Open Standards for Consulting Collaboration

“Open Standards For Consulting Collaboration Version: 2020 March 11 TABLE OF CONTENTS PURPOSE This document defines open standards for collaboration among individual consultants and / or multiple consulting firms working together on client engagements. With this framework we hope to create mutual assurance for “what is mine”, “what is yours” and “what is ours” based on values, operating principles, roles and agreed rates. Without standards like these for cooperation, individual consultants and entire firms tend to closely guard client information and therefore not collaborate with each other. This lowers potential for positive outcomes and prosperity for all involved; consultants, consulting firms and clients. Thus, on these pages we suggest: values (deal etiquette) operating principles roles for client engagements rates for earning: how client revenue can be split amongst participants in a client project OBJECTIVE OUTCOMES [1] Create an objective framework for use by individual consultants and / or entire consulting firms as a guide for collaboration with each other across organizational boundaries. [2] Create an informal, open marketplace (facilitated by these standards for cooperation) where independent consultants can work together on client engagements and in doing so, retain the professional freedom as independent consultants and gain greater financial consistency from client engagements formed rapidly and predictably through these standards. [3] Demonstrate organizational agility that creates greater value for all involved (consultants, consulting firms and clients) and in ways that exceed the capability of a single traditional consulting firm. WHAT WE MEAN BY “OPEN STANDARDS” By open standards, we mean operating principles, roles and procedures that can evolve with input of participants. We mean open standards in a manner that is similar to the way free software evolves by contributors posting code and offering suggestions. When a revision is robust enough to pass review, it is incorporated into the next version of code. And so it should be with revisions to this document. OUR INSPIRATION We draw inspiration from values and principles of: Business Agility Institute – Domains of Business Agility (Evan Leybourne) The Free Software Foundation (Richard Stallman) Agile Manifesto VALUES TRANSPARENCY – As peers, we value transparency. Client billed rates and corresponding amounts paid to each person and role in the client engagement should be known to all involved. No aspect of the client agreement should be hidden from anyone. All details of the client agreement and agreement documents themselves should be accessible to all involved. FREEDOM – Each of us should be free to choose: the teams with whom we work the clients with whom we work our billed rate INTEGRITY – Be the person who can do business on a hand-shake. Speak truth. Keep commitments. Resolve inevitable misunderstandings by following the spirit of original intentions of all parties. Honor the dignity of others, especially during times of disagreement. CREATE VALUE – Contribute to the group, create value for peers and clients according to your interests and unique strengths. Work with peers in your own way that will make them want to work with you again. DEFINITION OF SUCCESS Success, on an individual consultant level, and as a community, should be measured against goals of this framework: TRANSPARENCY Are rates earned by each person involved in the client engagement known to all involved? Are agreement documents available to everyone involved in the client engagement? FREEDOM Do you have more freedom to work independently in informal peer-to-peer networks of consultants on client engagements of your choice, without legal restrictions imposed by non-compete clauses? INTEGRITY Do you have more trusted professional relationships now than previously? Do you get more satisfaction from your work than earlier in your career? CREATE VALUE Do your clients consistently indicate they receive value from delivered results (either measurable or subjective opinion) by ad hoc teams of independent consultants and one or more firms? These questions are meant to focus on continuous improvement rather than specific achievable goals that can be declared as “done”. DOING DEALS BY THE CODE When using this framework to govern consulting engagements, we agree to honor the deal according to values, operating principles, roles and agreed rates. “Doing a deal by the code” or some equivalent expression, is meant to reference this framework and working together according to principles within it. Those who accept a role on the project according to this framework should be honor-bound to the agreed terms until the client engagement is done. OPERATING PRINCIPLES Operating Principles should be objectively verifiable. That is, anyone who is unfamiliar with the client engagement should be able to verify objectively that it happened or did not happen. Operating Principles added in future should also meet this standard of objectivity and should not be ambiguous. We currently have six operating principles: [1] All documents related to the client agreement should be available to all participants in the client engagement. There should be no secrets. [2] Client billed rates and corresponding amounts paid to each person working on or involved in the engagement in any way should be known to all parties. There should be no secrets. [3] Before a consultant agrees to work on a client engagement, the engagement leader or her / his delegate should brief the consultant on material terms of the client engagement such as project milestones, consultant payment terms, rates of all consultants working on the project, sales commission, consulting firm back office admin fees, recruiting fees. [4] There should be no non-compete clauses in agreements among consultants or between consultants, sales professionals, recruiting professionals and consulting firms. After consultants have delivered their commitments to the client engagement (this usually refers to a specific work order, but not always), every consultant should be free to work on a different engagement directly for the client whom s/he met via introduction through the original engagement, without being required to pay a fee to any third party, and without threat of civil litigation expressed or implied. [5] Every consultant should be free to accept an offer of employment by the client company, without threat of civil litigation expressed or implied. [6] If there are recruiting costs or other costs to be recovered related to assembling the client project team, then before each consultant agrees to join the client engagement, those costs should be identified, as well as whose obligation it is to pay those costs (client or consultants). This should be done as part of the initial briefing (number 3 above). BACKLOG for FUTURE OPERATING PRINCIPLES The following are backlog issues that have not yet been addressed: How revisions to this framework are proposed, evaluated and accepted. Procedures for handling disagreement with a team member. Procedures for involuntary separation of a team member (this should be rare). Authority associated with each role in an engagement. Procedures to define how a new team member is invited to join and clearer details for the onboarding process. ROLES FOR CLIENT ENGAGEMENTS We believe a simple peer-to-peer network organization with the fewest possible roles will produce the most value and satisfaction for all. This is organizational agility. We believe the following roles are needed for successful client engagements. Roles need not be assumed by different individuals. Sales Guide prospective new clients and existing clients through the sales process until the client requests a new consulting engagement. Lead the client from pre-sales through all steps of familiarization, evaluation and finally a signed agreement. We have a new client engagement when a signed agreement is received. Hand the project over to a Recruiter and a Client Engagement Leader, or perform those roles. Recruiter Receive client requests from a Sales Role or Client Relationship Manager role. Find individuals or teams of consultants to deliver client consulting engagements and projects. Explain how work, collaboration and payment will be handled for the client engagement potentially offered to the consultant. The advantage as an independent Recruiter is, there is no limitation imposed by a fixed pool of regular employees inside a traditional consulting firm. Traditional consulting firms try to fill client engagements with the consultants they have on the internal roster – regular employees. In this framework, there is no limitation. Anyone with the characteristics, skills and interest is a potential new team member. Client Engagement Leader This is a person who is actively working on the client engagement and who also serves as the client’s primary point of contact for discussion related to daily operations of the team, matters related to team collaboration, backlog priorities and the rest. Ensure client engagement requests are fulfilled. Consultant Perform work on client engagements alone or in teams to deliver value as defined by the engagement. Back Office Administration (requires a corporate entity) Provides the following: Client Master Services Agreement Client Statement for Work Client billing – invoices and collections Payments to consultants (corp-to-corp, US W-2, or independent contractor) General Liability insurance Professional Liability insurance Any other insurance coverage required by the client Pay any relevant sales taxes or payroll taxes Ensure regulatory compliance and be the sole accountable entity on the consulting engagement. Client Relationship Manager (optional) This role is often provided by someone in the consulting company which handles back office administration. The Client Relationship Manager may or may not be actively working on the client’s engagement. Be available as a trusted third party when the client needs to speak with someone who is not actively working on the project or engagement. Proactively inquire with client representatives about their level of satisfaction as it relates to their consult(s) functioning as a team and also delivered progress toward intended outcomes. Develop and expand existing client relationships at all levels of the client organization, from executives to project sponsors. For new engagements with an existing client, identify known consultants who can fulfill the engagement. A large professional network of consultants in defined practice areas allows Client Relationship Managers and Recruiters to connect consultants with client engagements without the usual overhead of interviews, evaluation and background checks. Counselor or Coach (optional) In a decentralized organization, we need a neutral third party to interpret rules, resolve disagreements and help improve overall functioning of the group. A good model for this role is the way professional agile coaches work now. Also diplomatic corps, mediation