“Why Most Consultants Bite!” Presented by David A. Fields

Zintro Webinar

Presented by David A. Fields, Managing Director at The Ascendant Consortium. Author, speaker and consultant specializing in maximizing the ROI from consulting engagements.

Presenter’s Note:
“Don’t waste another dime on an outside expert that overpromises and under-delivers. In this practical, consultant-reveals-all webinar, you’ll learn why standard RFPs and most purchasing practices virtually guarantee a dismal outcome from hired guns. More importantly, you’ll walk away knowing the six questions you must answer before talking a consultant; the only three outcomes from a consulting project that are worth paying for; a proven method for tripling your ROI whenever you hire an outside expert; the two biggest mistakes executives make when hiring consultants, and how to avoid them, and much more.”

About David A. Fields:
David A. Fields is one of the world’s leading authorities on using outside experts such as consultants, coaches and agencies. He is author of the highly acclaimed book, The Executive’s Guide to Consultants (McGraw-Hill, 2012), writes monthly columns for IndustryWeek and Consulting Magazine and has contributed to CNN Money, USA Today, Investor’s Business Daily, and dozens of other leading publications. Both sides of the client/consultant relationship love David’s work – he is regularly hired by savvy corporations including Time-Warner, Abbott Labs, ITT and dozens of others to help them get the most out of their investments in outside experts. He also works directly with hundreds of consulting firms every year to help them win more projects that are highly lucrative for their clients and for them.

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Transcription:

Chris Lawrence:  Hello and welcome, everybody. My name is Chris Lawrence, and I’m community manager at Zintro. For those of you who are not familiar with Zintro, Zintro is a global online marketplace that helps connect companies with highly specialized consultants and other expertise providers for projects that range from one‑hour phone consult to multi‑month on‑site engagements.

I would like to thank the over 900 people who signed up for today’s webinar, “Why Most Consultants Bite!” Attend this webinar before you spend money on an expensive advisor, by David A. Fields.

With great pleasure, I introduce Zintro expert, David A. Fields, managing director at the Ascendant Consortium, author, speaker, and consultant specializing in maximizing the return‑on investment from consulting engagements.

David is one of the world’s leading authorities on using outside experts such as consultants, coaches and agencies. He is the author of the highly acclaimed book, “The Executive’s Guide to Consultants,” writes monthly columns for Industry Week and Consulting Magazine and has contributed to CNN Money, USA Today, Investor’s Business Daily and dozens of other leading publications.

Both sides of the client consultant relationship love David’s work. He’s regularly hired by [inaudible 01:22] corporations, including Time Warner, Abbott Labs, ITT, and dozens of others to help them get the most out of their investments and outside experts.

He also works directly with hundreds of consulting firms every year to help them win more projects that are highly lucrative for their clients and for them.

If you would like to ask David any specific questions, feel free to use our question section or if you go to webinar control panel, in the top right corner of your screen at any time throughout the webinar.

David will respond to questions after this presentation. We will provide David’s contact information at the end of this webinar for follow ups, so stay tuned.

Without further ado, I would like to turn it over now to our presenter, David A. Fields.

David A. Fields:  Well, thank you, Chris. I’m practically blushing after hearing that introduction. Thank you to the hundreds of folks who are on the call right now and are going to be watching it. I know that a limited number of people could be on live and there are going to be hundreds watching this, so thank you for watching it.

I also understand from some polling data that we got earlier that there’s a mix of consultants and clients on this call, which is awesome. But I’m going to gear the entire presentation toward the client side. This is really about how you buy consulting services better.

Let me just give you a moment of background, and then we’ll dive right in. As Chris mentioned, I run the Ascendant Consortium. At Ascendant, essentially what we are is we’re general contractors; we bring in the consultants to do whatever is necessary. Corporate clients call us because they know they’re going to get an outstanding project every single time. Our expertise is actually the business of consulting.

We spent years analyzing hundreds and hundreds of projects, to understand what makes them go right or not go so well. That’s what this presentation is based on. Here’s what we’re going to cover. I’m going to describe this whole world of hiring outside experts, and how that’s working out on clients.

I’ll talk to you on a few reasons why most consultant privates don’t live up to expectations. That’s going to be very quick, because what I really want to spend the most time is right here ‑‑ The top 10 reasons that you as a client buy what I call, “cranberries.”

I refer to most consulting projects as cranberries. They taste sweet at the beginning, but then they lead to good or aftertaste, at least they do for me. It’s just a metaphor. The key question is, “What can you do that will help you not buy cranberries? Guarantee for yourself a fabulous outcome every time you permit an outside expert?”

The plan is to get through all of these, and call a 35 minutes. That’s what we’re going to do. We’re going to get through 35 minutes or 40 minutes, which will leave us a good 20 minutes for Q&A.

By the way, I do want to give you a head’s up that during this webinar, there are going to be two extremely brief breaks. I can just give you a little bit of background on what I do on Ascendant, that kind of thing. One is going to be right in the middle of this section here. The other, I’ll do right now.

