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In recent years, the strategic use of subcontractors has gained popularity among companies needing to scale operations due to economic fluctuations or internal shifts.

Subcontracting gives companies the agility to respond quickly to market changes and seize emerging opportunities without the constraints of a permanent workforce.

But effectively managing subcontractors is easier said than done. In this article, we'll explore key strategies and best practices for project managers to ensure successful subcontractor management.

What Is Subcontractor Management?

Subcontractor management is the process of coordinating the hiring, resourcing, and supervising of subcontractors on projects requiring specific skills to contribute to their completion and success.

The terms "contractor," "subcontractor," and "freelancer" are sometimes used interchangeably depending on the industry—construction industry vs. agency, for example. Still, they can refer to different work arrangements, accountabilities, and project roles. 

Contractors, for instance, are not classified as employees. Instead, they are engaged through a contract with a defined start and end date, specifically delivering pre-determined results or services. 

Subcontractors, in contrast, work under the direction of a main contractor rather than directly for the client. They perform a specific portion of the work that the contractor has agreed to complete, maintaining a hierarchical relationship.

On the other hand, freelancers are self-employed individuals who offer their services to clients. They enjoy the flexibility of working with various clients on multiple projects without being tied to a long-term employer.

Employment RelationshipEngaged directly by a client to complete a project or taskEngaged by a contractor to complete part of a projectWorks independently with multiple clients, often on shorter or smaller projects
Scope of WorkManages entire projects or substantial parts of themHandles specific tasks or components of a project assigned by the contractorOffers specific services, often with a focus on short-term or diverse projects
Associated CostsPaid according to contract terms, usually without benefitsPaid by the contractor based on their agreementPaid by multiple clients per project or task, responsible for their benefits
Project ManagementOversees project completion, potentially hiring subcontractorsFocuses on their specific task within a projectManages their own workload and client relationships
Client RelationshipDirectly accountable to the clientAccountable to the contractor who hired themDirectly accountable to multiple clients

Understanding these distinctions helps businesses choose the appropriate type of worker for their needs and ensures clear, effective project management and execution.

This article will use an agency-type model to discuss managing subcontractors as opposed to a project that relates to construction projects.

how subcontractors fit into the hierarchy of agencies
Subcontractors are typically hired by agencies that have gaps in the skillsets on their agencies.

9 Tips to Achieve Effective Subcontractor Management  

Here’s how to manage subcontractors the right way.

1. Involve Them Early

In many agencies, the project manager vets the scope and timeline initially presented to a client.

By involving subcontractors in early scoping conversations, you're giving them the space to ask questions, add context, and deliver quality work.

Different contractors have different approaches and may make suggestions based on client needs, project requirements, quality control, and their own experience, which can significantly contribute to the project's success.

Ask the subcontractor to estimate the hours needed for the job. Depending on their experience, rate, or specialty, this can differ significantly from your first guess. Plus, it helps you plan better and hold them accountable for their estimates more thoughtfully.

A trial period for subcontractors is valuable, as it allows you to evaluate subcontractor performance and fit within the company, potentially leading to a full-time hire or continuous work.

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2. Set Payment Terms

Underline the necessity of defining a clear payment schedule. This should include the project schedule, milestones, and payment due dates, which could be tied to completing specific tasks or project phases. Clear payment terms help to avoid misunderstandings and ensure timely and accurate payments. 

Specify the following:

  • Invoice requirements, including what information must be included (e.g., project plan completed, dates, amounts).
  • Payment method (e.g., bank transfer, cheque) and any necessary information to process payments. They will stay loyal if you pay them consistently within the payment terms or sooner.
  • The currency they will be paid, which is especially important for international subcontractors.

Clarifying tax responsibilities, including any withholdings or other applicable taxes, is a way to ensure a smooth working relationship. Providing this information upfront reassures subcontractors and makes them feel more at ease about their legal responsibilities.

