Deliverables: Results-Based Consulting

(initially published on Escape from Averageness® in October 2014 as the last in a six-part series;  republished here as part of our retrospective, “Above Average: The Best of Escape from Averageness®, 2009-2021”)

SAI Consulting is afforded the opportunity to serve our clients’ needs, because of our management experience related to a specific industry, matched with our ability to focus a distinctive constraints-based problem-solving approach to their specific circumstances.  We have a firm grasp of the operational performance issues that affect our clients;  we focus their efforts on solutions that they should be able – should be able – to translate into increased profitability, improved cash flow, and higher economic return.

By necessity or resignation, we deliver most of our consulting work in engagements that operate under a conventional, fee-for-service approach;  “by necessity or resignation” expresses the reality that the value-driven, results-based consulting we favor imposes requirements that cannot be met, that simply do not fit within convention, do not fit within accepted rules.

The conventional approach defines projects in terms of work product, not business outcomes;  the client’s willingness and capability to implement the change is rarely considered;  the client’s commitment is not gauged;  there is no insistence that clients learn and become responsible for performing the work themselves;  there is no connection between what a project costs, and the results – the value, the benefit in excess of cost – that it delivers.

We would prefer to work with clients – and be compensated – purely on the basis of the value we help create – value defined by the results we help achieve, measured in terms of improvements to operating and business outcomes.  In our view, consultants should provide more than expertise;  consultants need to obtain results, they need to share accountability for those results, and – in terms of compensation – they need to share in those results.

Defining a project in terms of shared responsibility for the financial outcome is only one element of how a results-based consulting model should work.

Other elements are that it should not be a solution in search of a problem;  it should apply the best solution to a range of problems and constraints.  The scope of the project should be based on the client’s capability and willingness to change.  It should break projects into phases that deliver rapid results, without losing sight of the long-term goal.  It should require that clients and consultants work and learn together, in full partnership mode.  It should leverage the consultants’ resources and capabilities, not make the client increasingly, unendingly dependent upon them.

This type of high-yield, value-driven, results-based consulting requires more than a traditional consulting approach can provide – a host of requirements that make low-yield, fee-for-service consulting problematic for its consultants:  greater comprehension, longer project timeframes, more agility, higher working capital commitment.

So – what is required in a results-based consulting arrangement?

First, the client has to agree to a focused process of continuous improvement, defined as a prioritized series of initiatives conducted in consecutive order with short durations, aimed at achieving targeted, defined, measurable results.

Second, the client needs to accept a variable costing approach to managerial accounting;  it needs to embrace Cost-Volume-Profit (CVP) decision-making, and prepare its internal financial reports on a Contribution Income Statement format.  It needs to embrace targeted increases in Gross Income as the unifying business outcome;  Gross Income is targeted because it is a border crossing, the demarcation point at which its pricing and cost issues meet its productivity issues.

Third, the client has to end the practice of bonusing individual job performance, and adopt a team-based performance compensation plan, within the tenets of Open Book Management.  It has to agree to a plan that provides a self-funding, progressively-weighted series of milestones that will distribute the team’s portion of a Gross Income Reserve, which is the residual created from a Gross Income Target achieved in excess of a Gross Income Baseline.

Fourth, all other improvement initiatives must be subordinated to the overall improvement process described in the first requirement;  the initiatives have to be integrated – unified – into the overall plan, and they have to contribute to the targeted results.

Lastly, the consultant has to be satisfied with his share of the Gross Income Reserve as the only compensation he will receive for his participation in an extended consulting engagement, an engagement in which he cannot limit or restrict his involvement.

Results-Based Consulting is not an approach that will succeed for every company;  consequently, it will never fully replace traditional consulting.  But – this is the basis for how we would prefer to work with clients.

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