I’m going to be just scratching the surface of how do I maximize your investment, while hiring outside experts. If you spend, as a company, more than $2,500 for your own consultants or coaches or trainers or other outsiders…Most companies are spending hundreds of thousands or a millions of dollars on hiring consultants.

The $25 investment in this book is going to give you back the zillion ROI. The link here will just send you right to Amazon. That’s it for that.

Let’s talk about what the deal is with consultants. Consultants get a bad rap because we’re bringing in outside experts. It can be really frustrating and sometimes you get very marginal value from it.

Let me give you an example. A couple of years ago, one of the world’s largest technology companies decided it was underutilizing its patent portfolio. The senior executive team hired one of the best known, most prestigious consulting firms in the world to help figure out where the leverage, all these assets that they’d got.

Then, six months later, after spending [inaudible 06:36] millions of dollars, seven figures, they had a list. The consultant came back with a list of recommended markets. But the problem is, once the operating team’s dug into the recommendations a bit, they’ve realized that not a single one was viable. Not one. [laughs] How much does that bite?

It was an incredible waste of time and money. The real drag, from my standpoint, is that this plays out every day in companies of all sized. I see it all the time. There has been some research on this. There’s some pretty widely quoted research that indicates around 90 percent of projects don’t come in on time, on target, or on budget.

90 percent. Which means that the average project is getting an F, [laughs] and that’s not so swift. I’m very curious with the experiences of the audience. I knew folks were listening. So feel free to just type your experience in the chatbox and say how it has worked out for you.

What I’ve seen suggests that this heavily cited research is actually sensationalizing it a little bit. It appears to me that the average consulting project delivers about a B. Occasionally, one is great. More often, one is very disappointing. But, you know, [inaudible 08:10] OK, I suppose.

What they’re not doing is knocking it out of the park. In fact, enough are missing the mark that it’s still a big risk to bring in a consultant, because the occasional C, or D, or F will cripple you. It can cripple you as a company and as an individual, as a manager or as an executive. It’ll really mean a black mark for you and on your career.

Let’s talk about why these Cs, Ds, and Fs, and even the Bs, happen. Why is it that most consultants bite? To illustrate the first reason, I’m going to go back a lot of years ago, to when I was new in consulting, and working inside of [inaudible 08:50] firms.

We were down in New Jersey, we were kicking off a project, and, after a couple of hours of meeting with the client for this kick‑off, we left to head back up to Connecticut. In the parking lot, before we even [laughs] got into the car to drive home, the lead consultant on the project said, “We’ve broken the back of this project. I’ve got it completely figured out.”

That was after two hours. You see, consultants are problem solvers. It’s in their genetic makeup to solve problems. That’s great, except that then they have a propensity to jump to conclusions, and often it’s a conclusion that’s based on the most recent project they did for another client. Then they defend those conclusions to the hilt. [laughs]

That’s one problem. Another issue ‑‑and I hear this all the time especially about career consultants, who join a big firm out of school and then advance through the ranks ‑‑ is that they don’t have any real, relevant operating experience.

That was the problem with that situation I was just talking about with that technology company that was leveraging their patents. Because what you want is not just smart. Those people are smart. You want a result that will actually translate into bottom‑line progress for you.

On top of that, there are some structural problems in most projects. I’m going to cover that more a bit later. But I will tell you, one of the most prestigious, well‑known consultancies in the world is on record for having driven more than one of their client companies into bankruptcy. [laughs]

Do you what their penalty was for that? Nothing. They were paid handsome fees, and then received those fees regardless of the outcome, which is clearly a problem. In addition, consultants have this can‑do attitude, and that’s great, but it can lead them astray.

I can’t tell you how many consultants I’ve interviewed, who present themselves as the perfect choice for my clients, but then I dig deeper, and it turns out they’ve never actually produced the outcome, ever, that my client’s looking for. Is it any wonder that that kind of a consultant produces a B result, at best? It certainly isn’t to me.

Let’s look at a couple of other reasons consulting projects don’t go well. One particularly insidious problem, it’s very evident, I see it a lot in the IT business, because while a consulting project might be a couple hundred grand, assistance integration can be like millions of dollars, or tens of millions.

What the large IT companies have done is they’ve purchased consultant groups. They’re using them as a front‑end to sell their large integration projects. It’s not just in IT. There’s always a strong bias to use consulting as a sales channel, if the corporate parent has any kind of back end services.

Interestingly, on the flip side, there can actually be a short time bias. You see these in projects. This can also generate absolutely disastrous results in the long term. I think we all saw this. Everybody on this call has been around long enough to remember, not very long ago, when consultants were hired to find cost savings, and they were being paid on a percentage of the savings that they turned up.

