How do you know if your consultant’s proposal is reasonable?

In the tech world today, there are many senior executives who have had successful careers and as a transition into retirement offer their services as a consultant or advisor. Many have a wealth of experience and wisdom to share, but many are also learning the craft of consulting as they go.

A few weeks ago, one of my clients asked me to help them understand how to evaluate a proposal from an independent consultant. My client knew the consultant from history working together at another company and felt very comfortable with the relationship they had and the experience and skills this consultant would bring. They also had a very specific situation that they wanted the consultant to investigate and recommend a course of action to them. What they had no understanding of was what they should reasonably expect from the consultant or how much it should cost.

Our conversation started with discussing the consultant’s rate. I had my client describe the person’s background and experience, their title at their last couple of companies and the task they were asking the consultant to do. Based on that, I guestimated the consultant’s hourly rate would be in the $400-500/hour range. My client was a little surprised because my estimate was bang on and I think they had been a little surprised that it was that high.

I asked what else he had provided in terms of estimate of cost, scope, approach or methodology. He had provided nothing further than his hourly rate.

As I explained to my client, this should be a large warning flag that the consultant has not thought through how they are going to approach the project and get to a deliverable or recommendation. I also explained in fairness to the consultant, he probably did not have enough background or detail on the work required, the people involved or the client’s expectations to even estimate what he planned to do.

This “which came first, the chicken or the egg” dilemma is often one that clients and consultants find themselves in. The client wants to know what it will cost before they proceed while the consultant doesn’t know the client well enough to understand know how big the project is or its nuances, whether the client will be helpful or a hinderance in getting to the end result, whether the client’s expectations are reasonable, whether the client’s business practices and processes are one-sided or fair, whether the client will prioritize making resources or information available, how politically charged the client’s culture is, and many other things that all drive the project timeline and cost.

This chicken versus egg dilemma is easier to resolve when there is prior working knowledge and trust between the client and the consultant but just having an hourly rate quote is still not acceptable.

The way that I typically resolve this issue is by proposing a short, relatively inexpensive engagement to do high level due diligence on the issue that I am being asked to investigate. This project usually spans two to three calendar week and involves a series of 45 to 90-minute interviews with a list of stakeholder that I ask the client to provide. This list usually comprises 8-12 people resulting in a fixed price project that requires 2-3 days of consulting hours. The deliverable from this initial engagement is a recommendation on how to proceed, a fixed price, a work plan, a defined end point and deliverable, as well as boundaries around what work I will be engaged in and a more extensive list of what is outside of the scope of this project.

The client now has made a small initial investment which demonstrates to the consultant that they are serious enough to put some skin in the game. In return, they get a clear expectation of cost and deliverable so they can make an educated decision on whether to proceed, abandon or request modification to the consultant’s proposed approach.

On the other hand, the consultant has invested time (in exchange for a small fee), probably in distraction from their other clients, to learn about the new client, the project and the people involved. Assuming they have been brought in for expertise the client doesn’t have, they can now reasonable advise the client on how to move forward to achieve the result the client wanted and a cost and scope known to both.