Monday, July 30, 2007

Hourly Rant...

I just finished answering a question posted on LinkedIn by Esther Schindler in researching a article she is working on for CIO.com

She asks (summarized):

"There's just one question to answer: If you could get the (client) boss(es) to understand JUST ONE THING about computer consulting and contracting, what would it be?

Or, to put the same question another way: If you were given a single wish of something to change (about a current or past client) what would it be?"

My response (lightly edited from the original):


If you are going to hire a consultant, do not ask them to bill by the hour. As a senior person with expertise in an area that you/your team doesn't have expertise in, a consultant had better know what they are doing. As such, it is not the number of hours they spend planted in one of your chair that you are paying them for, it's their results.

For example, if you were to decide that you needed a top of the line, custom-designed, tile floor in your kitchen you would expect to get some kind of quote for the total cost of installation and you would expect to pay exactly that price after the work was done. You would not expect to get a huge discount in price if the work took 1hr instead of the 60hrs you expected... in fact, you might just be inclined to give the installation crew a bonus for not inconveniencing you by driving you out of your kitchen for a week and a half!

Why, then, is it that people who hire consultants insist on paying them by the hour?

First of all, once I get on a plane, my time is yours. Typically I find that I can grossly exceed expectations in about 2 hrs a day OR that I need to put in 20+ hours a day to help you achieve your desired outcome. Either way, to me, each day is still a day that I am away from my family, a day that I can't spend doing something else, another plane ticket, rental car & hotel on my credit card until the client pays, and another day of eating junk from a vending machine, junk from an affordable chain, or wildly overpriced food from a restaurant that still can't compete with home. Basically, in most cases, a day is pretty much a day.

Second, which hours would you like me to bill? The ones that:

a) I'm sitting in your nice little mini-cubical with no computer, no phone, no internet access, no security badge, and essentially no way to accomplish anything while I wait for you to set up some meeting to (in too many cases) brief me on all the stuff that matters least to the ultimate solution?

b) In the hotel with my laptop (that you won't let me bring onto the premises for security reasons), the internet, my notes and my entire network of niche experts on the phone or chat trying to solve your problem?

c) Tailgating at the Brickyard 400, with a key member of the team who invited me to the race, taking mad notes while interviewing him about the *real* reasons behind needing a consultant is for this particular project.

Needless to say, most executives choose a) which essentially encourages the not-so-ethical consultants out there to spend a lot of time sitting in an office looking busy to clock enough hours to be able to bill enough $ to justify them being away from home.

If executives would simply pay based on results instead of hours, I submit that both the consultants and their clients would stop feeling ripped off.

 
--
Scott Barber
Chief Technologist, PerfTestPlus, Inc.
About.me

Co-Author, Performance Testing Guidance for Web Applications
Author, Web Load Testing for Dummies
Contributing Author, Beautiful Testing, and How To Reduce the Cost of Testing

"If you can see it in your mind...
     you will find it in your life."

4 comments:

Karen N. Johnson said...

All too often employees are measured by their SIC (seat in the chair) time and not by results.

I propose this done because a) it's the easiest form of measurement b) some people don't like their home life and assume others don't either and c) it takes more effort to evaluate people's performance based on valuable criteria vs. cruise by SIC checking.

SIC focusing is poor thinking. And it breeds bad behaviors because if an employee is teethered to the chair, there is no incentive to get rid of wasted meetings and an array of office behaviors worthy of sitcoms we laugh about about at night.

SIC thinking affects consultants because it can become such a deeply rooted mentality and is sometimes "the" only form of measurement. If you ask to be paid based on results vs. hours, you may force some to think in a whole new way.

For SIC thinkers, I want to say:

Unteether your staff.

Refuse to create cubicles that are like adult day-care centers or holding tanks.

And if the only way you're comfortable the work is getting done is to be able to see your staff, then you have hired poorly.

My own rant is done.

Oh, I wonder if this was a factor in leaving full-time employment and becoming an independent consultant myself. Mmm.

Alex Podelko said...

Scott,

Really we have two different issues here: billing by hour and being on-site. For most projects our team do (yeah, we work with the same products, so it is somewhat easier for us), we don't see much difference in performance and outcome between working on-site and remotely. Perhaps a short trip in the beginning can be beneficial, but afterwards - you described the difference. What the hell is the difference where I create all the scripts we agreed upon: in a "cosy" cubicle on-site asking somebody's badge to get into restroom or in my office having all materials available?

When I work remotely, the client saves trip expenses and we even suggest that we bill only the actual time we work (another luxury we have) - still almost everybody want to see us on-site.

When I work remotely, I really don't have much problems with billing by hour.

And I see some problems with billing by final results:
- Most projects take much more time than expected even with a lot of trade-offs on the way.
- Performamce (for example) projects depends on many other people. What would be difference for you how you are paid when you waiting for badge, computer, etc? When you are paid by hour, you at least get paid...