3. Include the Essentials

Include the following in all contracts:

  • Clauses that outline penalties or consequences for missed deadlines. This will not only incentivize timely delivery but also ensure steady project progress.
  • How additional work or change orders outside the original scope will be handled and compensated.
  • The notice period required for termination.
  • Clauses that protect sensitive information and intellectual property. This ensures subcontractors do not disclose or misuse proprietary information, safeguarding the project and agency integrity.

4. Conduct Agency and Project Onboarding 

When onboarding the subcontractor, consider sharing additional nuggets about your agency and project, especially if the project is client-facing. You want to ensure a consistent experience for your client and team members rooted in how your other employees manage the project and client.

Familiarize contractors with the internal process, core team members, and company portfolio. Plan and schedule the training for each based on their strengths and weaknesses. More senior subcontractors may only need your specific process rather than a full review of how to use tools or manage clients.

Encourage active participation in team meetings and brainstorming sessions for enhanced collaboration as well, and provide detailed guidelines and templates for deliverables to ensure consistency and quality control. This might include style guides, coding standards, or design templates.

Ensure the subcontractor is set up on all required project management software, such as time tracking, project management tools, document storage and a company wiki.

5. Set Clear Expectations

Create a trusting environment by being frank and transparent. Even though they may be temporary on the team, it's important to foster a positive relationship.

It’s also important to adjust the way you give and receive feedback. They're not employees, so there are likely no regular performance checks or reviews.

It is good to be transparent about how you'll assess their performance on the project. Define key performance indicators (KPIs) to measure the quality and timeliness of subcontractors' work.

6. Identify & Mitigate Risks

Once the project plan/timeline is created, have the subcontractor review and sign off on it. Their buy-in will reduce the project manager's or agency's headaches when negotiating increases in time or cost.

Add a day or two buffer with deadline timelines until you know the subcontractor’s reliability.

7. Set Clear Communication & Quality Standards

Set up a RACI chart for the entire project team so everyone, including subcontractors, understands their responsibilities. Assign the main point of contact who can consistently be the contact for your subcontractors if they have questions or need assistance with any emergency. Keep them updated if the scope of their work changes.

8. Allocate Subcontractors Carefully 

Get clarity on the subcontractor availability, flexibility, and timezone (especially when it comes to booking meetings) as early as you can.

Understanding and differentiating between a subcontractor's track record and their desire to expand it is essential. For example, a content marketing strategist may have worked on brand strategy a couple of times in the past but might be better suited for a role as a content strategist for complex client needs. 

This is important to keep in mind as you’re allocating work to them and managing them in your resource management software.

9. Continuously Monitor Performance

Lean on their strengths to maintain quality of work and offer opportunities for them to grow alongside full time employees or other subcontractors. 

Ensure regular check-ins with team members and department leads. It's easy to work in a vacuum and get a little lost in the weeds. Offering opportunities for subcontractors to provide feedback, collaborate, and share learnings improves processes and products.

How Managing Subcontractors Works: Example

Viewing the management of contractors and subcontractors through the lens of a baseball team (i.e. an agency hired for the work) can make it clear how each role contributes to the project's overall success.

Here’s how a baseball team might be analogous to an agency that you’ve hired to contribute to your project: 

  • Baseball Team = Agency Hired for Work 
    • Responsibilities: Coordinating all team members and ensuring that the overall project is executed effectively to meet the client's expectations.
  • League Commissioner = Client Stakeholder
    • Responsibilities: Defining project requirements, providing feedback, approving deliverables, and ensuring the team’s plan meets their needs and expectations.
  • General Manager = Product Manager 
    • Responsibilities: Setting the vision, defining product goals, prioritizing features, and making high-level scope and direction decisions.
  • Team Manager = Project Manager 
    • Responsibilities: Planning the strategy, monitoring performance, making in-game adjustments, and providing motivation and support to all players.
  • Team Captain = Product Owner
    • Responsibilities: Ensuring that the game plan meets the general manager's vision, prioritizing daily tasks, and communicating with the team members (designers and developers) to keep the project on track.
  • Infielders = Subcontractor Designers
    • Responsibilities: The infielder is responsible for quick, precise actions to prevent the opposing team from advancing, much like designers who create the visual and user experience elements that form a project's foundation. In each position, the infielder has the skill to play that particular role, such as UX designers vs. motion designers on a project.
  • Outfielders = Subcontractor Developers
    • Responsibilities: Outfielders cover a lot of ground, making critical catches and throws to prevent runs, similar to developers who implement code and ensure functionality to bring the project to life. Each position in the outfield has the skill to play that particular position, such as front-end developers vs backend developers.

