Who’s the Decision-Maker?
Company D’s decision-maker spent 12 months cultivating a relationship with a desirable client. He was anticipating submitting a bid for a 5 year contract. The RFP was finally issued, and it included a submission that requires a specialized skillset to execute at the highest level. I have that skillset, and they asked me to submit an offer to work with them as an outside expert.
I sent a Statement of Work with my value based fee.
Company R was in a similar situation. They asked for my support. It would have been for the same time period as the one from Company D. I could not do both simultaneously and give either my best effort. I have typically practiced ‘first come, first served.’
Company D Forced My Hand
It turned out that Company D made the decision for me. While I’d been approached by, and talked with, their Business Development lead, once he said I was their number 1 choice, the contracts department stepped in. The contracts admin insisted that I provide an hourly rate. I replied that my value based fee was a comprehensive fee that would deliver everything they needed on time and at the highest level. She kept coming back to the hourly rate. “It’s in our contract” she said. “We have to have a number.”
I talked with the VP of Business Development of Company R for 25 minutes. We both felt sure I was the right person for their response, and he concluded by saying “Thanks, Susan. You’re just what we need. Send us your SOW and value based fee and I’ll have Contracts make it work.”
I quickly received a contract with my SOW, terms and conditions, and value based fee incorporated. We executed it, and I am now deep into the work.
Where Does True Authority Lie in Your Firm?
This makes think about how authority can be deceptive in companies. The org chart may show people in hierarchies of authority, while their actual practices belie or deny that authority.
It is unlikely that the contracts admin in Company D is in a superior position on the org chart which gives her the authority to deny the Business Development VP’s decision. However, in practice, that’s what happened.
What are Contracts For?
The decision maker and the provider collaborate on the description and the outcomes. The contract admin should simply put them in a legally binding document. The contract admin should not be negating the decision made by the decision-maker because of a line or field in a contract.
Contracts have a few important purposes. They spell out the parties, the scope, and the rules or legalities that apply. The spell out remedies for violations. They also include other details such as the provider’s name, address, Tax ID number, and a description of the work and the outcomes to be delivered. All that is well and good, and I’ve never had a problem signing contracts like that.
Contracts provides a support service to operations. Make sure that the day-to-day functioning reflects that.
Have You Looked at Authority in Your Firm?
Whether you have an internal contracts department, or you rely on outside counsel to review your contracts, please investigate the practices of authority of your contracts admin.
Contracts admins should see their mission as supporting the decisions made by people in leadership, management, sales, marketing and so on by providing protection to the firm in case something goes wrong.
Contracts ensures that decisions are safe and legal. They do not make or contravene business decisions.
How Do You Deal with Resistance to Value Based Pricing?
The resistance to value based pricing in this story is not unique. Too many prospects think hourly billing is the only valid way to pay. This is demonstrably false, but hard to talk about.
If you get tongue-tied when talking about Value Based Pricing, or if you just fall back on an hourly rate when faced with questions, I can help prepare you. It takes deep commitment to Value Based Pricing plus a solid list of the life changing value you deliver to your clients. We can build that list together.
Hit REPLY or text VBP to 703-801-0345 to start the conversation with me. You can also book a 45 minute Starter Call here.