What happened is, they cut services, they cut personnel, and they cut R&D. They did all this streamlining, and then, when the economy turned around, their clients were totally unprepared to respond, because they didn’t have the personnel, or the new products in the pipeline. Then they lagged their competitors, and they fell behind. Sometimes, when there’s this strong, short‑term incentive, it leads to poor recommendations.

Those are six reasons why consultants can bite. They jump to conclusions. They don’t have operating experience. Their fees aren’t tied to results. They take projects on they have no business taking, and they’re biased, either because of the long‑term sale or short‑term wins.

You know what the number one driver is of mediocre projects, more than anything else? It’s lousy hiring practices on the part of the client. As you can tell, as you’ve heard, I am no apologist for consultants. I think consultants could do a lot better; however, if you’re a client and you’re not overjoyed with the results from a project, the first place to look is internally.

I don’t blame clients, because frankly they don’t hire consultants very often, maybe a few times a year. What is on clients is thinking they know how to make good hiring decisions when it comes to consultants, even though they have very little practice at it, and the results clearly show that most projects are anything but outstanding.

That brings us, really, to the meat of this presentation, which is the top ten reasons why clients buy cranberries, and really importantly, what can you do to prevent that. At this point, we’re talking about you, if you’re a client. We’re talking about you as a buyer, and everything I’m about to show you is the mistakes that clients make day in and day out. I’m going to show you how to avoid these.

The way I’ve structured this, I’m actually going to run through five very common mistakes, and then give you a framework, and a few tips to avoid them. Then we’ll do a brief break, a lunch, tell you what Ascendant does, and then I’ll cover the remaining five. That’s the plan.

Before I forget, I have prepared a special free download for the folks on this intro call. Just go to the link on the screen here, and you can download it. It’s a free project success checklist. This checklist has a whole bunch of things I’m not even covering on this webinar. Right now, we’re focused on hiring consultants well, and the checklist is going to help you run the successful project once the consultant is hired.

Let’s actually dig in. The number one most common mistake I see clients make is that they focus on their situation rather than their outcome, and as a result, they hire situation expertise instead of outcome expertise. Let me give you a couple of examples.

Situation expertise sounds like this. We’re a fashion company, and we need a website. That’s a description of the situation. That client will call me and say they’re looking for someone to build a website that has fashion expertise. We’re a tech company, and we’re having leadership problems. That client calls me and they say, “Dave, we need a leadership expert with tech experience.”

It kind of makes sense, right. It’s very, very common. It’s also a mistake. What that fashion company really wants is increased online sales, so rather than looking for a website expert with fashion experience, they should be looking for consultants who have increased online sales. That could be a website guru, or it could be someone else who maybe has an entirely different breakthrough approach, and may or may not have worked in fashion.

The tech company, for example, their outcome might be lower attrition and higher morale. Maybe they need a tech expert, but it’s just as likely, or maybe even more likely, that they’ll do better with some killer consultant who’s never worked in tech, but has created zero turnover and sky high morale in other companies.

As a buyer, your company is already teeming with experts in your industry and situation. What you need is outcome expertise. When you marry your knowledge of your industry and your situation with the consultant’s ability to produce an outcome, then that’s when you get an A‑plus instead of a B or a C.

A similar mistake to focusing on the situation, rather than the outcome, is focusing on tactics rather than outcomes. A tactic sounds like this, a tactic will be, “David, we’d like someone to run a sales program on spin selling.” Or, “David, do you have a consultant who can develop a market appraisal?” Those are activities ‑‑ they’re actions and tactics.

The problem with focusing on tactics is you get tactics. When you ask for a training, you get a training, and that may or may not help you get where you want to be, which is, say, a short sales cycle. When you ask for a market appraisal, that’s what you’ll get. You’re hoping it will tell you whether to enter the market or not, but imagine, let’s say you asked the consultant to help you make a smart decision. That opens the door to the consultant doing whatever is necessary to get you that outcome. That’s where the real win is.

Another major reason consulting projects don’t measure up is because they have nothing to measure up to. [laughs] When I conducted research, and I talk to executives all the time about consulting projects and ask them how projects went that didn’t do the best, they give me replies like these.

They say, “Well, it was pretty successful,” or, “We achieved most of what we had hoped,” or, “I think it could have gone a bit better.” Something like that. They’re all really fuzzy and vague, and not based on any clear metric. You see, it’s not enough to know where you want to go, what your desired outcome is.

It also needs to be clear when you get there. That’s how you know your consultant is delivering or not delivering. Unfortunately, most projects don’t have clear metrics of success in place. I have seen multi‑million dollar projects with no success metrics in them. Without clear metrics of success, you’re basically just hoping for good results.

What I’ve covered so far, you’ve probably heard a lot about. The next reason for these cranberries is just as common, but it’s definitely less well explored by both sides, by consultants and by clients, and that’s leaving risks unmanaged.

This is really a largely unexplored area in consulting. Every project has risks. For the most part, they’re simply embedded in the project. Sometimes, actually where they’re embedded is in the fees. But one way or another, your risks as a buyer and the consultant’s risks are in the project.

