There are never enough resources to complete our ambitious plans, so Microsoft is constantly hiring help—vendors and contingent staff (CSG). Full-time employees (FTEs) are hired too, but the relationship is different—at least it’s supposed to be.

Ever since the $97 million December 2000 settlement of the “permatemps” case, Microsoft has been very careful to treat vendors and CSG differently than FTEs. These days, processes and policies prevent permatemps. However, that hasn’t wiped out stupidity on this front. FTEs are still asked to do work with little growth potential that is far better assigned to vendors or CSG. Vendors and CSG are still asked to cover work that, if restructured, could yield far better results at a lower cost when accomplished by FTEs.

Why are FTEs doing vendor and CSG work? Why is work that is better accomplished by FTEs left to vendors and CSG? Two reasons: people are lazy and people are ignorant. Let’s expose the lazy and cure the ignorant.

What am I supposed to do?

First and foremost, the ignorant must learn the difference between FTEs, vendors, and CSG and understand which assignments they should be given.

• FTEs are employees managed and paid directly by Microsoft.
• Vendors are companies contracted by Microsoft to do a specific statement of work (SOW). The vendor company selects which vendor employees are involved, with input from Microsoft, and the work can be ongoing (janitorial service) or fixed length (a marketing campaign).
• CSG are temporary workers employed by an outside agency. They are contracted by Microsoft to do a specific assignment over a limited timeframe (365 days or fewer). Microsoft selects the individuals involved from resumes provided by the agency, and Microsoft oversees the individuals, providing feedback to the agency.

Here’s a set of rules to help you assign work. Treat these rules as strong suggestions—every situation is unique.

1. Primary assignment is super-secret. Use FTEs. At the very least, your VP should be involved in setting the policy of who works on what.
2. Primary assignment is ambiguous or open-ended. Use FTEs. Vendors and CSG should only be used for well-defined work.
3. Primary assignment does not provide career growth at Microsoft. Use vendors or CSG. Don’t assign FTEs to dead-end roles.
4. Primary assignment is ongoing. Use FTEs or vendors. CSG folks, also known as temps, should be used for temporary assignments.
5. Primary assignment is short and must be filled within days. Use CSG. FTEs and vendors take a minimum of a few weeks to hire.

There are many other policies and guidelines for hiring and using vendors and CSG, and those policies vary by region. This list above helps you decide what sort of people should be assigned to what work, particularly within the United States. Let’s consider some examples.

No future for you

The first two rules are basic—highly confidential, ambiguous, or open-ended roles are for FTEs. What about the third rule—jobs with limited growth potential? Receptionists, gardeners, and the janitorial staff play important roles at Microsoft, but they aren’t growth roles at the company. They are done by vendors.

What about folks who send the daily build mail, localizers, or event planners? Those jobs could be designed to be entry level roles that lead to careers in engineering or marketing, but if that’s not the plan, then FTEs shouldn’t do them.

If you as a manager can’t describe how a role is leading an FTE toward his or her career aspirations, then that role needs to transition to a vendor or CSG. The fourth rule often determines the selection. If the role is ongoing, it should be filled by a vendor; otherwise, a CSG could probably handle it (the exception being highly specialized vendor work).

This is just temporary

Looking at the list of rules, most seem to point to FTEs or vendors. When are CSG folks the right choice? When it’s a temporary assignment for a specific purpose that requires oversight or must be filled quickly.

For example, let’s say you need to hire three people immediately to code and/or test a straightforward new feature to meet one of those random requirements that crops up from time to time. You could pull FTEs off their current assignments to handle this fire drill, but they are working on other critical work items. Hiring three temps to code and/or test the feature makes sense.

Let’s say an engineer on your team suddenly needs to leave for a few months to care for a family member. You can’t afford to scope back the engineer’s work, but you can hire a temp for a few months until your engineer returns. The temp probably won’t replace your engineer’s skill set precisely, but between the temp and the rest of your team, you can handle all the loose ends.

There are many other examples, but they all have the same basic structure—you’ve got a temporary assignment for a specific purpose that requires oversight or quick action. Otherwise, you’d use FTEs or vendors.

What now?

Your temp does a great job on the new feature or covering for an employee on leave. Now the feature is done or the employee returns. What’s next for this great CSG? Surely you don’t let her go—there’s plenty of other work to do! Wrong. You let her go.

Temporary employees are, well, temporary. They have a specific purpose. When that purpose is served, the CSG contract is over and the person leaves. Perhaps at a later date you’d hope to hire the CSG into another temporary assignment or even into an open FTE position. However, for now, temporary means temporary, and a contract is a contract.

What are we doing?

What happens when you’ve got vendors or CSG doing work that does have Microsoft career growth? Work that is ongoing and requires frequent oversight? Perhaps the work started out specific and temporary, but grew in scope. This sounds like work better suited for FTEs, but you don’t have the headcount. What should you do? You should reexamine your business.

What are you trying to accomplish? How has it changed? How should you operate going forward? Business changes all the time, yet people don’t often reexamine the way they operate their business. Why not? Because they are lazy. Because they get caught up in the day-to-day work. Because the changes come slowly enough to go unnoticed.

This is a test

For example, say you used to hire CSG to test your service at release time. You didn’t need as many testers during the long product cycle, but hired a bunch for the crunch at the end. Over time, competition and enlightenment moved you to a monthly or even weekly release cycle for your service. Now you’ve got CSG testers on staff all the time, rotating through (no permatemps). It doesn’t make sense anymore. What do you do?

You’ve got a few options:

• Continue to use a rotating crew of CSG testers because you are a lazy, backward fool who enjoys release cadence disruption caused by turnover.
• Convert your CSG dollars to FTE dollars and hire full-time testers. Yes, this can be done and is often cheaper when designed well. You do need to think carefully about your hiring ramp so as not to be left with periods of reduced capacity.
• Change how you test your service to use a combination of instrumentation, statistical methods, testing in production, and increased unit and component pair testing by developers. This allows you to reduce the size of your test staff over time, while increasing its statistical and strategic capability. However, this is a big technical and people change that takes time and patience to implement.

Business changes are business opportunities. You can ignore them, or use them as a catalyst to remake your team to be more competitive. The opportunities do require you to embrace change, break old habits, and rethink your business.

Doing it well

Do you have the right people doing the right work? Has your business environment changed, yet you and your team haven’t? Get off your butt, and take a close look at how your business is run.

Have you got some folks in dead-end jobs? Fill those roles with vendors instead. Got a quick job to do right away, but you need extra staff to do it? If it can be done offsite, hire a vendor; otherwise, hire some CSG. Are you using CSG for work that has now become commonplace? Convert them to FTEs or adapt to a more competitive approach.

Don’t be lazy—be proactive. Don’t be ignorant—be informed. Use the right folks for the right jobs. Keep your team growing, competitive, and attuned to your business and customers. Make your staff your means to win.