and arbitration professionals. Observation and conversation may be initiated by the counselor or at the request of consultant(s) or client. This role is recommended for continuous improvement in emotional intelligence of the group as a whole, in long term client engagements or large complex projects. Facilitate conversation and help to resolve group tension when needed. Due to cost constraints and smaller size of some client engagements, it is understood that the role of counselor may not be present in some client engagements. PRINCIPLES FOR RATES: TRANSPARENCY and FREEDOM This framework has already stated that the most important point about billable rates is TRANSPARENCY: the rate, amount or percentage earned by each consultant and every other person involved in a client consulting engagement should be visible to all involved. After transparency, the next most important point about rates is, FREEDOM. Every consultant should be free to accept or reject the engagement on the basis of rate and other factors (how much time is required on the client site, how much travel, full-time or part-time, etc.), and make their choice in the context of having full information about other consultants’ billable rates. This does not necessarily mean the entire team will collectively discuss and agree what rates will be paid before the client has signed a Statement of Work. It is possible that one person may have already agreed billable rates with the client in advance, before roles are offered to consultants. We acknowledge many engagements may be formed this way as a natural end to sales discussions. Regardless of whether billable rates are determined by a single person or a firm, or collectively determined by the prospective engagement team of consultants as a group before the client engagement begins, the main point is, each consultant should be free to make her / his own decision about whether to join the project or not and in the context of full information (rather than being told to as an employee of a traditional consulting firm to take the engagement). DECIDING HOW EARNINGS WILL BE DIVIDED Who carries the cost and risk of collecting client payments? A key consideration for determining how revenue will be divided among the team is, who will carry the cost and risk of collecting client payments? Every consultant? Or only the consulting firm which is serving as the client vendor – the legal entity? For each consulting engagement started under this framework, consultants should agree whether; [1] the consulting firm is carrying risk of receivables (the consulting firm that is handling back office administration) such that consultants are paid on a regular schedule before client payments are received, [2] or all consultants are carrying the risk together. That is, consultants are truly independent – they don’t get paid until the client pays. In a traditional employee / employer relationship, the consulting firm not only bears the cost of paying consultants before the firm is paid by the client the firm bears the risk of collecting payments from clients. This typically requires either large cash reserves or a line of credit to process payroll costs until the client payment is received. A traditional consulting firm also carries the full burden of collecting payments from clients, which is a risk. Clients don’t always pay on time and some skip payments entirely. In a traditional employee / employer arrangement, employees are typically paid a salary regardless of whether the client pays. In this arrangement, the traditional consulting firm earns a large premium from the client billable rate. It’s different for independent consultants who don’t get paid until the client pays. This arrangement usually implies a time lag of 30 to 60 days from the last day of work in the billing period to the day payment is received. In this case, consultants not only bear the cost of carrying client receivables, independent consultants also carry the risk of a client not paying after work is performed. A common remedy for collecting payment is to require client payments in advance or a retainer (the estimated average monthly billable amount). Some clients, however, will not accept a pay-in-advance or retainer arrangement. RATES FOR EACH ROLE – A GUIDE The following paragraphs are offered as a guide to facilitate discussion among consultants who form a client project team. This information is NOT meant to dictate rates. Sales Sales compensation can be a percentage of client billed revenue for the first year of each new client engagement. Although there are as many variations in percentage and duration as there are client SOWs. Recruiter A key consideration regarding recruiting services (introducing consultants to clients who need their services) is whether the client is paying the recruiter directly or will consultants pay the recruiter fee for connecting them to the client project. Traditional industry practice makes the recruiter fee a permanent percentage for the life of the client engagement. To protect recruiter fees, traditional firms usually implement a contract clause which forbids consultants from working directly with the client and should instead always work through the recruiter’s firm. A breach of these clauses typically incurs civil penalties (large lump sum cash payment to the recruiting firm). That practice which restricts consultants’ freedom is not consistent with the values and principles of this consulting collaboration framework. However as a practical matter, just as with other rates and fees related