There are 20 or 30 common risks in consulting projects, such as the project doesn’t work, or it doesn’t deliver the value you were expecting, or it misses key dates, or maybe the consultant alienates some personnel inside your company. Which, that would never happen. [sarcastically]

There are bunches more. But 99 percent of projects, all these risks are left bundled into the overall approach and the fees, and they’re not managed. That’s a huge opportunity. We’ll address that. But before we do, let’s cover the final entry in this first batch, this first five reasons that clients buy cranberries, which is an undue focus on cost rather than value

Most clients focus on costs almost obsessively. There are plenty of good reasons to look at costs, but it also leads clients to make hiring mistakes when it comes to consultants. Just think about your own behavior. What is the first section of a client’s proposal that you turn to? It’s probably the fees [laughs] , because that’s where almost everyone goes.

They want to know, what’s the bottom line? What’s this going to cost? Then, everything is put in relation to fees, even though you’re not hiring a consultant so that you can spend $10,000 or $100,000 or a million dollars. You’re hiring the consultant to achieve an outcome. But the first place that a client turns to is the fees.

Also, they tend to compare day rates or hourly rates and those kinds of things, which, for a whole bunch of reasons, is typically a bad idea. Or, they’re comparing the costs of consultants to internal staff salaries, which is totally an Apple to Oldsmobiles comparison. If you are going to compare a consultant to internal staff, then what you need to look at is the value created for total dollar invested.

Another driver of this focus on costs has been the increasing use of purchasing departments who issue RFPs for consulting. If you could purchase consulting the way you buy commodity products or services, I would be all for that. But, unfortunately, you can’t. There’s just a huge world of difference. Nevertheless, purchasing groups focus on costs, so, once again, there’s an emphasis on costs rather than value.

Those are the top five reasons that clients buy cranberries. They focus on situations versus outcomes and tactics rather than outcomes. There are unclear success metrics, unmanaged risks and there’s this focus on costs rather than on value. Here’s the real question, is how do you avoid these?

Let me give you one simple structure that would help. By the way, for all of you consultants listening, I advise you use the exact same structure. This structure is what I call a context document. I highly, highly recommend that you develop one before you contact any prospective consultants or trainers or coaches or experts of any kind.

The context document has six parts. The first part is a situation. What’s really important about the situation is, what’s changed? Why is it that all of a sudden now you either have a problem or you’ve got some aspiration you’re trying to achieve? What’s changed? Then, why do you need to go to the outside? Why can’t you solve this yourself?

The second part of the context document is what your desired outcome is. An outcome, as we just discussed, is not a task. It’s not your situation. It’s not an activity. It’s how you’re better off at the end of the project. In what way is this project going to make a meaningful difference to you, to your company, to your customers, to your employees?

Part three of the context document is success metrics. It’s making sure you will know when you get there. I recommend that you follow this acronym called CRAVE with your metrics. CRAVE stands for concrete, reliable, attainable, valid and engaging.

Which means that your metrics have to be concrete, they need to be something you can bite into. They need to be reliable, so when you measure it, you measure it ten times, you get the result. It has to be data that you could actually attain, that you can actually achieve or have access to. Maybe “accessible” is better. Valid. Then, engaging. They should be metrics that actually get your company moving.

Part four of a context document is risks and concerns. What are your risks and concerns about this project? What could make it go wrong? What could make it fail? What can derail it? What about using a consultant? What are your concerns? What do you see as the risks in using a consultant and bringing one into your company to help you with this?

Part five of the context document is the value. What is the meaningful impact on you or your business, your employees, your customers? If at all possible, and it’s almost always possible, I’ve been doing this for a long time, I can tell you it’s almost always possible to quantify this.

There should be a meaningful quantifiable impact on your business. That’s how you can make a smart investment decision. It doesn’t have to be precise. We’re not looking for the third decimal point here. We’re just looking for some estimate of value so that when you take a look at your investment you can say, “Yeah, this makes sense. This is a great return.”

The sixth part of the context document is simply parameters, anything that puts boundaries on your project. Work with these people and not with those people. We have to hit these deadlines. We have a board meeting. We have this budget, or we’re constrained within this fiscal year, or something like that.

You put all of that inside your context document. Then, what you’re going to do is you’re going to share your context document with prospective consultants. It tells them everything they need to know to develop an outstanding proposal. Yes, I am saying you share the whole thing [laughs] , the parameters, the value, because a collaborative approach is going to benefit everyone.

Similarly, I would avoid traditional, tactically specific, input‑focused RFPs. RFPs are great for commodities and for products where you can specify the inputs or characteristics, but consulting doesn’t work that way. You know a paperclip is always going to hold papers together. An RFP process makes a ton of sense for something like that. It’s a commodity, it always works.

But a consultant doesn’t always work. [laughs] They may be working hard, but the outcome doesn’t always come through. You then may or may not deliver against what you need. An RFP can actually end up steering you in totally the wrong direction.