Here’s how this plays out in a game (project) scenario. The team manager (project manager) develops the strategy, including positioning and plays, to help the team get a win (complete the project).

comparison between team manager and project manager
Project managers have similar duties to those of team managers.

The general manager (product manager) defines the overarching goals and priorities, ensuring the team's efforts align with the team’s broader objectives, and the team captain (product owner) executes the strategy on the field, ensuring team members follow the game plan and make real-time adjustments.

comparison between general manager and product manager, and comparison between team captain and product owner
Product managers and product owners work together to define goals and priorities, to make sure that the team is following the game plan.

When it comes to communication, the team manager (project manager) communicates the overall strategy and provides feedback on subcontractor performance during the game (i.e. the project life cycle).

The general manager (product manager) communicates the vision and ensures the team understands the broader objectives, and the team captain (product owner) acts as a liaison between the players (subcontractors) and the management (project manager and product manager), ensuring everyone is on the same page.

roles of general manager/product manager, team captain/product owner, and team manager/project manager
Throughout the project, the project manager and product manager communicate with each other and with the product owner to keep everything on track.

Project tasks translate to the execution of plays. The infielders (designers) execute quick, precise actions (such as creating design assets) to prevent the opposing team from advancing, while the outfielders (developers) cover ground and make critical catches and throws (writing code and implementing features) to prevent runs (ensure project progress and deliver functional features).

Through the game, the coaching team gives out feedback and makes adjustments. The team manager (project manager) observes the game, provides feedback, and makes strategic adjustments to improve performance.

The general manager (product manager) ensures the team has the right players (resources) and makes high-level adjustments to keep the project on track, and the team captain (product owner) provides real-time feedback to players and makes adjustments as necessary to ensure the successful execution of the defensive strategy.

baseball game scenario comparison to projects
The team adjusts their strategy according to guidance from the project manager and other members of the "coaching team" throughout the project.

Benefits of Using Subcontractors

Here are the main benefits of using subcontractors:

  • Cost Savings: You can expect lower overhead as you are not paying for benefits, such as health insurance, retirement plans, and other employee benefits. Employers are not required to pay payroll taxes for contractors.
  • Flexibility: Subcontractors can be hired project-by-project, allowing businesses to scale up or down based on workload and demand. You can bring them on board for short-term projects without any long-term commitments. This allows you to adjust your workforce as needed, giving you complete control over your business operations. Also, subcontractors can often work remotely, providing access to a broader talent pool without needing relocation or office space.
  • Specialized skills: Subcontractors often have specialized skills, certifications and extensive experience in their field, allowing businesses to benefit from their expertise without needing long-term employment. They can often start contributing immediately as they bring their tools, knowledge, and experience to the job.
  • Fresh perspectives: One of the most exciting aspects of having the right subcontractor is the potential for innovation and fresh perspectives. With their varied experiences, different subcontractors can bring new ideas and approaches to the table, potentially leading to significant innovation and process improvements for your business.

Gather Your A-Team!

Effectively managing subcontractors can transform your team into all-stars, much like a baseball team's defense. Want to connect with other digital project managers to share resources and best practices? Join our membership community and get access to 100+ templates, samples, and examples and connect with 100s of other digital project managers in Slack.

Kelly Ostrowercha
By Kelly Ostrowercha

Kelly Ostrowercha is an operations leader with a strong focus on workflow automation and operational efficiency. With over 15 years of experience, she has successfully developed people, teams, and processes in marketing agencies, small start-ups, and larger corporations. Her people-first leadership style has fostered collaborative and supportive work environments, leading to successful projects and positive outcomes for teams and business units. Her expertise in workflow automation and operational efficiency has consistently led to streamlined operations and continuous improvement in a wide range of industries.