Where does value come from? For our second episode of the AdHocnium Catalytic Podcasts, our Catalysts discuss the various strengths and drawbacks of value-based billing. In today’s podcast, Chris Heuer is joined by Hank Wasiak of ConceptFarm, Shel Holtz of Holtz Communication + Technology, Redg Snodgrass of Stained Glass Labs, and Bill Sanders. Each discuss their own experiences working with value-based billing and share their insights on how to bring clients and consultants in better alignment. They also relate this to AdHocnium’s strategic decision to move away from long-term strategy consulting projects and focus on selling “days, not weeks.”
For many years there has been an ongoing conversation about the value of consultants and whether time-based or value-based billing is a better strategic choice. The reason for more dialogue and less change in this area? The simple fact that businesses are reluctant to adopt value-based billing out of pure FUD (Fear, Uncertainty and Doubt).The idea of value-based billing speaks to AdHocnium’s founding purpose: to streamline the how we provide strategic advice, and cut away at the fluff that so often clouds the perception of what value is provided through consultant work. Catalysts at AdHocnium, each with their decades of experience on the edge of transformation, have valuable insights and creative ideas for both struggling and thriving enterprises. Value-based billing strives to assess the monetary compensation that is most appropriate for the actual improvements their contributions make on the growth or survival of the company.
Bill Sanders initiates the conversation by explaining what it means to place emphasis on value as opposed to time. The idea of trading time for dollars in a consulting context loses some professional appeal, as it puts the consultant and client fundamentally at odds. Value-based billing works best in pure consulting situations, where the consultant is either 1. Solving a problem, 2. Helping to make a decision on solving that problem, 3. Planning, or 4. Helping the company innovate. Adopting value-based billing for these sorts of intellectual/strategic services are the areas in which Bill has mostly found interest and acceptance.
Further on, Hank Wasiak explains how a digital world fundamentally disrupts a fee-based system based on hours and timesheets. Consulting agencies are now wrestling with finding the true source of their value to clients. Trying to value the unexpected and what can happen introduces the biggest challenge to securing agreement about value. However, the moment value can be defined explicitly, both the consulting firm and client benefit tremendously.
“Not all consultants are created equal,” says Redg Snodgrass when asked about his experiences with value-based billing. Through the various roles of consultants, determining the value of the task helps to define where the consultant’s value rests, and helps give the project a more precise direction. Finding that value also helps to contribute to the sense of camaraderie between consultant teams, and gives a clear finish line for them to reach.
Shel Holtz enthusiastically supports the idea of value based billing, but has never had much success in implementing it in his years of experience with large companies. He paints a clear picture of the reality to which everyone can seemingly relate, “Even just a brainstorm in the shower is worth a lot more than the fraction of an hour you’d be able to charge for that.” He does a good job of explaining the difficulty in measuring a consultant’s value, but also explains why clients tend to be dubious of value-added billing. Obviously, clients have an interest in paying consultants less, and value-based billing can still be difficult to sell to clients due to the ambiguous nature of attributing value to the work.
As our Catalysts illustrate, value-based billing is a particularly convoluted issue and one that takes a lot of thought so as to best align everyone’s interests around providing the best service possible, in addition to ensuring fair compensation for the contributions made. Listen in to this week’s podcast to hear the many perspectives our Catalysts provide on the topic of value-based billing. Please share your thoughts on this topic in the comment section below on the inexact science and fanciful art of determining the value consulting services provide.
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