General Consultant Discussion

Compensating staff in a world of fixed fees is a work in progress for us. Like many we have long offered a base plus performance bonus to staff. The calculations were very easy to administer when we billed by the hour (a model whereby the most skilled consultants often were not getting the best of the situation.). Now that 90% of our service revenue is generated on a fixed or project basis, allocating revenue earned appropriately to staff on a project by project basis is more challenging. If a project producing $20k in services was exclusively delivered by one person life is simple, but as soon as others are brought in, for whatever reason, the lines start to blur. I'm finding that our fallback position has been ""give them the benefit of the doubt"". To date we have not had any real drama around this, but as our company grows I can only imagine those moments will come. We use a base plus % of allocated revenue model and the consultants generally can name their base (okay, we give 3 choices) - the % slides accordingly. Anyone have any experiences to share about better ways to do this?

Are you still tracking hours even though you're not billing by them?

For now we are, but our goal for beginning in 2013 is for the timesheet to be completely history.

So in that case you won't have an accurate gauge of who contributed what % of their time to the project. That will be harder to track there. It might be that you just go to a team incentive instead.

Good question. We are in the same boat - just starting to bill by project. So far, they have been single person projects so pretty straightforward. Let me know if you come up with an answer!

We're definitely trying to re-imagine a comp plan with team incentives. For now our eyes are wide open!

While I don't have an answer, I've found that tracking hours for the purpose of defining someone's ""contribution"" is not worthwhile. I can burn through 5 hours trying to accomplish a task, or have an expert complete it within 2. Who should be compensated more? When I billed hourly, clients would call and speak quickly so as to keep costs low. Now, I have to monitor myself so I don't become the fast talker when working on projects. Go figure.

We have the same struggles, Mark. At least now I don't feel quite so alone.

Are you envisioning something like a profit-sharing plan where you take revenue less employee costs = profit and splitting the profit by some percentage? Maybe the percentage is based on years of experience versus employee contribution.

@DawnAnastasi We tend to compensate for differences in the experience and uniqueness of the skill set with the base salary. What we have in mind is exactly what you are describing for team performance profit sharing wise. Then the ace in the whole is the discretionary bonus. When I worked in public accounting and was part of audit teams we all reported hours and were entitled to some kind of 'overtime comp', but the firms really let you know you were wanted with the discretionary bonuses. If we can find something more systematic while we're at it, all the better.

We need to get John Shaver to add his comments here. He is the leader in this value metric.

Busy touring around DSD! That can be part of the conversation on Saturday, if you want.

We do it rather simply at Azamba - it's definitely not perfect but here you go: We have team based revenue targets. As we hit a target, the bonus pie is ready to serve up. As targets go up, the pie grows in size at an accelerating rate (think of it as an accelerated commission - the more revenue we bring it, the faster it grows). Each person is entitled to a piece of the pie based on seniority. The people who have been around the longest are here for a reason - they're good and they're loyal. I want to reward them the most so the seniority element does that. For the newer hires, the longer they stick around, the more it equalizes their slice of the pie. And ... as a group ... we are incented to grow, find more revenue oppos by keeping an eye on the client's needs and situation so we can help them succeed with additional services or products. We do everything based on revenue - not profit. This is not a problem for us. The pie doesn't get served until we have hit break-even plus a bit more. There are many advantages to this approach: 1. People are rewarded for skills and loyalty. 2. We work as a team. It's rare that anyone beats their head against the wall for personal satisfaction in solving a problem (I used to get that a lot in the old days). 3. We all are incentivized to truly care about our clients, what their goals are and to look for ways to help them reach their goals. 4. The team self-monitors for the most part. If someone is not carrying their own weight, it comes up in team meetings or private conversations between the team members and the perceived slacker. Not perfect but it works for us. I hope it helps.

Good feedback...

My only advice is to keep it simple. As systems people, we sometimes get carried away with permuations and computations, but in the end it has to be easy to explain, easy to track and easy to calculate. Our model assigned a lead consultant to every customer. 90% of the time that consultant does all the work for that customer and got full revenue credit against a pre-established goal. Once they reached their goal, we had a an escalting bonus that increased the further past their goal they got. When a team was involved, the lead consultant/project manager had to divy up the revenue credit. PM knew they couldn't screw the other staff if they wanted them to work on their projects again, so found them to be very fair. Great learning curve for future supervisors and managers. All other factors like seniority, skill, etc, showed up either in base salary, or in their ability to get more work and more revenue, thus bigger bonus. Some might say a little mercenary, but sure was simple. Last thing I would add in is, if in doubt, err on the side of the good employee. I never hesitated giving credit for things like sales presentations, user groups, etc that took away direct revenue producing time, but was good for the firm. Small dollars towards larger goal.

@MikeFitzgerald - Great words to live - and work - by.