FAQ: How Do You Mean We Get Ripped Off By Professionals Who Charge Us Hourly Fees?

Well, there are many ways, but here are only a handful of handsome ways of ripping clients off. They are all legal but in my view, highly unethical.

Time-based fees remove the ceiling on your investment. You never know exactly how much more you have to pay to get the project done in high quality. You live in the vice grip of constant surprises, because - somehow- there are always a few more hours to go until completion. And you pay for those hours, regardless of the outcome.

There is always a "timer running." Every time you need your advisor's assistance the clock starts and you get billed. In many cases even if the assistance is in the form of a five minute phone call, you get charged for 30 minutes or sometimes even for one full hour. And you also pay the advisor's long-distance charges.

Instead of focusing on the success of the project, you end up focusing on daily budgetary decisions and try to justify every single task. Your focus should be the outcome of the project, but you are forced to focus on tasks.

You or your people will hesitate ask for the advisor's help because every piece of help needs financial justification and budgetary approval. This only makes your people more resistant to sharing their views about the project, and it delays the flow of important information, thus jeopardising the successful completion of the project.

If your advisor finds additional work that was unanticipated but must be performed, you must write another cheque to get it done. In many cases these instances may attempt to generate additional hours or days to get paid more. Remember: Your advisor's focus is selling you more hours.

By the time you pay for each day, hour and minute, you pay much more than you would pay if your advisors charged value-based fees. Time-based pricing, since you're buying time not results, gives you the lowest ROI.

If conditions change in your organisation, you may have a hard time to complete the project due to lack of budget. Corners get cut to save time and the quality goes down the toilet. However, you are still responsible for the outcome of the project. So, if something goes wrong, it is your arse on the line.

If you decide that additional resources are necessary to successfully complete the project, there are always additional costs you must pay. You also restrict your advisor as to what action to take. Your advisor may end up taking the kind of action that merely fits the budget, not what would contribute to the success of the project.

Working with time-based advisors is complicated. There are always debates about what is billable time (e.g., travel, report writing), when to turn the timer on and off should be running or what should be done on site or off site. I've just read an article about how a law firm (what else?) charges 25 cents for a letter-sized photocopy and how to dump telephone charges on clients.

Many time-based-based advisors encourage simple problem solving, the restoration of the status quo. There is no incentive for innovation and raising the bar. The more problems they can "sniff out" and offer "status quo restoration" on, the more hours they can sell you and the deeper you have to reach in your pocket. And for this status quo restoration work they can use freshly minted MBAs with little or no real life experience.

Your time-based advisor is always on the opposite side of the table. Your focus is on the ball, that is, the outcome of the project and getting the project completed. Your advisor's focus is on the scoreboard, that is, "How many hours have I sold so far, and how many more can I sell?"

You want to reduce implementation time; your advisor tries to increase it and tries to sell you more time to make more money on you without extra marketing. There is a clear conflict. Your advisor makes money when he sells you more time chunks regardless of improvement in your business.

You advisor can further increase revenues by "overstaffing" your project with junior partners and new MBAs at your expense. That junior staff will learn the profession at your expense.

Other Crimes Professionals Commit Against Their Clients Using Hourly (Per-Diem) Fees

Continuing education: Professionals love attending conferences and various educational events to keep themselves up to date with knowledge, and charge the conference costs to those clients whose projects are similar to the conference's topics.

Regurgitated solutions: Creating a PowerPoint presentation for client A and two weeks later using the same presentation, with some name changes, for clients B. Then charging both clients for the time it took to develop the presentation from scratch.

Double charging: Invoicing two clients for work performed during the same time chunk. The professional performs 30 minutes of work for client A and 30 minutes for client B. Then he invoices both A and B for 1 hour of work... each, so the firm pockets 2 hours of billing.

Lack of delegation: Senior professionals answer a few questions for junior staff, and it's the junior staff that works on the assignment, but the firm charges "full senior" time for the whole hour.

Charging for travel: Instead of doing some work in the company's offices, professionals prefer to travel to their clients' premises and charge full hourly rates for the journey... while they are listening to the car radio or having a nap on the train. Or... The professional flies three hours to a client's site, and while flying, he works on another client's case. Returning home, the professional invoices both clients for three hours each.

Overstaffing engagements: The service company wins the contract on reasonable hourly rates, but then floods the client's premises with an army of juniors and "wet ink" fresh graduates to crank up billable time.

Research and analysis mania: The service firm ignores the research materials and the analysis the client has already done and paid for, and does it all over again as an easy way of cranking up billable time.

Small charges: Charging for minor things (stamp, envelope, fax, photocopy, etc.) in very small chunks, so they don't draw attention. But by the end of the project, they add up nicely.

Summary

So, why do clients put up with them? Because over the years they've got ill-educated on the topic and don't know any better. Also, many clients erroneously believe, they hire professionals' time.

No, they hire their accumulated brainpower and experience. And they invest in an expectation to achieve certain results. It has nothing to do with time.

There is a key distinction: Professionals who set value-based fees focus on the outcome of the project, that is, the improvement in the client's condition. Professionals who set time-based fees focus on selling more hours, which may or may not contribute to the end result. So, if someone tries to sell you time, don't walk away, but run away as fast and as far as you can. You can save yourself a bucketload of money and some serious grief.

"If you're not part of the solution, there is food money to be made in prolonging the problem." ~ Dr. E.L. Kersten, a former professor of organizational communication and founder of www.despair.com

Nuff said, I reckon.

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