based on time and materials for resource hours, it may lean towards contracting.

Are we transferring knowledge or executing a task?

• If the objective is to build the client’s internal capability, solve an ambiguous business problem or challenge the status quo, it is more likely to be consulting.
• If the objective is primarily to plug a temporary tactical skill gap or fulfil an operational role, it is more likely to be contracting.

Heres a comparison.