Typically financial incentives are the go-to carrot to keep subcontractors engaged and motivated  to work efficiently. While financial incentives are absolutely important, they shouldn’t be relied upon until you have set the stage and laid the foundations for a highly efficient and productive environment.

Know who you’re dealing with

Sounds like a no-brainer right? Well, this is the first and probably most overlooked lever you can pull to improve the motivation for subcontractors. Getting to know the subbies that you hire is a double-edged sword that can both positively affect motivation or negatively affect your decision to hire. Both are good in the long-run for the project.

Firstly, motivation is incredibly subjective and is dictated by each individual persons needs and desires. Therefore, what is going to motivate one person might not motivate another person at all. The big trick is to understand a subbie well enough to know what their higher goals are. If you can then tailor your engagement to help them achieve their goals you will have a far more motivated subbie on your hands.

On the flip side, if in the process of getting to know a subbie you may come across some red flags in the way they perform their job. In that scenario you can pull the plug and save everyone the drama of a job going bad.

Creating goals and milestones

Breaking a job down into incremental steps and milestones is common practice in many contracting relationships. However, a milestone or a long to-do list can actually become counter-productive and have a negative effect on the motivation of a sub-contractor. It reduces the ability for the contractor to step back and look at the big picture while also creating stress and anxiety with the amount of work to get done.

A goal on the other hand provides a tangible challenge that a contractor will strive to achieve and create ongoing motivation. The goals need to have the contractor’s buy-in and they need to follow the SMART principle (Specific, Measurable, Achievable, Realistic and Time-bound).

People are naturally motivated by a challenge and by structuring your jobs as a series of smart goals rather then a long to-do list, you will see shifts in the motivation of the contractors performing the job. A mechanism to monitor the performance of the contractor and celebrate the goals achieved creates positive reinforcement and will lead to better outcomes.

Keep communication easy and open

Communication is a two-way street, and your method of communicating may not align with the communication method of the sub-contractor. Mismatches in the type of communication e.g. spoken, email, SMS and the timeliness of communication e.g. once a day or once a week are the most common causes of a breakdown in communication.

In a fast-paced working environment having clear, open and easy communication between you and the contractor is critical. Simple and regular check-in’s will allow you to keep your finger on the pulse and quickly react to changes or issues before they become a real problem. It is also just as important to make yourself or someone in the organisation present and available to receive and respond to contractor requests promptly.

Set the expectations from the start

Given that contractors are typically only around for short periods of time and run their own businesses it’s often seen as un-important to bring them up to speed on your organisations values, habits and ways of operating. As a result contractors often lack an understanding of the entirety of a job or being able to integrate effectively with the business they are working with. They may quickly fall back into habits or methods that don’t align with your expectations on the job.

Having clear expectations on the quality of work, communication frequency, safety standards, time-frames and scopes will eliminate the chances of mis-interpretations that cost time and money. Expectations should be simple and structured and need to have the acceptance or buy-in from the contractor to be effective.

Make sure the deliverables are clear in the contract

Contracts are often passed off as excessive paperwork in small businesses that don’t have the luxury of a contracts administrator and even in some that do. However, the contract is an essential tool in expressing the deliverables of a job, the scope of the works and can link up non-traditional aspects like goals and expectations.

It is also important from a performance and productivity perspective that the contractor accepts and takes on a level of risk in relation to the job. The risk involved will in itself motivate a contractor to work efficiently, reduce costs and ensure the quality of the workmanship they are providing.

Similarly, if things don’t go to plan, it is the contract that you will need to fall back on to ensure contractors meet their side of the bargain and complete works to the necessary standards.

The biggest conflicts in contractor management can almost always be traced back to a deficiency in the contract itself.

Avoid micromanaging the contractor

There are certain elements of a job that will actually de-motivate a contractor in the course of completing a job. These factors are often a result of your relationship with the contractor and come from things like poor work environments, over-instruction, excessive changes to details of the job and poor payment timeframes.

A contractor is paid to come in as a professional and complete a particular job to the standards agreed. Your job is to ensure that your are creating the right environment for them to succeed and then letting them use their expertise to get the best job done.

Linking incentives and rewards to outcomes

Incentives and rewards is a topic in itself and there are many varieties and combinations of rewards that can be used. The most obvious incentive is financial and often comes in the form of lump sum payments or cost-plus contracts. Progress payments are also frequently used to keep the wheels moving on longer jobs.

The motivational driver behind financial rewards is clear, however simple changes to the structure and payment of financial rewards can make a big impact. For instance, what if instead of paying a progress payment out each month as is the norm, we link progress payments to incremental goals and milestones? The difference here is that rather than simply ticking boxes throughout the month, the contractor is motivated to hit their targets more efficiently and productively as the reward is linked to a set objective instead.

Thinking of rewards outside of the traditional financial payments can yield great results as well. Things like a subbie of the month trophy or a BBQ lunch on a Friday can help boost the morale and overall motivation of a contracted workforce.

Everyone is different and will respond differently to incentives, the trick is to find out what makes your contractors tick and structure incentives and rewards that will bring out their best.

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Why hire subcontractors?

Subcontracting is an essential tool for small businesses across Australia to connect and engage with other small businesses. It allows for two businesses to combine forces to deliver the best possible outcome and meet timeframe requirements.