Also, I recommend that, during the negotiation process, you reallocate risks, both yours and the consultant’s. This is a huge and really easy way to increase your expected return on your consulting dollars.

But the overall takeaway, what I really want you to walk away from this webinar with more than anything if you’re on the client side, is to focus on outcomes.

You are in the business of achieving an outcome. As long as you focus on that, you’re going to experience much better results when you hire some sort of outside expert. As I put on this slide here, a very small improvement in your ultimate outcome will pay for a huge increase in costs.

Look, now we’re halfway through these 10 reasons why clients buy cranberries. I’ve given you that context document, and also a few other tips. We’re going to do a really brief break so I can just give you an overview of what The Ascendant Consortium does.

When companies bring in outside help, this is typically the process that they go through. They decide they need help. They do draft RFPs and look for vendors and blah, blah, and eventually they work the project. As we’ve seen and as the research shows, when companies go through that, typically they’re getting about a B result. It’s kind of mediocre.

At The Ascendant Consortium, what we are all about is getting to an A‑plus, and that’s what we deliver. We have ways of going through these steps that we’ve perfected, because it’s what we do day in and day out, that creates a better outcome.

If you are on the client side and you’d like to know more about this, of course, I’m delighted to talk with you about it. Just give a call and I’ll tell you more about how we hire consultants and help you use [inaudible 30:18] more effectively.

Also, just before I move on, I want to give a quick heads up, because there are a lot of consultants listening. Over the next few weeks, you’ll be able to sign up for a course that Zintro is sponsoring called, “The Client Acquisition Formula.” This is the single best program for consultants I have ever offered.

The participants in this have ranked this off the charts. Zintro is going to be giving a special one‑time only opportunity to join the group that’s going to go through this program to set up 2015 for success. I’m just planting the seed. Keep your eyes open for that.

Let’s cover five more reasons why client buy cranberries when they’re hiring consultants. Then I’ll give you some recommendations, and then I want to open it up for Q&A. I want to make sure there’s time to answer questions. If you have questions, please type them into the chat box.

Let’s look at these. Five more reasons. Reason number six is hiring end to end. This seems like a great idea sometimes, but it’s really not. Having one consultant take you all the way from figuring out what to do, through developing a plan and then implementing it, that sounds great.

But here’s the reality. No firm or person is excellent at everything. They simply can’t be. Also, on top of that, back end expertise biases the front end of the project, and you really need to be careful there. I recommend you split strategy, plan and implementation. You don’t have to hire three consultants by any means. If you’re determining what to do, making some sort of decision and you want outside help to go well with your implementations, you should have at least two different firms involved.

That gets rid of that bias. The next big reason is that clients put all their eggs in one basket. There’s still a lot of risk when hiring a consultant. A mistake on the part of the consultant could be a disaster for the company and be a disaster for you personally. There’s a really easy to mitigate this risk.

That’s by creating a pilot project if at all possible. That could be one division. It could be one iteration or one market or even a small phase. I do this all the time with my own business. I do it with my clients’ businesses. You do that pilot with three firms. If you hire three consultants instead of one to do a pilot project, and then you choose the best one, your project actually one needs to deliver a one percent better outcome at the end.

You only have to produce one percent more value at the end to pay out the extra costs. That’s it. Great. Let’s hit the last three reasons. Reason number eight is that clients look for a traditional waterfall approach.

In a traditional project, what that is or that means is a consultant comes in and they’ll do this in‑depth assessment of the situation. They’ll make this big presentation. They do recommendations. Then they go wait for some more time and develop detailed plans. Then after that, you get months and months of implementation.

That’s traditional. In my experience, about 90 percent of projects use that traditional approach, especially when you get outside the rules of IT, Agile, and innovation. Yet, 90 percent of projects would actually do better with a more iterative approach. My recommendations are to use an iterative approach, what I call a C to a B to an A, and make iterative, make flexible the name of the game when you’re hiring consultants.

By the way, that’s another reason that being task focused and using a traditional RF&P doesn’t work terribly well because they don’t fit well with a flexible approach. The next reason clients buy cranberry, it’s really easy to correct. Clients don’t check references. They get all warm and fuzzy you with the consultant, “The material looks good. Your case studies look good. The client list looks good.” [laughs]

They’ll be, “OK, yeah, great. Let’s go.” That’s a big mistake. I highly recommend you get at least five references including at least one reference from a client who had a project that did not go well. That’s like a four plus one there; four good ones, one bad one. If your project is of any kind of scale, I can guarantee you that it won’t go completely smoothly.

What you need to know is then, “How does a consultant deal with that? How do they handle the project that went south?” If a consultant can give you a single project for a client that didn’t go well, I wouldn’t use them because they’re either not being open and honest or haven’t been in the business long enough.

