I didn’t intend for this to be a multi-part blog topic, but the topic found me again and I can’t ignore it. This is a little bit of a spin on the previous blog, Heads I Win, Tails You Lose. Previously I discussed why we need to pave the way for winning at our game. It was primarily directed at employees and their path forward with our firms. Hopefully you bought into that. So why do we put ourselves in positions with our clients where we don’t have a chance of winning?
One area where we see this is on the engagement timeline. We agree to a fixed delivery date, but don’t hold the client as accountable for their end of the bargain, or don’t define it at all. However, this typically rears its ugly head with the economic arrangement that we agree to with our clients. In an hourly arrangement, the better we are at something, the less we get paid. Likewise, with fixed or value billing arrangements, we tend to base it on hours or undervalue our contribution. Both are losing propositions. But the worst arrangement and the one that, once again, presented itself to me yesterday, is hourly with a cap. This is clearly a heads you (client) win, tails I lose game and one that we should not play.
In this scenario, the client has agreed to a maximum fee, the cap, so clearly they see that much value in what you are providing. They’ve agreed to it and are willing to pay it. But if we are really good at it, and rates times hours produces and lessor amount, they’re happy to pay the lessor amount. They are giddy about it! On the other hand, if time and materials produce a greater amount, we eat it. The client is still giddy. We take on all of risk of overruns without any upside for performance. Clearly a losing proposition and one we should avoid at all costs.
Only play if you have a chance of winning.