Moving to the other side of the fee type spectrum we have time-based fees which is traditionally how about accountants and lawyers charge their clients. They have a charge out rate per hour, so if you engage them for ten hours, then of course they pay ten hours times the rate per hour. That’s all well and good, but by definition, the professional advisor in this case, has put a cap on what they could potentially earn – because there’s only so many hours in a day, days in a week, weeks in a month, months in a year – if they’re purely charging on the basis of time. The advantages and disadvantages have been well documented in lots of places for a long, long time. No need to waster our time here.
Much more interesting is the school of thought where an advisor charges, not just on the basis of success or time, but on the basis of the value that you deliver to the client. An extreme example here will help. There’s a very famous management consultant author by the name of Alan Weiss who has written a whole stack of books. He gives some really good examples of, perhaps, the foolishness of advisors like accountants and lawyers charging on the basis of time purely because of that reason, that their potential earnings are capped by the availability of time. His approach is, to work out with your client from the get go what value they really need from the project that the advisor has been asked to deliver or the advice on.
There’s a wonderful example, which may fall into the realms of urban myth, of a CEO calling in a consultant – (it’s not Alan Weiss in this case, just some other guy) to help him. This CEO lead a very large firm and he was having problems getting his executive team of seve people to really achieve the things that they needed to achieve on a daily, weekly and monthly basis. So he called in his friend, who was (I think) a senior partner with one of the big consultancies, and he explained his dilemma to the consultant. The CEO went into lots of details and he shared his frustration that he just couldn’t get these people in his executive team, who were all talented, skilled, experienced senior executives to do the tasks and deliver the outcomes in the right time frame. Things just took too long and would drag out from week to week, month to month, and so on.
The senior consulting partner, after pausing for a moment, shared the following with the CEO (let’s call him John)
“John, I hear your problem and I can sense your frustration, disappointment, and anger. Please be assured that you are not the only CEO on earth to feel these things. What I’m about to share with you will revolutionise the way that your executive team will work and how they relate with you. It will change their world and your world. The CEO, of course, leant forward and whispered, “Tell me the secret. Tell me the secret. This is fantastic. I can’t wait.”
The partner took out a blank sheet of paper and started drawing a table. The table had two columns. The left hand side, was labelled task; the right hand side, labelled task completed yes or no?. I think in this case he had a tick for the yes or a cross for the no. And he said, “Look, John, this is really simple. In week one you get your executive team to write down the ten things that they want to achieve that week. Some of them will be small things which will be achieved in five minutes. Some will be quite long and they will be done over several weeks. What I want you to do in week one is put the ten things that you want your executives to achieve, but also not just what you want them to achieve but what they want to achieve, and they get sign-off from you and they show you the blended list. So that’s week one. Every get together you have with them in week two, week three, week four and so on, you go through that one list. You go through the things that are done and the things that are not done.” This consultant said, “I guarantee that within a three months they will be transformed. They will be focused on achieving those things on the list.”
The CEO said, “Is that it!? A to-do list?”
Tune into the next post to read what happens next!
All my best,