This is the fourth in a series of postings about my thoughts from sessions that I attended at the Information Technology Alliance’s Fall Collaborative (<-I love that word) held in Palm Springs.
This was a panel session, hosted by Lisa Kianoff of L. Kianoff and Associates. Three partners (all Sage) participated. More significantly, I was not a participant (except as an attendee). This is a huge victory for the pricing with purpose movement.
To develop her price she does begin with rate times hours, but then factors in likability of the customer and their people, the complexity of the work to be done, the potential risk to her firm in doing the work, whether or not the customer has an internal IT department or uses an outside contractor. Before setting price, she believes you must have a thorough understanding of what the customer needs.
“Even if you do rate time hours and you do not understand the needs, you are still guessing at price, aren’t you?”
For the most part, she believes RFPs are poorly written and inconsistent and refuses to get involved with prospects who will not let her bypass them.
“When a customer asks, ‘How long did this take?’ We say, ‘We don’t know, we do not keep track.’”
Annette kept timesheets for a year, only to realize she never looked at them and it caused ill will with her team. To manage projects she is using duration (due date) completion percentage rather than effort estimating.
“I don’t know if I make money on a project, but I do not care. I know I make more money overall. Oh, and by the way, I have no collection issues and no bad debt.”
Started fixed pricing on upgrade projects and found that customers love fixed fee engagements. They are paying a premium and they love it because they are only down three or four hours, rather than the one day or two days when they billed them by the hour.
Developing scope is always an issue, but it is much easier when they do paid Feasibility Evaluation engagements. Pre-sale of software engagement. They found that if they can prove that they have a viable solution, even the customer’s budget number is irrelevant!
They offer a 100 percent money back guarantee with 100 percent payment upfront and have never had a customer as for their money back. They have however, insisted on giving a customer’s money back and not continuing to work with them. They also include a 15 percent premium on fixed fee engagements.
The reason they move to a fixed price is that they found they were only collecting the forecast hours anyway, so why not get the benefit if they were able to do the project more quickly.
This is the second in a series of postings about my thoughts from sessions that I attended at the Information Technology Alliance’s Fall Collaborative (<-I love that word) held in Palm Springs. Since they are all not appropriate for this site, those of you who are interested can see the others as they appear at www.edkless.com.
Presented by Jeanne Urich of SPI Research. The highlight of my ITA experience occurred during this session when Jeanne acknowledged that a conversation that the two of us had at the spring ITA meeting has influenced her thinking and that she now believes that fixed price agreements are better for customers and consultants. Now to convince her to give up on these dozens of benchmarks! I think this will be a much harder task.
The study consists of 175 metrics, 20 of them deemed key performance indicators. The problem in my mind is that all, save one of the 20 are inwardly focused on the firm, even those in the “Service execution” and “Client relationship” areas are firm-based.
The problem as I see it with most benchmarking is that it focuses us on all the wrong things: the past rather than the future; internal rather than the customer; efficiency rather than effectiveness.
For example, one “customer” metric was about project completion success. The question was asked of the providers, “What percentage of your projects are completed on time and on budget?” The average answer was 74 percent. This more than doubles the number (35 percent) according to a study done by The Standish Group who asked the same question of customers. Needless to say, I side with customers on this one. Again, to her credit Jeanne acknowledged this flaw.
Many of the other metrics are based on the false premise that value delivered is equal to rate times hours, aka, the labor theory of value. This theory is demonstrably false and belief in it has been proven to cause harm.
I have sat in on countless benchmarking session and the reactions of the attendees is always the same: a) if they are doing better than the benchmark, they think they are OK and do nothing, and b) if they are worse than the benchmark, they dispute the data and still do nothing. Path (b) actually happened twice during the session!
My beef with all benchmarking in business is that while it attempts to appear scientific, it is not even close. To her great credit Jeanne is very careful about saying that these metrics are correlative not causal. Unfortunately, most people do not understand this distinction and are lulled into the illusion of control via data.
The findings are always similar and in many cases are nothing more than a bunch of truisms:
Firms who market well have higher revenue. (Yet, marketing spend, even among top firms, is less than average across all industries.)
Firms who close more business (win to bid ratio) are more successful. (The question is, what do they do differently that allows them to have a higher win to bid ratio? Win more or bid less?)
Few firms grew revenue in 2009.
Clear vision and strategy and taking care of your people are important in professional firms. Firms that focus on culture are rated as better places to work. (What kind of culture?)
Conclusions are almost always the same - “Increase revenue, lower discretionary spending.” Always a good idea.
For the past few weeks I have been involved in a dialogue of sorts on the TEDtalks LinkedIn Group about whether the value of an idea is in the idea itself or rather in the implementation.
This led to a pithy, but profound exchange between myself and Wan Chi Lau. To spare you the details of the other parts of the conversation, I have excerpted just the relevant threads of the conversation. Thanks, Wan for the permission to reprint your comments.
Ed
Without an idea, you have nothing to implement.
Wan
Actually I would disagree...the evidence is all around us. The entire Universe is one big implementation without any "idea." We are of the Nike mantra...."Just Do It."
Ed
Only if you are an atheist. I am not.
Wan
Well, clearly I am :-)
This brief exchange is the whole essence of the argument and I am curious to know if the following hypothesis is true: If you believe the value is in the idea, then you are likely to be theistic; if you believe the value is in the implementation of the idea, then you are likely to be atheistic.
Ron has written extensively about this in these two posts:
Dan Ariely authored one of the best books I read in 2009 entitledPredictably Irrational. In this brief clip from his TEDtalk he demonstrates the powerful effect of options pricing. Ironically, the subject is The Economist magazine and they completely missed the opportunity to display their pricing prowess. They blew it! Big time!
In reply to a conversation with a member of VeraSage I wrote a really good paragraph and I thought I would share since it is TLFT (too long for Twitter).
One of the issues (with tracking time) is vagueness which is the enemy of accountability. Getting people to define the results is hard work; time sheets allow managers to be precise about the effort expected while leaving the results entirely vague. Thus someone who bills many hours can be considered a hero or an idiot depending on what the manager thinks of them.
I was honored to speak at the ITA Fall 2009 Collaborative in Rancho Mirage on the topic of monitoring an controlling project in software implementation engagements.
During the presentation I did a brief workshop on dealing with resistance. The video clip is part of the introduction to that topic. My thanks to Wendy Gorrie of Plus Computer Solutions for agreeing to serve as my videographer for the session, she captured way more that I had hoped. (I hope the blood returned to your arm, Wendy.)
I am deeply indebted to Peter Block who developed this idea extensively in his book Flawless Consulting.
If you are interested to view the entire segment, please send me an email at ed.kless *at* choosegreat.com.
Congratulations to Mark Bailey and the whole team at Mark Bailey & Co. for being named the Best Accounting Firms to Work For by Accounting Today for a second straight year. The article specifically identifies the trashing of the timesheet as the reason for their tremendous success.
"We threw out timesheets," explained Mark Bailey, the firm’s managing partner. "But the motivation to throw them out is that they didn’t really reflect the value of the service that was being given. What we came to realize very quickly was that a timesheet is a control tool."
The 16-person firm decided that controlling professionals didn’t drive productivity; instead, it hampered innovation and creativity.
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