One of the more complex aspects of being a service provider (any kind, really) is discussing the cost of service with a client. It is complex because clients are rightfully trying to be careful with their budgets, protect themselves from risks, and, at the same time, make meaningful progress in areas of their business they feel they need to experience growth. As a service provider, we have to balance ethical and responsible billing, being an advocate for our clients, and knowing the value of our services and the impact of an engagement on our teams. This balancing act has been going on as long as service providers have existed.
There are good service providers and there are not-so-good service providers. The not-so good-ones are only interested in the sale. They place their sales KPIs and margins above genuine value creation. Good service providers are focused on how they can have the most impact for their clients. Not all value-creating service is expensive. However, outstanding service typically comes at a premium, because it is labor intensive and requires concentrations of talent and expertise.
Take your local gym for example. They may have personal trainers with varying levels of knowledge and experience. You might be able to pay $60/session for a less seasoned trainer or upwards of $100/session for a master trainer. If you’re in perfect health you might be able to make a lot of progress with the $60/session trainer. If you have physical limitations, like back or knee injuries, that $60/session trainer might not have the experience and repertoire to help you achieve your fitness goals while protecting your injuries. The master trainer, on the other hand, can manage this with finesse.
I used this example because I lived this example. I tried to go cheap, and the young, less experienced trainer did not have enough knowledge to guide me to a routine that fit my physical needs. Begrudgingly, I shelled out the cash for the master trainer, and he always had a trick up his sleeve to modify my workout and work around my injuries. My goal with a personal trainer was to get myself back in shape and to work towards reclaiming my athleticism as much as my 34-year-old neck, back, shoulder, and knee-pained body would allow. If I worked off of the advice of the younger trainer, I would have eliminated things from my routine because my body wouldn’t support them. I would have made compromises to my goal or, worse, I would have exacerbated my injuries. Since I was serious about my goal, these were not acceptable compromises. I needed to invest in the guidance of a real professional if I was going to get real about my goal to recover my fitness.
“An international energy company that needed to save money fast started by simply defining the amount of savings it needed and then required each department to cut costs by a similar amount, primarily through head count reductions, which varied from 17 to 22 percent. The reality, however, was that the company needed to invest more in certain technological areas that were changing quickly, as well as in operations, where performance was far below industry benchmarks. What’s more, the HR and IT departments substantially duplicated certain activities because different layers in the organization were doing similar things. Much deeper cuts could therefore be made in these functions, with little strategic risk. But the company cut costs across the board, and just six months later, technology and operations were lobbying hard to bring in new staff to take on an “uncontrollable workload,” while substantial duplication remained in HR and IT.” – Suzanne Heywood, Dennis Layton, and Risto Penttinen (McKincsey)
This Price vs. Progress dynamic is multiplied exponentially with services rendered at an organizational level (or even at a departmental level). However, businesses rarely treat themselves like they might treat their own body (or maybe they do). Too often we observe companies identify strategic goals only to go for the $60/session solution and spending years never really accomplishing those goals in a meaningful way.
“It is important to streamline your costs, especially if you’ve let them get bloated. But incremental expense cutting in an already-lean organization can threaten your corporate mission as well as your culture.” – Karen Firestone (Harvard Business Review)
If you are a business leader and are serious about the hurdles you want to overcome or goals you want to achieve, I encourage you to find a partner you trust and to listen carefully to the compromises you’ll be making if you try to place price over progress. The cheapest solution is rarely the best. A good service provider will coach you on how to approach your goals by identifying the earliest and least expensive wins in the context of a broader strategic roadmap. That entry point may or may not be as cheap as the cheapest possible option, but you’ll know it is the option that is designed with your best interests in mind and making strides towards goals you’re all working together to take very seriously.