to the consulting engagement, the recruiters’ fee should be known in advance and paid in full. This framework recommends (but does not require) recruiter fees be a fixed amount and not perpetual. If recruiter fees are perpetual, it becomes difficult to determine at what point (if ever) can a consultant work directly with a client and bill the client directly. Regardless of the arrangement, it is essential that recruiter fees be paid in full. Recruiters are an essential part of the market for consulting services. Client Engagement Leader Typically one consultant will lead the consulting team and serve as the client’s primary point of contact. It may be appropriate for the consultant who serves in the Client Engagement Leader role earn a higher rate than other consultants to compensate for additional responsibilities of this role (over / above regular consulting work). Consultants Consultants should be responsible for determining their own all-inclusive rate (after sales and client relationship commission, recruiter fee, administrative costs). No one should determine a consultant’s rate unless the consultant asks for input. Rates for services are often (but not always) known within a market range of similar services and relative expertise. Back Office Administration Back office administration fees may be determined by the consulting firm that is engaged by the client. Or consultants may decide together what services and corresponding fees are appropriate, if one of the consultants will use her / his own firm as the client billing entity. As mentioned above, the key consideration is who will carry the risk of collecting client payments? When all consultants carry the cost and risk of collecting payment from the client (no one gets paid until the client pays), fees charged by the consulting firm for back office administration can be lower. This is the life of an independent consultant. For example: 10%-15% mark-up (fee) for consultants on a corp-to-corp arrangement 20%-25% mark-up (fee) for consultants paid as W-2 employees (employment administration handled by the firm) When the consulting firm incurs the cost and risk of collecting payment from the client (consultants are paid before the client pays), then back office admin fees charged by the consulting firm are usually higher. This is similar to the way traditional consulting works. For example: 35-40% mark-up (fee) for consultants on a corp-to-corp arrangement 50% mark-up (fee) for consultants paid as W-2 employees (employment administration handled by the firm) Client Relationship Manager The role of Client Relationship Manager is typically provided by the consulting firm which is handling back office administrative services. The reason for this role is, clients will occasionally turn to someone representing the corporate entity that is accountable for the engagement, to resolve concerns or other matters which the client may choose not to address with the Client Engagement Leader. Counselor or Coach Compensation to be determined. Perhaps billed on an as-needed basis similar to consultants. Except in complex projects, counselors / coaches will likely not be dedicated to one project and will instead have a portfolio of client engagements to support. JOIN THE CONVERSATION – HELP US SIMPLIFY THIS FRAMEWORK Discussion about this document is maintained on LinkedIn Group Name: Open Standards for Consulting Collaboration https://www.linkedin.com/groups/13837215/ CONTRIBUTORS Steve Pruneau Mary Rood Jon Jorgensen Rich Theil We would like to thank: Evan Leybourn Brett Palmer Shawn Roberts Tim Stadinski VERSION HISTORY DATE AUTHOR DESCRIPTION 2020.03.11 Steve Pruneau Reduced content to simplify. Added a new LinkedIn group for discussion. 2020.03.07 Steve Pruneau 2019.10.01 Steve Pruneau Revised to convey the intended collaborative spirit of this initiative (Thanks Rich Theil.) Reduced content to simplify. 2019.09.09 Steve Pruneau Clarified values, rules of governance, roles, rates. Trimmed content not pertinent to the central purpose of this framework. 2019.09.06 Steve Pruneau Updates based on feedback from April 25 and April 27 and also comments posted in the previous version.(Thanks Jon Jorgensen.) 2019.04.19 Steve Pruneau Changes in word choice in some sentences to achieve clearer meaning, in preparation for the invitation to the next Open Space discussion. 2019.04.17 Steve Pruneau Added Creative Commons License: Attribution-ShareAlike CC BY-SA 2019.04.16 Steve Pruneau Minor improvements in word choice and grammar to smooth reading flow. Added role of Counselor (Coach). 2019.04.08 Steve Pruneau Suggestions from Mary Rood accepted into the document. Added formatting in several areas of the document. 2019.04.03 Mary Rood Suggestions added – MR 2019.04.02 Steve Pruneau Initial Draft PUBLICATION DISTRIBUTION MODIFICATION – Creative Commons This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. https://creativecommons.org/licenses/by-sa/4.0/ Attribution-ShareAlike CC BY-SA This license lets others remix, tweak, and build upon your work even for commercial purposes, as long as they credit you and license their new creations under the identical terms. This license is often compared to “copyleft” free and open source software licenses. All new works based on yours will carry the same license, so any derivatives will also allow commercial use. This is the license used by Wikipedia, and is recommended for materials that would benefit from incorporating content from Wikipedia and similarly licensed projects. https://creativecommons.org/licenses/ “