Small businesses by their very nature don’t have the resources to have professional experts across every field employed within their business, it just simply isn’t possible. Without subcontracting, small businesses would loose out on the ability to bring in specific professionals to complete a job.

The result of subcontracting is a continual intermingling of small businesses across Australia who use each other’s services and skills when and where they need them. This helps not only the businesses, but the communities they work in and creates a diverse range of jobs.

In a broader context these relationships are key drivers in producing a productive workforce. The incentive of being paid to achieve a result rather than being paid by the hour creates a driver that can create substantial productivity boosts to businesses, the community, and the economy.

A simple example

A simple example is your everyday builder, who generally operates more as a project manager than an on the tools carpenter. The builder wins the contract to build a specific building and then assembles a team of the best suppliers they can to complete the job. In the process, the builder will typically subcontract out the individual aspects that go into the building e.g. electrical, plumbing, framing, gyprocking and the list goes on. These other businesses have a niche set of skills and are great at what they do. Together, they get the job done in a way that any single small business would struggle to do on their own.

It’s a commercial contract

A subcontracting relationship is made possible by creating a commercial relationship (the contract), where each of the businesses agrees to perform a job for an agreed compensation. The key here is that it’s a commercial contract and is governed by the laws of contract which gives subcontracting the flexibility it needs to adapt to the specifics of the two businesses joining forces.

Australia is built on the back of small businesses, we know this and we hear the rhetoric regularly in the media. Contracting forms the glue that allows these small businesses to thrive and grow with each other.

The end game

The role of subcontracting is the mechanism for small business to share skills, experience and expertise in a business environment that demands increasing change, specialisation and flexibility.

For subcontracting to thrive in the business community it is essential that all participants follow the laws that apply to subcontracting in their entirety. The laws are diverse and range from the common law to state, federal and local legislation. Having access to professional support for small businesses to understand and manage their compliance responsibilities will be a key factor in ensuring the highest standards are maintained.

The benefits of a well-functioning community of inter-connected small businesses flows down to almost all aspects of Australian life and should be supported and nurtured.

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1. Engaging a contractor without a contract

The commercial nature of contracting relationships means that a contract detailing the engagement is imperative. The idea of a hand-shake agreement between friends regularly comes un-stuck and leaves a big mess in its wake.
A simple contract that spells out the terms and conditions of the arrangement and expectations of both parties will often save you a lot of pain in the long run. Having it written down and agreed minimises disputes and creates a clear platform for everyone to get on with the job.

2. Inadequate document management

Contracting requires more documentation than most other forms of engagement and needs to be managed efficiently and appropriately. Because contracting covers a wide range of legal responsibilities and wide-ranging industries, the documents you need to collect and the frequency you need to collect them will vary.
Insurance misinterpretations are common, where a business will hire a contractor and ask for their certificate of currency, which is valid at that time. Later down the track if the business hires that same contractor and fails to get an updated certificate, the insurance may have lapsed or expired without them knowing.
Other documents like qualifications, licenses, green/white cards, subcontractor statements (NSW) etc. should all be collected and monitored to ensure compliance standards are maintained ongoing.

3. Safety oversights

Safety on a worksite is one of those non-negotiables and is highly regulated regardless of the type of worker you are engaging. Just by hiring a contractor does not pass off all your responsibilities to ensure the worksite is safe.
Essential to meeting your safety obligations will be the ability for you to prove you have taken steps in conjunction with the contractor/s to manage the safety of the site at the beginning, during and end of the job.

4. No onboarding or induction process

Each and every time you engage with a contractor it is critical to go through a consistent and transparent onboarding process to ensure all documentation is accurate and up to date. Failing to take this step or skipping important documents leaves a hole in your compliance management. While it may not be apparent straight away, all too often missed documents will come back to bite you down the line.
Induction processes are often linked to safety protocols, which are important, although inductions can be used to help bring a contractor up to speed on all aspects of a job. Incorporating into induction material your business philosophy, expectations, process and timelines can help them to see the big picture and work in with the rest of the team.

5. Incorrect worker classifications

Workers can be classified in a myriad of different ways for the purposes of different laws and regulations. Understanding where a worker sits within the legal system is no easy feat but is essential to staying on the right side of the law.
On top of the common law view of a contractor vs employee, laws that regulate superannuation, workers compensation, payroll tax and more have extended definitions that can deem certain contractors to be employees.
Take the time to gain a thorough understanding of your obligations under the different rules and get independent legal advice on your engagements or risk substantial consequences.

6. Poor contractor management policies and procedures

Many small businesses overlook the importance of having a documented process for managing the day to day engagement of a contractor. Having a written policy and procedure helps to ensure that all important documentation is identified, and a set structure is followed to maintain those standards.
Just as important as having a written policy is making sure that it’s followed by all members of your team and that it is enforced consistently. I sometimes come across a fear from businesses that they don’t want to put too much pressure on a contractor to follow protocol or the will move on. The reality is that if a contractor is not conforming to simple compliance requirements, it’s often a good thing if they move on before things go wrong.

7. Relying on individuals rather than a system to track compliance

We are all human and humans make mistakes. A system on the other hand is designed in specific ways to remove the opportunity for mistakes to happen. A simple and structured contractor compliance management system will identify and highlight important or missing information before it becomes a problem. Similarly, as individuals we tend to default to management practices we are comfortable with, meaning that each and every person has their own unique way of doing things. If compliance isn’t managed in a systematic way, it leaves too much up to personal interpretation.

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