Contract-To-Hire? Use Judiciously

One of the hiring mechanisms that seems to be gaining popularity is contract-to-hire. This vehicle allows a company to bring on an employee, see how they perform, and then either make them permanent or let them go. All the risk resides on the candidate’s side and there’s no downside for the company. Sounds perfect, right?

Not really. It is true that in today’s job market there is a surplus of applicants for jobs, and salaries tend to be depressed. For lower level positions where technical proficiency can be readily measured, contract-to-hire is an excellent choice. It allows you determine the candidate’s real qualifications for the position and then make an informed decision. At this level, candidates are not going to quibble over this issue.

In vital positions affecting the overall profitability or critical functioning of your company, however, contract-to-hire may not be the right way to go. For the strong candidates (the ones you really want to hire), contract-to-hire presents a less than flattering perception of your company. Consider this.

First, it says the company isn’t really certain about the direction it is pursuing. That pretty much shoots up a flare declaring “weak management”. Reserving the right to cut and run when a strategy doesn’t work is always there; advertising that right has no upside.

Second, it says that your company’s hiring process is not to be trusted. Again, most hiring situations are “at will” anyway. So if the person doesn’t work out, they can be let go without much fuss. But the use of contract-to-hire for really important positions (senior project managers, director of applications development, product manager) broadcasts a lack of faith in your own hiring practices. Not good.

Third, the strong candidates are going to look at this and say to themselves “why would I quit my job to take a chance with these guys? They are certainly not investing anything in me”. In effect, you are restricting the pool of good candidates and increasing the number of mediocre (or desperate) ones who will consider your company. Is that the outcome you really wanted?

Again, in some lower level technical positions or those positions with a limited lifetime, the use of contract-to-hire can be a good choice. But for vital positions, think again about the subliminal message you send to potential employees. Trust me, they are listening.