I have a question for Rob Nixon pertaining to his comment #16.

Rob, that’s awesome about the project. What a great example of how moving from billable time to a value-based pricing model changes your entire world for the better. My family totally agrees with yours.

Here’s my question: Since you are using a fixed price approach for this project, will you still use timesheets on it? I’m curious to know you thoughts on whether timesheets would still provide value to you or do you think it’s best to throw that part away too.

And attend as many of Alan’s workshops as you can.

As the great musician Robert Fripp likes to say: do you want to look at a picture of the girl or go on a date with her?

Not that I’m calling Alan a girl! But you get the idea.

Alan,
I’ve read Getting Started In Consulting and that’s given me the frame work for my firm. What should I read to learn HOW to consult? Thanks.

John

You can show significant value and an ROI to any consulting assignment.

Best thing that I have learned is Output not inputs……results not methodology. It works for my clients.

You have to ask the client: What improvement, why, and what’s the impact? Impact can be qualitative or quantitative. The reason that HR and training departments are mostly worthless is that they pay no attention to value (output) only to the task of training people (input). That’s also why Donald Kirkpatrick’s “four levels” of training measurement, which they STILL talk about in the current issues of training magazines, is so infernally dumb, just as it was 40 years ago!

The only thing that matters is some kind of improved condition. And if you can’t identify it, how do you know it’s been created?!

Yes, I completely agree with you concerning the two types of consultants. It’s all about the value created by the consultant. The customer really doesn’t care about anything else.

Regarding PKFs, I’ve been reading and talking with Ron Baker quite a bit over the past 2 years and I picked up the term from him. For me, it’s a good description for anyone who is differentiating between selling a service and selling knowledge. A consultant who implements ERP software is selling a service. However, a consultant who adds value to their customer’s business is selling knowledge and has evolved into a PKF.

There are only two kinds of consultants: Those who think the input side is important, who stress methodology and bill by the hour; and those who think results are important who stress outcomes and bill based upon value contribution. The former are lucky to make $250,000, the latter make seven figures. The former are known for their implementation, the latter are known as thought leaders.

I think one of the fundamental shifts in thinking that needs to happen in a Professional Knowledge Firm (PKF) is the realization that none of us are in control. We’re not in control of our employees, our customers nor our vendors. Anyone who thinks they are has lost their minds!

Time sheets and billable hours give the illusion of control. They attempt to control what cannot be controlled.

We trashed our time sheets and billable time almost 2 years. Our customers are overjoyed. They don’t care how long it takes us to complete a project; they just want it done and they want it done effectively.

Notice that I said effectively and not efficiently. A good consultant understands that effectiveness trumps efficiency every time.

So, my recommendation is to stop using tools that simply give the illusion of control and start using tools that provide predictive management as to whether a project is on track or not.

Concerning Warren’s point: of course the consultant should take the risks. Why in the world would the customer take those risks?

You don’t want to work the maximum time you have available. Also, if you’re charging, say, $150,000, and you wind up working a week less or a week more than you estimated, who the heck cares? See Rob Nixon’s post beneath yours.

You need to read my books.

because if they don’t – no (or tiny) value = no or tiny revenue

Count me in – I will find the books –

I see the concept – but assigning a ‘value’ in any particular project must be difficult.

Because it assumes that the client will follow your recommendations on a particular improvement that **may** save x hours per week …..

Reminds me years ago when I almost hired a guy to help me with some marketing who tried to sell me (poorly) on his value-based pricing. I had never heard of it, was completely confused about how he worked, and thought he was way over the top expensive. Obviously NOT how to do it. He should read your stuff too.

I wrote Getting Started in Consulting, the most successful Getting Started book in Wiley’s history, and it’s in its third edition. My conclusions come from over a decade of mentoring solo practitioners at all levels.

More experienced consultants – especially those solo practitioners – may not need to track time as closely, since they have a good feel for the scope and cost of particular services. Others just getting started, however, greatly benefit from knowing just where all those hours go. Even if you don’t bill that way, you need to know that your hours are being fruitfully spent and that when all is said and done, you are making the best, most efficient use of your time.

In a way, it goes back to the social networking argument. If you know you spend X hours per week on MyFaceTwitterSpaceLinkedBook with a resultant benefit, that produces a metric against which your alternative endeavors can be measured. Drucker strikes again…