Last week I finished up my first consulting engagement. Or at least I presented my wrap-up summary and final invoice. I probably shouldn’t say I’m “done” until I get that last check.
It’s been an amazing ride so far, and I’m having a blast. I’m learning again. In fact, I’m learning so much that I have that “drinking from the firehose” feeling … there’s a big difference when drinking from the firehose as a consultant, though, because if you mess up you don’t get paid. As an employee, you get a grace period. As a consultant, you don’t.
This is new to me. Before joining Microsoft, I called myself a consultant for more than 14 years, but I really wasn’t one. I was a high-end temporary employee. Good work, but it’s not consulting. I should have called it contracting.
You see, the way you get paid matters. For 14 years, I was paid hourly … actually, for my highest paying gigs, I was paid daily, but I never liked that, because I have a harder time putting in a “full billable day” than most people I know who are similarly useful. I remember being very proud (a bit cocky even) when I crossed over the $1,000/day barrier in the mid 90’s. I used to whisper to myself, “another day, another grand” – that’s pretty obnoxious now that I think about it. But I only felt good about charging for a full day maybe one day out of five, so I ended up essentially translating into hours anyway by charging for half a day here, three fourths of a day there. My standard “billable day” was about 6 hours long, so I preferred billing hourly to avoid any sense of impropriety.
When you charge by the hour, your incentive is to work more hours, to stretch out your value for the customer. I know a little about a lot, so I’m generally handy to have around. I would poke my nose into lots of different situations for a customer, and I would genuinely make myself useful. People would invariably say, “Patrick, could you join us for this meeting? We’d like your perspective on this” or “Patrick, could you investigate xyz while Joe’s out? We need an answer right away.”
In the late 90’s, my friend Linda brought me into a bank in San Francisco, ostensibly to implement column-based security in a custom database app. I was there for more than 2 years doing a little bit of everything, from coding web apps to teaching Java to performing Y2K remediation. Linda called me her “pinch hitter” because she’d bring me into tough situations or put me on projects where she simply didn’t have anybody else who could do the work. She knew I’d figure it out, whatever it was. It was fun and paid well (although San Francisco during the dot com boom was crazy expensive). The only reason I left was that I finally convinced my wife to move to my childhood home of Grand Rapids, MI (you try convincing a Texas girl of that – once you get an opening, you take it). Even then, Linda called me a couple months later and asked me to come back. After all, I was handy – but ultimately, I was just an expensive employee who paid his own benefits and could be fired easily.
Funny detail about that gig – I never actually addressed the security issue that I was brought on to fix! It was kind of a hard problem and there was a lot of low-hanging fruit elsewhere. As a contractor, I was happy to bill hours for anything. Another hour for this customer meant I didn’t have to spend time looking for a new customer. And once there was a way to pay me, my “boss” didn’t really care about justifying my expense for any specific objective. I was useful to her. I solved her problems, so she wanted to keep me around. I made her life easier. That’s nothing to sneeze at – it’s good to be useful, whether you’re a full-time employee or a contractor – but how do you put a dollar value on that kind of usefulness? There was clearly a cap that was intuitively based on the fully-loaded cost of a comparable employee plus a premium for the ability to get rid of me at will.
A new friend recently observed, “You like to do things the hard way, don’t you?” You know what – I do! I already know I can do hourly contracting well, since I did it for 14 years. It’s not interesting to me anymore. Leaving Microsoft, I wanted to do things differently, even as I “returned” to consulting. So here’s the big difference: this time, I’m not charging for my time. I’m following the principles of Alan Weiss and billing based on the value I create for clients. In other words, I’m charging a fixed price for a specific result.
Billing based on value is utterly terrifying – but in a wonderful way. At a deep, philosophical level, I want to go where I can create the most value. I think most people do. Well, if you want to create a lot of value, you have to be pretty specific about it. When I was charging by the hour, I wasn’t specific. My value was always assumed … it was always positive, but it was pretty vague, too. Now I’m talking to customers and attempting to quantify the value I can create for them. Whoa. It’s scary, but it’s also focusing. It forces me to work closely with customers before engaging to find out where I can make the biggest impact. This sales process is real work, hard work – it’s an investment in relationships, not a perfunctory search to fill an opening.
During an engagement, I’m no longer incentivized to poke my nose into any and all issues … instead, I’m necessarily focused on delivering the value I said I’d deliver. That’s a huge change for me, and I’m still adjusting to it. Interestingly, I’m no longer rewarded for being the “smartest guy in the room” (the indispensable consultant, the guy you can’t get rid of) … in many ways I have the opposite incentive. If I collaborate well with employees to accomplish the desired result, I’m actually delivering MORE value than if I did all the work myself (teach a man to fish …). If I make employees look good and inspire them to do more of the work required to generate a result, then I’m increasing my own efficiency and margins. That’s a fascinating change of perspective for me, and I suspect it’s going to teach me a lot.
I have not mastered this form of consulting yet. I have a LOT to learn. For example, the engagement I just finished was supposed to take me 8 weeks, and it took 15. I was off by almost 100%. That’s OK – it was my first engagement, and I was going through a massive transition. There were so many details to figure out. Ultimately, I think I missed on my timing estimates because I rushed the sale – I should have slowed down a bit to get a more precise understanding of scope. I should have invested more upfront time in the sales process. To that end, I’m looking to start a more substantial second engagement with the same customer, but I’m spending a couple of weeks up front to make sure we both understand the scope better before finalizing terms. I assume I’ll get better at estimating as I complete the whole cycle a few times. I’m going to have to.
In the past, I’ve always liked getting to the point in a project where I’m not thinking about money at all, where I’m just focused on the job. It turns out that this might not be in the best interest of my customers. Money is a really useful way to keep score, especially if your goal is to create the most value you can. In the end, the goal of consulting is simple – to improve the client’s condition. My goal is to create so much value for the client that assigning some of that value back to me in the form of compensation is easy and obvious and lucrative.
I haven’t come close to figuring this all out yet, but I think I’m on the right path, so I’m going to keep moving forward. It feels like it’s going to take about three years before I’m an expert in this kind of consulting, and I couldn’t be more excited about the journey.
Of course, it’s not really about me – it’s about my customers. This has been such an intense ride for me that I couldn’t resist writing about my experiences so far. But soon I’ll start writing about the actual problems I’m solving, like migrating a data center to the cloud to improve disaster recovery. That’s pretty fun, too.