Eight Death Traps IT Companies Can Fall Into by Hiring Subcontractors With Low Contractor Bids
Isn’t it interesting to observe that typical North American homes have 2.55 children and 2.73 televisions in them, and these 2.73 tellies can have a serious adverse effect on the 2.55 children’s health?
Similar adverse effect can be observed on many IT companies’ financial health based on their methods of hiring subcontractors.
They fail to maintain a pool of reliable subcontractors, but when they are hit with the large project, they go on a hiring binge. But this binge is distorted by the view of “The less we pay them, the more can keep”. So, they advertise on Craigslist in search of sufficiently cheap subcontractors.
Instead of focusing on getting the biggest bang for their bucks, they get so obsessed with minimising the buck that the expected bang very often is nothing more than a barely audible dull thud.
Yes, the budget is saved but nothing gets accomplished. And who do you think clients blame when something doesn’t get done? Yeah! The main contractors. Always.
In my experience buyers and sellers behave similarly. Buyers buy the same way they sell as sellers. So, it’s fair to say that a company this hires subcontractors on price, sells its services on price. And premium companies hire premium subcontractors.
Now imagine a high school graduate who wants to become a world-class brain surgeon, and the question comes up…
“Jamie, what is your next step of becoming a world-renowned brain surgeon?”
Then Jamie says…
“Well, I’m searching for the cheapest medical school where I can study to become a world-class brain surgeon.”
I may be slow in the head but something just doesn’t add up here for me. And this is exactly how too many purchasing agents in IT companies operate.
They create requests for proposals, send them out to lots of potential subcontractors, and then hire the lowest bidder.
The other criterion besides being cheap is being Building Companies Near Me 100% obedient and pledging unconditional servitude to the main contractor.
So, it’s a master-slave relationship. One problem: Self-respecting companies would never enter such relationships. So, our main contractor, by default, is stuck with the sludge of the industry.
This situation is even worse with governments, but let’s not go there right now.
But it’s worth noticing that the “lowest bidder” mentality creates certain attributes in companies. Just like in governments, in companies with the low price obsession we can see chronic financial problems, low morale, high levels of pilferage and absenteeism, rock-bottom performance, endless miles of red tapes and indestructible bureaucracy.
How does this play out in the business world?
“We want to do a bang-up job on this contract, so let’s hire the cheapest subcontractors to help us to achieve it.”
Or, on a slightly stronger note…
“I want to have a great romantic relationship, so let’s go the city’s slum and find the cheapest hooker in town.”
Here are a few reasons why you should run very far and very fast from the lowest bidding subcontractors.
1. Poor Mental and Emotional Preparedness
Lowest bidders operate on volume. They have lots of low-margin projects and switch their time and attention between them. The attention per project ratio is very low. So, this is where the ultimate quality of their services suffers. They run around like headless chickens and busily perform tasks.
They run from appointment to appointment, and are always hyper busy. They are the people who are “stuffed” with all sorts of electronic gadgets that keep them permanently plugged into the world. They have no time to relax and recharge their batteries.
Their brains are always racing, they are always in hyper mode. Their states of mind undermine their creativity, so the quality of their services is barely mediocre. They are always busy and exhausted. They are the prisoners of their professions, after all they work on high volume to earn a living.
Also, lowest bidders operate from the subconscious perspective of “I don’t deserve more”. Their lives and work are riddled with fear, guilt, need and the desire of proving themselves. It means this is what they instil in their clients, so they end up operating out of the same negative paradigm.
In contrast, premium subcontractors work on fewer but higher margin projects, so they can sustain their earning potentials without