How To Prevent Scope Creep
by Jonathan Stark
In my previous post on value billing, I opined that billing by the hour creates trust fractures in the relationship between client and consultant. This week, I’ll describe how a lack of trust can contribute to scope creep.
Scope Creep
When I talk to a roomful of consultants about value based billing, one of the first questions I get asked is:
“How do you prevent scope creep if you give clients a fixed bid?”
My answer is simple:
“I don’t.”
The truth is, I don’t have to. I trust my clients to not take advantage of me. And guess what? They don’t take advantage of me.
The Baseball Bat
Consultants use hourly billing as a baseball bat. When the client asks for something that’s out of scope, the consultant hits the client with the bat. Statements like these probably sound familiar:
“That feature was not part of the original estimate. I’ll build it for you, but it’s going to cost you.”
“I’d be happy to discuss that with you, but it’ll have to be on the clock.”
“You should have told me about that earlier. This is going to blow the estimate.”
When a consultant says that he has to bill by the hour in order to prevent his clients from abusing his time, it tells me that he doesn’t trust his clients. Which raises a key question:
Is it reasonable to expect people to trust you if you don’t trust them back?
True Story
Back when I worked hourly, I had this one client who was really chatty on the phone. He’d tell me about his weekend, his kids, etc. I genuinely liked the guy, and we’d often spend 30 minutes or so gloriously gabbing about life, liberty, and the pursuit of happiness.
Unfortunately, this non-work banter created an issue for me. My employer was billing me out by the hour and I was responsible to have a certain number of billable hours per week. So, for every 30 minutes of shooting the breeze with my client, I had to work an 30 extra minutes in the day in order to meet my quota.
I explained this predicament to my client on several occasions. I’d say something like: “I’d love to hear about how you proposed to your wife, but I have to get back to work.” Of course, he would say he understood and things would be strictly business for a little while. But soon enough, he’d start gabbing again.
Eventually, I pulled out the bat. I started tracking the time spent on the phone – regardless of the subject matter – and billed him for it. I’m sure you can imagine the effect this had on our relationship.
The Moral
When I think back on this situation, I just shake my head. Consultants should jump for joy if clients are willing to share personal details of their lives! It builds trust, which is an essential ingredient to a successful relationship, business or otherwise. Throwing this opportunity away because of 30 “lost” minutes here or there is asinine.
If you are a consultant, value billing will allow you to build trusting relationships with your clients. This will lead to more successful projects, repeat business, and in many cases, rewarding friendships. However, it does require that you put down the bat.
Comments
Thanks for another great piece, Jonathan. I took the trouble to register because I’m intimately familiar with the pain of dealing with clients via both hourly and value billing. Your posts about the advantages of the latter have been deeply comforting to me, given that that’s been my MO for the past few years.
Having said that, it’s not all peaches ‘n’ cream in value billing land. There are still scope creep issues. While you say that people won’t take advantage of you, there’s the simple fact that clients sometimes don’t know what constitutes a scope-changing event, and what doesn’t. And let’s face it, some clients can become unreasonable. It’s actually a rare job that doesn’t feature this conversation late in the game:
Client: “Can we add x?”
Me: “Of course, but that’s out of scope.”
What happens next is the scariest part of my job; sort of the equivalent of a police officer pulling over a speeder (you never know what you’re going to get!). Some clients are cool, and understand, while others feel ripped off. Education is key here, but the gist is simply that it’s never easy.
Still, I am completely with you on value billing, but it’s not a panacea for clients who don’t know what they’re hiring you for.
Cheers!
Aaron.
Hi Aaron –
Thank you for your comment!
I certainly don’t mean to imply that value billing is a magic bullet. Making the switch from hourly billing to value billing is a tough transition for many consultants. It’s a fundamental shift in perspective.
My main point at this stage of the series is to open people’s eyes to the fact that hourly billing is the source of many problems, and that optimizing the process of hourly billing is not the solution.
Thanks!
j
Jonathan, if you ever need a testimonial on the benefits of value billing just let me know. We approached it both ways & I definitely prefer value billing & I don’t think our project would have turned out as well if we hadn’t switched.
Hi Jonathan,
Thanks for the series of interesting articles – I’ve ordered the book you recommended and look forward to learning more about the value based billing approach as I can’t wait to make the transition from hourly billing.
I have a question about defining the scope upfront and then arriving at the actual amount that you quote – would love it if you could go into more detail about that as arrriving at the actual $ amount to quote seems to be the hardest part that I don’t yet understand. Also if you fee like posting a copy (appropriately censored) of an estimate that you have prepared for a prospect showing the detail you go that would be very helpful to see where you are coming from with your scope definition.
Thanks for the articles and look forward to joining you in value based billing land soon.
regards,
Steve
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