It’s the same as the investment world. The top investors know you never go with management that hasn’t failed at least once. I would use the same philosophy here. Also, make sure you’re getting records for the specific consultants who will be on your project, not the firm as a whole. The firm doesn’t matter.

What you’re looking for is how these particular consultants have done. Let’s round things out with the last reason. Clients hire consultants poorly and get poor results. That is, they use the word, pricing structure. That is worth a minute because, at this point, most consulting projects are being contracted on an hourly or daily rate.

In most cases, that is not the best way to hire a consultant. I don’t have time to go into great depth in the pricing structures here, but I know there are always questions on this. Let me give you a framework and a couple of notes that will help you make much better hiring decisions.

First, think of consulting fees as being determined either based on time or on value. In most cases, consultants are hired for fees that are determined based on time, which is a mistake because it doesn’t align the consultant’s interests with your interests. Your objective, as we’ve been discussing, is to get an outcome. It’s to create value.

When you hire consultants with fees on that basis, then they’re aligned to your goals. That doesn’t mean you have to pay more percentage by the way. It means you have to create some alignment. The other way to think about fees is based on when those fees are determined.

They can either be determined before the project has started, in which case they are fixed, or they can be determined after the project’s done, in which case they’re variable. If we take these two dimensions, you get a very easy quadrant chart. Down here, you’ve got a variable time and materials.

Over here, you’ve got fix cost projects that are based on time. Up here, you have fixed value based projects. Over here, you have success fees, or “skin in the game”. Like I said, there’s a lot more to this than I can go into here. But what I will tell you is that fee structure you want most often is a hybrid.

Right here, we’re up to this gold star. The one fee structure to avoid at all costs‑‑it is the single worst fee structure for everything involved‑‑is down here. It’s called a variable fee with a cap. I see this all the time. It drives me crazy. But I would never, ever let any of my corporate clients enter into that fee structure.

It might seem like a good idea. It’s bad news. It’s bad news on all fronts. There you go. That’s the top 10 reason why clients buy cranberry projects along with some tips to help you do a better job. Let me summarize what I covered. Then we’ll handle any Q&A. If there’s no Q&A, I’ll send you on your merry way. But I wanted to make sure there was plenty of time for that.

First, create a context document before reaching out. A context document has six parts. It has a situation, which is what’s changed and why you need a consultant. It talks about what your desired outcome is. That’s extremely important and what the indicators of success are, what any risks are, what concerns you have about the project and about bringing in a consultant, what the value of the project is, and any parameters.

Always, always, always focus on the outcomes. Keep your eye on the outcomes, not situations, not the activities, not the costs. Maintain your flexibility in your approach and your vendors by using the right approach using an iterative approach, a C to a B to an A. Run pilots when you can. Don’t hire end‑to‑end. That is not the path to excellence.

Get real references. By the way, check them. It’s not enough to get them. You have to check them; either you or someone who’s used to doing this should be actually making the calls. Finally, use the right fee structure. There you go. That’s a whole day worth of material, I managed to do I think in about 30 minutes, right in that range, maybe 45.

Let’s turn it to Q&A and make this more interactive. Chris, if you’re looking at the board, did any questions come in? Where there any questions? What are you seeing?

Chris:  Yes, David. We have been receiving questions along the way. But, first, I would like to say, Zintro members feel free to David directly with the information provided or by going to a Zintro profile. We will keep this webinar session open for another 15 to 20 minutes so David can respond to questions by our attendees. I will hand it over now to Enrique for the Q&A section.

Enrique:  Thank you very much, Chris. Yes, David, we have a couple of questions. Well, more than a couple of questions. I’ll try to go through them quickly. The first one is by Felix. Felix is asking, “What is one thing we can do right away to not be the consultants that bite?”

David:  So Felix is a consultant. [laughs]

Enrique:  Yes.

David:  This is a great question. This is how to not bite, right…

Enrique:  Yep.

David:  … [laughs] as a consultant. I love that. Here’s my recommendation. First, be good at what you do. Have something that you do and be the best in the world at it that’s a specialty. Be the best in the world with that, and don’t take on projects that you shouldn’t take on.

I know there’s a great temptation to do everything. You feel like you’re leaving money on the table if you don’t take a project that, well, maybe, you could do. I often joke that the three most important words in consulting are, “Yes, I can.” But, “Yes, I can,” can get you into some real trouble. It doesn’t help your clients.

Focus, be great at something. That’s how you don’t bite. The other thing I would say is master the context document and master the discussion that leads to that document because most clients don’t know it. They will benefit from walking through those six steps. When you walk through those six steps with them, you are going to be in a position to succeed.

Everything else is easy. Everything else is easy. The hard part is when, and you know this if you’re a consultant, is don’t make clients call you when thinking about that situation. They have not figured out, how do they measure success? What is the value? What could go wrong?

If you do that, that’s a good start. Specialize; really know what you’re doing. If you’re the best in the world at, you’ll be great at it. You don’t have to be different. You have to be great and really master those context documents with the context discussion.

