When we established 33 Sticks, one of the first, and most important, decisions we made was that we would charge our clients for the value we deliver rather than the hours we work.
I’m paraphrasing Alan Weiss, consultant/speaker/author, here as he says it best, any time you are charging by the time unit, you are in an ethical conflict with the client. The client is best served by quick resolutions. But the consultant is best served by taking the most time. It’s impractical and an unwise business approach. It’s unethical to the client and unfair to the consultant.
I got my first exposure to the world of consulting in 1999, when I was teamed up with a group of consultants from Andersen Consulting. From there it has been an colorful adventure of hiring and managing consultants early in my career to running a consulting team later in my career.
In all my interactions with the consulting industry, there was one common tread that stitched my experiences together and that thread was a general focus on hours billed to the client rather than value generated for the client. In fact, there was an inverse relationship between hours and value, the more consultants focused on hours the lower the quality of work they delivered.
As the years went on, I found myself becoming more and more dissatisfied with life as a consultant. I found the majority of my time being spent on managing operational overhead, made necessary by the need to continually account for every 15 minute increment each consultant worked, rather than doing the work that I love, the work that generates tremendous value for my clients.
It was at that point that I made the decisions to stop trying to fight a broken system, I wasn’t going to change “the way it’s always been done,” and start creating a new system. One built not on time but on quality and value.
This decision has lead to one of the most rewarding experiences I’ve had in the first few months of running 33 Sticks, as we now have the ability to work hand-in-hand with our clients to create extraordinary value, unencumbered by a ticking time clock. Refreshing!
I’m not pretending that this approach will work for every consultancy, I’m sure there are compelling reasons to do it another way, but it works for us and our clients and we will continue to put our focus on generating value.
-jason
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While I generally prefer the idea of value based billing, I wonder how you deal with unreasonable clients.
Unfortunately, whenever I’ve made websites on value basis, it turns into a nightmare of change requests, specification “clarifications”, etc. I lose money & sanity.
How do you deal with that? I wish we could exclusively have excellent clients, but customer relationships are just like any other relationship: you don’t know how bad someone is until the relationship is failing.
Thanks for your comment, Gene.
While there is no perfect model, I have found that by setting clear boundaries for a project and being flexible to allow things to slightly ebb and flow naturally that the majority of projects stay within a well defined scope.
With that said, we have had projects that came in looking like A and went out looking like Z — that was because both sides were flexible enough to realize that Z was where the true value was, for both of us.
For those projects, and yes they do exist, that wander all over the map, it takes a strong consultant to focus the conversation and create future projects where necessary.
Both models have inherent issues but if you are driving huge value, then those issues are minimized, regardless of value based or hourly based billing. For me, I am willing to manage the occasional project that goes out of scope in order to realize the tremendous upside that value based billing provides, both to us as a company and to our clients.