What Do Professional Service Providers Want?
When working or negotiating with professional service firms it’s helpful to understand what they want and where they are coming from to protect your organization’s interests. Much like building and maintaining a relationship with a romantic partner, understanding what the other person wants is important context.
When clients have challenges working with professional services firms it is sometimes because they have lost sight of what their “partners” want from the relationship. It reminds me of my early bad attempts at romantic relationships—when I was so focused on what I wanted/needed that I wasn’t tuned in to what my partner wanted/needed—leading to frustration for all involved. The good news is that relationships with professional services firms are much less complex than romantic ones.
Subtleties and nuances may arise in some circumstances, and some individual contributors may have different goals, but in general what service providers want can be boiled down to four main ideas:
- Profitability – Are we generating sufficient revenue to cover expenses and remain a going concern?
- Staff development – Are our professional staff improving their capacity to successfully deliver client solutions?
- Utilization – Are we keeping most of our professional staff gainfully employed most of the time?
- Reputation – Are we providing sufficiently good service to build our positive reputation and are we avoiding a negative reputation?
These four goals are not always in alignment. When they are in conflict, it may require trade-offs.
For example, a firm that has just finished a large project may find itself with several team members “on the bench” and not billable until another project is available. For a small organization, this utilization issue can be the financial equivalent of arterial bleeding – paying staff who aren’t generating corresponding revenue. Options might include:
- Layoffs – The advantage is that it stops the bleeding (addresses Profitability). The disadvantage is the loss of prior investment (sacrifices Staff Development)
- Training – If an organization can afford the revenue hit (sacrificing Profitability) in the short term, they can send underutilized staff to training to improve their skills and efficiency (improving Staff Development).
- Chase less profitable engagements – Bidding at or below cost (sacrificing Profitability) makes sense if the alternative is either losing money because of low utilization or firing/laying off staff and reducing an organization’s capacity to do work in the future.
Understanding these motivations can provide insights into what an organization has to offer a vendor when trying to resolve conflicts. People usually focus on their assumption that vendors want revenue—this always true to some extent—but it isn’t the only thing that can be offered. Other things that vendors might recognize as valuable include:
- Future work – Giving a vendor the inside track for future work can get their attention and make them favor you as a client. It not only helps the vendor with revenue forecasting, but human resource planners love to have future work penciled into the backlog to help with resource planning and sustained utilization.
- Good Press – If a vendor provides good service, talking them up at professional conferences or jointly authoring a testimonial article for the trade press can be extremely valuable to the vendor and minor cost to you.
- Staff Development – Sometimes you may find opportunities to help the vendor develop their staff. Perhaps you could give the vendor permission to augment their senior staff with junior staff. Maybe some portion of your project uses products or technology that the vendor isn’t familiar with. Offering to train the vendor to help them get up to speed might be very attractive if the proposed product or technology is something that they are likely to find in future engagements.
- Staff Utilization – If your project schedule allows the flexibility, giving the vendor some latitude in staffing—for example allowing senior subject matter experts to be part-time, can be a boon for a vendor that has limited resources. For example, if the vendor proposed a stellar database administrator for a project, allowing that person to work half time augmented by a competent but less skilled DBA might be a win/win. You get a lower billing rate for the less experienced staff and the vendor can leverage their ace DBA on another engagement.
- Bad Press –Threatening profitability will get the vendor’s attention but can open Pandora’s box in terms of unintended negative consequences. Once lawyers are involved it is easy to lose control of the conversation. An arrow in your quiver to consider first is the threat of bad press. If the evidence is strongly in your favor that the vendor is not delivering quality services consistent with your agreements, threatening to broadcast the vendor issues to your peers in other organizations can be an effective point of leverage.
- Nuclear option – If a vendor is not providing good service, one dangerous and potentially powerful option is to threaten canceling the project or involving lawyers. This not only menaces the planned revenue from the project but threatens increased legal fees and bad press. Get a consult from a legal expert familiar with professional services contracts in general and yours in particular BEFORE you burn this bridge. Proving poor service in court can be expensive and time consuming and shouldn’t be undertaken lightly.
Once you realize what motivates your service providing vendors you will realize that you don’t have the same goals. Some of your goals are aligned and some are in opposition.
You want the project done as inexpensively as possible; the vendor would like to make a fair return or better.
You would like a flexible schedule; the vendor would like staff placed profitably and continuously on your project until it is complete to maximize utilization.
You want the project to be successful to accomplish your business objectives. The vendor wants the project to be successful to build their reputation in hopes of follow-on business and a solid reference.
You want the best troops the vendor has to offer working on your engagement. The vendor wants to provide you with the minimum troop levels and skills necessary to have a successful engagement.
Although there are some unscrupulous vendors, most are just trying to manage a high-risk business that is extremely human resource intensive. If you are aware of your vendor’s motivations it helps you understand their behavior and can be a real asset when you negotiate with them.