Enrique:  Thank you. We have another question by David. David is asking, “Developing the GRAVE and context document will require someone to do a lot of research into areas that our in‑house people may not know. How can this be managed?”

David:  I’m not sure I understand the question completely. I guess I would push back. The context document, let me actually go up a couple of pages, a note here. What’s changed? That doesn’t require research. A line is down. Attrition is up. Morale is down. We bought somebody. We’ve had a merger. These things are all evident or we decided we want to go into a new market.

We’ve decided we want to bring in a new customer relationship. These are decisions. Why a consultant, also? It doesn’t take a lot of research or work. You know we’re good it or we’re not good at it. We don’t have the expertise. We value a third party point‑of‑view. We don’t have the time.

A lot of it is you don’t have the expertise. You haven’t done it a lot of times. That doesn’t take much research. What’s the desired outcome? No research on that. You know what your outcome is. Your outcome is reduce attrition. It’s higher morale. It’s the ability to make a smart decision.

The outcome is all of our folks are on the same system; something like that. That doesn’t take a ton of research. The indicators of success, again, not a lot research. Every single outcome has at least one indicator of success. Does it take some thought? Yes. Does it take a little practice to do these well? Yeah, but it doesn’t take a team of [inaudible 45:02] .

What are the risks and concerns? Again, this, for the most part, most executives know when they think about it. Well, one risk is our engineering department will [inaudible 45:13] buck at having some outside experts come in. Or, we’re concerned that we might miss two dates. Or, we’re concerned that…These are really concerns, at least 20 or 30 really common ones.

These are listed, actually sitting right in my book, most of these. It doesn’t take a lot of research. It goes down in the book and say, “Oh, we have this one. We have this one. Do we have this one?” Value is the one that’s trickiest. It doesn’t take huge amounts of research.

It can take some. It can take a little bit of effort depending on what type of project you’re doing and what the focus is. But, again, we’re not looking for precision here. You’re looking the most for [inaudible 45:56] estimation. You’re looking for an order of magnitude? Is this a million dollar value to the company? Or, is it a billion dollar value to the company?

It doesn’t matter. It matters less when you have monthly to five million than if you a million versus 10 million versus 100 million versus a billion. If we get this line to be more efficient, well, maybe, what’s more efficient, maybe it’s five percent? Maybe it’s five percent. Maybe it’s three percent. Maybe it’s six percent.

Ultimately, that would make a big difference, but for the purposes of making investment in a consultant, really the right range‑‑three, four, five percent‑‑we’ll call it four percent, what would that mean? That doesn’t take a huge amount of effort. I guess I would push back, [inaudible 46:41] are easy, and say it doesn’t take a huge amount of effort to develop a context document. What it does take is focus in the right places.

Enrique:  Thanks, David. We have another question by Rick. Rick is asking, “Is it wise to hire consultants to do a sales job?”

David:  Is it wise to hire consultants to do a sales job? I’m not sure I would call that consulting because consultants are there really to advise you to take you in the right direction. There are three things that a consultant can do. They can either help with the decision. They can help you develop a plan. The decision is, “We’re going to go here or we’re going to go there.” The plan is how you’re going to get there.

Then they could help you with implementation. Those are the only three outcomes that are valuable from consulting. If they’re helping with sales, they may help you with your process, which is along here. They’re advising you. The other thing is that’s from a project with an outcome.

The other thing is just plain advice. A consultant can advise you how to do it better to train your company how to do it better. I go into consulting firms all the time and teach them how to do this, how to do sales better. When you’re hiring someone to actually do these sales for you, I’m not sure that’s consulting, per say.

But even so it depends on the type of business you’re in. The manufacturers very often hire brokers. The broker business is a common business. Brokers are professional sales people. They carry a bag, they represent a lot of companies, and you get a lot of efficiencies that way.

That works well. In the business of consulting, it doesn’t work so well because consulting is built on trust. The reason those big clients come back to me over and over and over again is because they know we always deliver. There’s trust there. I’m not sure that answers the question. If not, type in another question and we’ll answer it as we go.

Enrique:  Thanks, David. We have another question by Alex. “How can I better get prospects to understand and accept a value based fee structure, [inaudible 49:08] percent of some long‑term target?”

David:  This is another question from a consultant. Really, we focus more on clients in this one. But a value based structure, let me first click back and say, value based, or success fees, you’re talking about a variable. There are two different ways. Remember, you can do it fixed or you can do it variable.

There’s a fixed value based fee, the return value based fees are [inaudible 49:41] . That doesn’t mean a percent necessarily. It’s just means you’re looking at the value and saying, “A reasonable payment, a reasonable return, for us to be paid to go over that value is a certain amount.”

That gives you a seven to one risk adjusted return, or 10 to 1 risk adjusted return, when they’re success fees and “skin in the game”. Remember, I said the best place to be is here. Something that’s based totally on a percentage of the savings is not actually good for either side.

