Sent by Jonathan Stark on November 29th, 2017
Someone in a marketing forum recently asked me about my advice to stop billing clients by the hour for project work. She wrote:
are you looking at this from the client’s or the freelancer’s point of view? As a client I would want to have a quantifiable data to measure the productivity of a consultant - especially on large and complex projects. But as a freelancer the hourly rate would benefit me the most. I’ve been on both scenarios and I haven’t found a clear cut answer. I can see how you would want to charge a set project rate for a small enough project…but what do you recommend for a complex, time consuming project with many stages/levels? I’m following this. Very intrigued…
There are a few questions here, so I responded to them one by one. Here’s what I wrote back:
are you looking at this from the client’s or the freelancer’s point of view?
I’m looking at it from the perspective of both parties, the client and the consultant. It’s better for everyone.
As a client I would want to have a quantifiable data to measure the productivity of a consultant - especially on large and complex projects.
I believe that if you ruminate on this for a bit, you’ll come to the conclusion that measuring how many hours the consultant worked tells you… how many hours the consultant worked :-) It tells you nothing about their productivity.
Paying someone by the hour gives them a powerful financial incentive to NOT be more efficient, to NOT look for quicker solutions that are as good or better than the initial plan, to NOT invest in tools that will speed his or her progress… it’s bad for both parties.
what do you recommend for a complex, time consuming project with many stages/levels?
Three things come to mind immediately:
With these things in place (and assuming the financial incentives are aligned by not billing hourly) the client can trust that the consultant is going to do the right thing because, why wouldn’t they? The longer they work, the lower their profit.
This results in a collaboration where the client can be the expert at what they know best (e.g., their industry, their business goals, their customer needs, their vision for the company, etc) and the consultant can be an expert at what they know best (e.g., implementation details of their craft brought to bear upon reaching the clients desired business outcome).