Under a conventional consulting approach, we use a simple memorandum to outline the terms of an engagement with a client. The memo describes the project, sets forth the results, lays out the project structure, timeline, fees, expenses, and payment terms. Fees are based on a schedule, differentiated by where the work is performed and who performs it. Expenses are invoiced at cost. Payment terms are Net-10 Days.

Simple, straightforward, eight pages, no contracts, no attorneys.

We don’t want the contractual aspect of Results-Based Consulting to be different, just because the approach to delivering it is different. In spirit, we want our consulting agreements to continue to put forth understandings that are informal, and based on mutual trust and mutual self-interests. The most noticeable difference is the emphasis placed on the client/consultant relationship, and not just on the project/engagement.

For a detailed explanation of Results-Based Consulting, (contact us) and request a copy of ‘A Different Type of Consulting Firm’.

There is a big difference in fees and billing.

Under a Results-Based Consulting arrangement, there is no fee schedule. Our compensation is 10% of the Gross Income Reserve, paid out as each Gross Income Milestone is achieved, in accordance with the same progressive, rear-weighted distribution formula applied to the employee group.

There is also no concept of ‘billable hours’. There is no limit to the time and effort we will expend to achieve the outcome. We work hand-in-hand with our client-partner, and do whatever it takes to reach every GI Milestone. We do whatever it takes to foster a willingness and capacity for change, a sustainable capability for implementing the things that continuously improve operating performance and business outcomes, increasing innovation and learning, and, ultimately, independence from us.

That makes our compensation – as a consultant-business partner – completely results-based, closed-ended, and totally self-funded. There is no safety net, nothing to break our fall if the arrangement doesn’t work. Our only margin of error is achieving fewer milestones. There is no consulting annuity, no anticipation of ‘endless consulting’, no expectation of more consulting as a reward for good consulting.

We are paid under the same team-based performance compensation plan as every eligible manager and employee in the company. We are compensated solely from the GI Reserve, from Gross Income generated above the GI Baseline, out of Gross Income that likely would never have been generated, without our involvement and contribution. Since our compensation is based solely on Gross Income achieved above the GI Baseline, we assume a higher level of risk than any other internal stakeholder, certainly higher than the managers and employees, who still receive their base salaries.

There are only two caveats.

First caveat. At the beginning of a Results-Based Consulting arrangement, there is a need to understand the ‘current reality’. When faced with the facts of that reality, and the understanding of the depth of the change that will be required, there is a possibility that a client will conclude that it is beyond their reach, and pull out of the arrangement.

We bill ‘the cost of current reality’ (Current Reality Assessment) at its conclusion, and our client owes us that fee, regardless of whether the arrangement goes forward or doesn’t. The cost is around $15,000. But – if the arrangement goes forward – we will refund the cost of the Current Reality Assessment from our portion of the GI Reserve over the ensuing year.

Second caveat. We want some assurances. Results-Based Consulting provides plenty of incentive for taking action, for making change, for achieving results, but there has to be an understanding. We are as serious as a heart attack. We are absolutely committed to getting results, to getting things done. We have no intention whatsoever of wasting our time and effort. A client-partner does not necessarily have to do everything we tell them, but they do have to come to terms with us.

We want assurances that a client-partner will, in fact, take action, will change, will do whatever it takes to achieve the targeted results, or – if there is no action, no change, no results – then there need to be consequences.

The Gross Income Reserve is the difference between the Gross Income Baseline and the Gross Income Target. The GI Baseline is a budget – a results threshold set at the beginning of the year. The GI Target is a target, set above the GI Baseline; while the GI Target sets possibilities, and somewhat sets expectations, it doesn’t impose limitations. In other words, the GI Target does not ‘cap’ the Gross Income that goes into the GI Reserve. The GI Reserve is not ‘set’ or ‘determined’; it’s a result, a performance outcome.

The projected GI Target is used to set the size and number of the Gross Income Milestones. The projected GI Reserve is used to set the size of the expected payout from each milestone.

Expenses are invoiced as incurred. We expect to be on-site as often and as long as needed; depending on the circumstances, our time on-site could be fairly often and fairly extended. Results-Based Consulting is not fee-for-service, does not involve billable time; our compensation is determined by the Gross Income Reserve and the GI Milestones achieved, however, we still need to cover our expenses.

Our work product is covered under the compensation arrangement. Unless there is some extraordinary expense, like printing a lengthy report with lots of copies, there is no additional cost.