Alex

reasonablerobinson said...

I read this 'rant' with great interest. This issue is all too common. A good starting point to make sense of this puzzle is to be aware of the 'world view' of yourself and the other party and how this pre-disposes you to explain the 'problem' and determine possible 'solutions'

It is likely that as a 'technical' consultant providing explicit, well reasoned, logical argument is your favoured way of 'making a case'

Surprisingly this isn't always effective, as you have noted.

Looking at the puzzle through a 'marketing' lens (please check out explanations of marketing philosophy for 'deep' understanding of this term) The following issues become apparent.

i) Clients can be classified by 'attitude' to spend, those who see it as a 'cost' and those who see it as an 'investment' It is difficult to shift the mind set of the former and so devoting energy to this is futile - play the game. Become more selective and pre-qualify clients by their attitude to 'spend' and their awareness of project management joys and pains to reduce having to deal with the problem.

ii) Sell what you 'do' in terms of process (effectiveness - not just simply efficiency) and business improvement (competitiveness) terms not what your service 'is' (technical advantages)


iii) Emphasise Value! - This will be a combination of the tangible and intangible benefits you are adding

iv) Establish 'what success' will look like in the clients words for the whole project experience not just the technical 'spec' when you are scoping the project at the start. At project 'wash up' & prior to invoice review these to point out what you have achieved.

v)For every client facing day it is common to attract 2 pre-thinking and management days. All quotes should be made on that basis. So 5 day project is really a 15 day project. Manage client expectations up front!

vi) Study some commercial and behavioral texts that are probably not part of your normal 'reading' I sincerely recommend:

Peter Block - Flawless Consulting because it distinguishes between 'types' of consultancy - such as 'pair of hands' or 'coaching for change' and the approaches to them

Miller Heimann - Strategic Seling because if helps you characterise the business buying group and shows you how to make sense of the role of the technical expert, the buyer, the decision maker (CEO/MD)

Neil Rackham - SPIN Selling because it will help you with your client probing skills and pre-qualifying

Theodore Levitt - Marketing Myopia and the Total Product Concept

vii)Finaly, I am reminded of the story of the plumber who was asked to fix and emergency boiler problem. He visited the house spent 5 mins in the kitchen, tapped the boiler with a hammer, sorted the problem and left. He invoiced £1000. The customer went mad and said but...you only spent 5 mins here! So the plumber sent a new invoice as follows:

a) Time spent on premises and tapping boiler with hammer - £1

b) Knowing where to hit boiler and how hard £999

p.s.If you have found any of the above helpful it would be great to see you at my blog sometime...

cheers
RR

Scott Barber said...

Short Response:

I've been there, I get it, and I'd rather fight and lose this fight than give in.

Longer Response:

The only argument that I've found effective on this topic is to simply lie about the number of hours you charge your client. Logic doesn't work, nor have I seen the other arguments you've presented work. It's not that I expect business people to be swayed by logic, it's that I refuse to get caught up in the game of dishonesty that I keep being told is simply "a fact of business".

If lies and deception are a "fact of business" then I suspect that I won't be very "successful" at business -- and that's ok with me.

I do understand marketing and actively reject the notion. I do not and will not permit "marketing" of my company or my services. Should I ever sell a product, I may reconsider. Should I ever be in a position to promote an event, I may reconsider. I will publicize services and abilities, I will not be a party to trying to convince someone of what they need. If they need it (and I am successful) I will be in the public eye enough and have educated enough people that they will come to me. If I have to do marketing, then I'm not being successful enough in publicizing and educating.

I absolutely will not pre-qualify clients by their attitude to "spend". The notion is offensive to me. I qualify my clients based on the value I can provide. Once I know I can provide value through the "people in the trenches" I'll work through the nightmare of coming up with a way to bill/invoice/get paid by the business people who either "don't get it" or "just don't do business that way". There is no way I'm going to let the organizations, products, clients and folks in the trenches suffer because I'm too busy "pre-qualifying" clients to add value. When people need help, they call me, I help them. It's no more complicated than that and never will be... at least not in my company.

As for texts, I prefer Weinberg's Secrets of Consulting. Top lesson "Give your best work away for free."

In engineering school, we learned it as the story of the retired engineer called back to help them fix something in the boiler room for a fixed fee of $50,000. The invoice was similar "Chalk X - $1, Knowing where to put it $49,999"

I appreciate the thoughtfulness of your response. I further appreciate that is how business is typically done by people who sell things (to include selling services). I started a company specifically so that services could be provided without selling. The day will come when my model of value, honesty, helpfulness and integrity over dollars will either bring in enough $ for me to start giving back to research and education or take me broke. I'm willing to accept either.