It puts too much pressure to deliver short term risk. The question of how to get clients to agree to that, I’d actually like to table. This is focused. This is really for clients. What I will say is as a client, the reason you want to be up here on value as opposed to down here, which is on costs, is because you want yourself and the consultant focused on producing value.

You want to focus on producing an outcome. When you are focused on costs, you’re going to be looking at activities. You’re going to be looking at hours. You’re looking at dates. That’s not really why you’re hiring someone. You’re not hiring someone for hours. You’re not hiring someone for dates. You’re hiring someone to produce an outcome.

The more flexibility you give to that consultant to produce that outcome, the better off you are. My consultants, for the most part, we work up here as you would expect. This is where I put my clients is in these types of projects. We do whatever is necessary to deliver that A plus.

We’re doing that because we’ve been paid on a value basis. We’re not worried about, “Is this going to be an extra hour or is that going to be an extra hour?” You, as the client, aren’t worried about it. You’re not saying, “Mm, I don’t know. Should I pick up the phone? That’s a change of work. That’ll be an extra hour.” That’s not being wise.

You want everybody focused right here on value. Enrique.

Enrique:  Yeah, we have another question by Mauricio. I think it’s partly a follow‑up to what you were just explaining, David. He would like you to elaborate a little more on your value cost after/before charge.

David:  It would help to know in what way [laughs] to elaborate on it.

Enrique:  Mauricio, if you’re there, we would really appreciate a follow‑up question on that.

David:  This is a construct. It’s an easy construct for thinking about these structures because, as you know, this is pretty much…There are other ways of looking at it that I offer. There’s another way in the book that looks at foundedness, whether a project is founded or unfounded. But, basically, this is best for consults and for clients.

I will tell you. I’m a big believer that what is best for the consultant is best for clients, and what is best for clients is best for consultants. This is long‑term. I’ve been in this business a long time now. If you are a consultant and want to be in this business for a long time, you have to produce value for your clients.

The best way to do that is say, “OK, we will be paid a fixed amount, a certain fee, based on achieving an outcome for you, and we’ll do what it takes. And if we achieve it, we get a bonus.” Now, usually you don’t want that based on a percentage. What you want that based on is a discrete action‑based binary kind of indicator.

For instance, as a client, I would recommend ‑ let’s say we got hired to do an integration plan. And the way it was structured was we got paid a certain fee [inaudible 53:30] do the integration plan. Then we said “The indicator of whether this was successful for you, whether you like it, whether you believe in it, whether we’ve delivered what you need is that you use it. If you decide to use the plan, we get paid a bonus.”

It’s a binary indicator. We either get it or we don’t get it. Of course, we got the bonus. But that way, when the client is paying the bonus, they actually are paying more, but they’re paying only after they’ve achieved on a very, very high‑value outcome. And so the return for them is guaranteed.

But we’re not into any kind of conflict over measurement, and we’re not into any kind of conflict over percentages and we don’t have to worry about getting into their books or looking at these kinds of things. So there are best practices for structuring success fees and these kinds of hybrids. Some of it’s in the book and some of it I teach elsewhere.

Enrique, what else do we have?

Enrique:  We have another question by Tony. He’s a consultant, and he asks, “Until a client learns about and actually goes through the process of a context document, how should consultants best manage the challenge of overarching importance clients place on fees over the true value of consultants? I think this question is truly valuable for both sides.”

David:  How should we manage that?

Enrique:  Yes.

David:  You manage that by just focusing yourself [laughs] and the client on the outcome and talking to the right people. The focus on cost…here’s a typical organization. C suite at the top. Lots of workers here at the top. As you go down the organization, the focus on cost tends to increase. As you’re going down the organization, the focus on cost tends to increase.

If you are not talking to the decision‑maker, the decision‑maker is the one who’s experiencing the problem, the one who has the aspiration and they’re more likely to be looking at cost. If you’re talking to the person who’s actually suffering with the problem and deciding, then they’re going to be more focused on the value. So talk to the right person. And that person, by the way, is usually not up here. That person is usually in here. That’s one thing.

If you are dealing with a procurement department they tend [inaudible 55:58] to be focused [inaudible 56:00] and the way you deal with procurement departments is you say, “I’m happy to talk with you, but in order to deliver a proposal, I must also speak with the person who’s actually going to be using this or the people who are going to be using this. I will not respond to just RFPs,” because you can’t guarantee an outcome that’s going to actually deliver against what they need.

So you have to focus on value. And you have to talk to the people who are focused on value [inaudible 56:31] and that would help you get away from this cost [inaudible 56:33] . One more, or…

Enrique:  David, thank you very much. I think we’re out of time. We have many more questions. I will forward them to you, so David will be following up after the webinar with any questions. If you have any questions free to contact David.

Chris, off to you.

Chris:  David, on behalf of Zintro and our over 160,000 members, thank you so much for sharing your insights. This closes today’s presentation. I wish all of you a very nice day….