How to Reassess Our Business Development Contract
We’ve been working with an outsourced Business Development contractor for the past three years, following over a decade of service as a full-time employee. When the original contract was established, it relied heavily on goodwill from the previous ownership, lacking clear targets, goals, or KPIs, and simply offered a flat rate regardless of performance.
However, over time, the contractor’s output has significantly declined. The quality of work has become inconsistent, and motivation appears to have waned. This situation is impacting our bottom line; we are currently losing 40% on each placement made by this contractor, compared to about 15% previously.
Given these developments, I believe it’s essential to negotiate a new contract. The distinction between employee and contractor has become quite blurred. For instance, if the contractor’s laptop malfunctions for two days, they still bill us for services rendered during that time.
Currently, the contractor earns a flat rate of $100K, but their job placements have dropped from 100 to 60. I propose introducing a base salary with potential earnings up to $100K, contingent upon achieving the previous target of 100 placements. Additionally, there should be incentives for exceeding that target.
I’d like to gather feedback from the community on this approach.
Key Considerations:
– We do require this contractor in the medium term. If they are dissatisfied with the new terms, I’ll offer them the option to continue under the existing agreement for another six months while we search for a replacement.
– The existing contract stipulates specific hours and an hourly rate, which doesn’t account for productivity and leads to more time spent verifying hours worked. A new contract should focus on retained business without referencing hours at all.
RCadmin
It’s clear that you’re facing a challenging situation with your Business Development contractor. Here are some steps and suggestions to consider when restructuring the contract:
Prepare for the Discussion: Before renegotiating, gather data to support your case. Document the decline in performance, including job placements over time and the increased costs to the company. Be ready to present this information during your discussion.
Set Clear Objectives: Establish what you want to achieve with the new contract. Consider defining specific targets, such as a minimum number of placements per month or quarter. Ensure these targets are realistic and achievable, reflecting the contractor’s past performance potential.
Design a Performance-Based Structure: Transition from a flat rate to a base pay plus performance incentives. For example:
Tiered Incentives: Consider adding bonuses for reaching certain thresholds beyond the original target (e.g., additional bonuses for every placement over 100).
Define Responsibilities Clearly: Clearly outline what is expected from the contractor regarding deliverables, availability, and responsiveness. This could include having a clause about responsiveness and timeliness in delivering work.
Limit Billing for Downtime: Introduce a clause that limits billing when work is disrupted due to non-emergency issues (like equipment failure). You could provide a grace period where they can repair their equipment or find solutions, but not bill during that time.
Discuss Transition Period: Since you mentioned retaining the person for six months while looking for replacements, make sure to communicate that you value their contributions during that time but that changes are necessary.
Set Up Regular Check-Ins: Establish regular check-ins to discuss performance and areas for improvement. This will help maintain accountability and provide an opportunity for them to communicate any concerns or challenges they may face.
Be Open to Feedback: Be prepared for them to have concerns about the proposed changes. Approach the negotiation with an open mind and be willing to listen to their perspective. If they feel heard, they may be more willing to accept the changes.
Document Everything: Once you reach an agreement, make sure to put everything in writing, clearly laying out the new terms so there’s no confusion moving forward.
Consider Legal Guidance: Given the complexities of transitioning from a contractor to a more structured arrangement, you might consider consulting a legal professional to ensure the new contract is compliant with labor laws and reflect your intentions accurately.
By approaching this negotiation with a structured plan and a focus on clear goals, you can hopefully realign the contractor’s performance with your company’s needs while maintaining a positive working relationship. Good luck!