Deliverables: Results-Based Consulting®

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

By necessity or resignation, we deliver a lot of our consulting work in engagements that operate under a traditional, conventional, fee-for-service approach;  I use the terms “by necessity or resignation” to express the reality that the value-driven, results-based consulting we favor imposes requirements that cannot be met, that simply do not fit, within the traditional, conventional, fee-for-service consulting approach.

Under a conventional approach to delivering consulting services:  projects are defined in terms of work product, not business outcomes;  a client’s willingness and capability to implement the change is overlooked;  client commitment is not gauged;  there is no insistence that clients learn and become responsible for doing the work themselves;  there is no connection between what a project costs, and the results – the value, the benefit – that it delivers.

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

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 requirements.

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 the unifying business outcome;  as its 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, the residual created from a Gross Income Target in excess of a Gross Income Baseline.

Fourth, all other improvement initiatives have to be subordinated to the overall improvement process described in the first requirement; they 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 not threaten traditional consulting.  But – this is the basis for how we would prefer to work with clients.

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Fletcher L. Groves, III is a Vice President and senior consultant at SAI Consulting, Inc.  He can be contacted at (904) 273-9840 or at flgroves@saiconsulting.com.