How to Pay Consultants & Contractors More Than You Should
(DISCLAIMER: This post is a time-delayed modified draft from the past — all names removed to protect the guilty — incorporating some timeless concepts of project management.)
One of the lessons you learn in business and life is that’s it’s never just about the money.
Rather, money is the vehicle that people use to express what matters to them — their motivations, desires, values and concerns. I’ve seen this principle manifest itself in all sort of situations, from simple business negotiations, to complex financial arrangements between people in a relationship. Yes, whether you are buying a trinket in a flea market, working out a payment plan for a tuition, planning an estate or working through the dissolution of a partnership, it’s never just about the money.
Here’s a simple example of the above principle, involving the contracting of customized services from a contractor or consultant. This is work that requires a pricing quote which isn’t captured in a simple rate sheet, and where the contractor must decide based on a “gut feel” of the client and project.
This list is called “How to Pay Consultants/Contractors More Than You Should” ..or alternately, for the Consultants and Contractors out there, “When You Should Charge Your Customers a Premium/Penalty Pricing.”
- Customer acts like a jerk
- Customer is vague about work requirements
- Customer demonstrates disorganization
- Customer exhibits tendency to throw things at others at the last-minute
Putting the above list into positive terms:
- Be a mensch
- Be specific
- Be organized
- Be proactive/considerate
Some notes on the above list:
#1) ACTING LIKE A JERK:
This is sometimes called the “A-hole Tax.” Over the years, I’ve encountered about a half-dozen companies where their payroll and professional services costs were inflated well above average for similar companies in the same market, because anyone with talent and half-a-brain would immediately perceive that senior management suite was populated by flaming a-holes and so would demand a premium in their pay rate. In a typical scenario, senior management was churning through employees and contractors and so was forced to pay this “A-hole Tax” to get a few decent folks who would be willing to put up for them… for a while… and yes, in some cases, I was one of those people charging them premium rates.
As a consultant, I am more generous with clients who play for the long-term rather than the short-term and who treat their employees and contractors with respect. Does that sound weird? It shouldn’t. If someone acts like a slimebag, I charge them more… and I’m not the only one doing that. Amazingly, there are people in business who frequently pay the A-hole Tax and simply don’t realize it.
#2) VAGUE ON REQUIREMENTS:
This is a classic issue when it comes to any sort of creative work such as design or systems development. A customer is vague about what they want is a dangerous customer. After signing off, they may proceed to reveal a wider set of requirements, continue with incremental scope creep, periodically change their mind about what they want, and occasionally introduce ideas or requirement that will contradict or “break” what was previously built. Experienced contractors know this. Pity the in-house employees caught working for such managers/projects… and recognize when one of those employees is passing one of those hated projects off to you, the consultant.
Some words of advice to the business owner looking to get a lower pricing quote on their next project: Map out the requirements and write a spec first. If the project is big enough, consider hiring someone to write the spec before asking for project pricing. After not acting like an A-hole, this one bit of advice will provide you the biggest savings for the least effort (unless not acting like an A-hole is a huge effort for you, in which case writing a detailed spec is your only hope).
This is similar to #2, above, although usually not quite as pernicious. The consultant must account for the amount of time it will take to process (or “sanitize”) any information provided by the client, and must be ever-vigilant for errors or inconsistencies that could throw the project off.
Dear Disorganized Prospective Clients: Please consider this a value-added aspect of the contractor’s service.
The client who throws you a project at the last-minute — especially when they had plenty of time to come to you beforehand — may be manifesting some or all of the above-listed tendencies. The key here is to discern whether the short notice is part of a larger pattern or a one time occurrence. In any case, there is a premium attached to turning things around on short order. Remember the contractor’s Cheap-Fast-Good Rule: Everyone wants all 3, but they can only get 2 out of 3. Since the client wants it to happen Fast, they’re going to have to get it Not Cheap or Not Good. Personally, I don’t like doing any work that’s Not Good.
Parenthetically, the Cheap-Fast-Good Rule has certain exceptions: Sometimes you get only 1 or even none out of 3… particularly in building construction… and especially when you go with the lowest-bidding contractor (think broken, delayed and over-budget project with costly repairs and maintenance costs).
On the bright side, you can get all 3 when it comes to Chinese take-out food.
Now here is a Career & Branding decision to consider: If you are a consultant or contractor, decide on the importance you place on those three attributes of Cheap, Fast and Good, as it will determine the types of clients you attract and the reputation you establish. For me, the order of priority has always been 1) Good, 2) Cheap and 3) Fast… although lately my very Good clients have demanded that I be Fast, so it’s been a balance of maintaining quality while asking for some additional consideration and/or saying “no” to those things which don’t have a good pay-off, either short-term or long-term.
Notice also that the previously listed client behaviors #2 and #3 — Clients Who are Vague on Requirements and Disorganized — pose direct risk for doing Good work… and for that matter, Cheap and Fast work too!
As for list item #1 — Clients Who Act Like Jerks — well, life is too short for that sort of thing. So, charge the jerks extra and give your discretionary effort over to the nice guys — especially those clear, conscientious and well-organized nice guys.
Think of it as a kind of redistribution of wealth… the “wealth” being the very best work that you can do in the limited time you have.
Posted on June 16, 2011, in Business, Career, Project Management and tagged A-hole tax, Business, Consultant, Consulting, General contractor, jerk, kindness, premium, specific, third parties. Bookmark the permalink. 4 Comments.