Air Traffic Controller 2nd Class Branden Powell keeps track of aircraft using a SPN-43 radar screen during routine flight operations on board amphibious assault ship USS Tarawa (LHA 1). Tarawa is participating in a composite unit training exercise with the 11th Marine Expeditionary Unit off the coast of Southern California. U.S. Navy photo by Mass Communication Specialist 3rd Class Bryan Niegel (RELEASED)

Using Time Span of Discretion to Price Consulting Services?

E. Forrest Christian Managing, Project Management 5 Comments

The issue of how to price consulting services perennially agitates IT consulting companies. The issue of market price never quite seems to fulfill the need: what a client will bear is often as close to free as they can get. All too often, customers get shafted with a too-high price for twenty-somethings but can’t see the value of the older, more experienced consultants.

But, of course, most IT consulting companies don’t know about Elliott Jaques’s findings on Time Span of Discretion (TSD) and its affect on felt-fair pay. Jaques, for those who haven’t been following me, discovered that what people felt that they should get paid correlates with what he called the “time span of discretion” of their jobs. TSD identifies how far into the future that you have to work without knowing the results of your work.

For example, a production manager may not see the results of his changes to the production line until the numbers come back from Sales two months later. The Time Span of Discretion for his position would be two months. Positions with longer TSDs (that is, one must work longer into the future before one can see the results of one’s work) were seen as deserving more pa. The “felt-fair pay” increased with TSD, although not quite smoothly.

What if you used TSD to price IT consulting services? The real trick will be determining the TSD of particular jobs. IT projects actually have some interesting time-spans. Where do you measure? Are you interested in the length of the scope of work, or do you need someone who can see the lasting effects that stretch ten years or more?

I’m not sure of the answer, but I have a hunch that TSD pricing could revolutionize the IT industry. Clients would know how much a job is worth and wouldn’t have to pay a premium for lower level workers who are (more or less, depending on the firm) simply there to pad the payroll. Consultants would know what their clients will think is fair, if they are successful at showing them the TSD of the jobs.

Image Credit: Air Traffic Controller tracks aircraft with SPN-43 radar screen, 2007. U.S. Navy photo by Mass Communication Specialist 3rd Class Bryan Niegel (RELEASED)

About the Author

Forrest Christian

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E. Forrest Christian is a consultant, coach, author, trainer and speaker at The Manasclerk Company who helps managers and experts find insight and solutions to what seem like insolvable problems. Cited for his "unique ability and insight" by his clients, Forrest has worked with people from almost every background, from artists to programmers to executives to global consultants. Forrest lives and works plain view of North Carolina's Mount Baker.  [contact]

Comments 5

  1. Not sure I’d recommend that avenue. They’ll hire you on short term easy project because you’ll price them cheap. They’ll hire someone else who’s cheaper on the harder one’s because you’ll price high.

    Just because you have a handle on TSD do not assume that others, especially purchasing professionals, do. My experience with purchasing folks is that they almost universally have a TSD that is measured in negative numbers. . .. ..

  2. Regarding fair pay for consultants, I would say that organizations should be paying the consultant based upon his/her current capability level rather than the time span of discretion of the project.

    Pardon me while I back up my supposition with some theory:

    The time span of discretion of a role can be determined by assessing the longest task associated with the role.

    It is important to note that: Time span of discretion cannot measure the complexity of a single TASK but rather is the measure of the complexity level of a ROLE. The word “discretion” refers to the need to exercise discretion in choosing what to do today so that all tasks required by my role are delivered on time and meet the needed level of quality.

    For example if the longest task associated with a role was:

    Change the culture within a banking organization from that of “single interactions and order-taking” to one of “relationship building and proactive selling”.

    A typical and realistic time frame for that would be about 3 years. This would mean that in order to be successful at this, the person responsible for this task would need to have a minimum current capability of stratum 4.

    Those whose current capability falls within stratum 4 can manage projects with delivery dates falling between 2 – 5 years. A description of what typical work “looks like” at this level is: Integrate and oversee the work of departments within a function. Must balance resources between multiple serial projects.

    You can see how making the type of culture change called for above would require the integration and management of multiple serial projects within several departments simultaneously. (HR, Training, IT, Operations, Marketing, Advertising). When I say serial projects, I mean that one thing must be accomplished to set the conditions for another which then leads to a third step and possibly more.

    Now back to the question at hand: If the bank were to hire a “culture change consultant” to help with this, I doubt the bank would have the budget to retain the consultant for the entire 3 years. However, it is likely that the consultant would be brought in to help with the planning phase of the project to help make strategy, timeline, and budget decisions.

    This part of the task might take 3-6 months. If you were to look solely at the time span of the planning phase, 3-6 months, this would suggest you could hire a consultant of stratum 2 capability. WARNING, WARNING, WILL ROBINSON!

    This would prove disastrous. A person with current capability at stratum 2 is not yet capable of the sequential, multiple cause and effect thinking necessary for this project (this would mark stratum 3 capability), much less the balancing and integration of multiple sequential pathways (this would mark stratum 4 capability).

    They breadth of data you would want your consultant to consider during the planning phase would point to your needing a consultant at least at stratum 4.

    This is why Jaques always says that managers may NOT delegate their planning tasks. If they were to, they would find that their direct reports would not take into consideration all that the manager would have hoped because his/her ability to think is more complex that that of his/her direct reports. (This is assuming that the manager has current capability one level above his direct reports.)

    So the TSD for the consultant is squirrelly and misleading if s/he is being called upon to help with planning and strategy. If this is the case, you want a consultant whose current capability at least equals that called for by the entire project, not just the time span of the planning phase.

    Another example, might be hiring someone to deliver training. The task (delivering training) might only take 2 days which in terms of stratum level equals to stratum 1. This type of work consists of following procedures only. No anticipation of problems is expected. Problems are only addressed as they are encountered, and if a procedure is not in place to rectify the issue, a supervisor is called. This type of work pays minimum wage or slightly more.

    Now, you may very well be able to accomplish your training with a stratum 1 trainer of it were completely proceduralized and VERY black and white. Like for instance, how to run a cash register. However, if the topic of your training was how to apply Jaques’ theories to analyze interview transcripts to determine the interviewee’s current level of capability based on the content and structure of the interviewee’s verbal argument, I doubt you could find a stratum 1 trainer willing to take a stab at that. You would need a trainer of higher capability and thus his or her pay would need to be higher accordingly. The time span of discretion does not fit here. Because time span of discretion cannot measure the complexity of a single TASK but rather of a ROLE.

    Therefore, when hiring a consultant you may be hiring him for one TASK, but his ROLE, if he is an independent, is really determined by his own goals.

    Maybe his longest task would be:

    Build a client network that allows me to continuously carry out projects equal to that of my current capability relying solely on word of mouth advertising.

    OK, now I’m not speaking for Jaques, I’m talking off the top of my head.

    Interestingly enough, the time span of discretion for the independent consultant task above would vary. The higher the capacity of the consultant, the longer this task would take. And to really bend your mind, this task might have started before the person was aware of it, as his stellar work reputation prior to being an independent consultant might have won over the hearts of clients early in his career.

    We at PeopleFit have toyed around with felt fair pay rates. Jaques’s model is “pinned” with a value of X on the role with a time span of 2 years, that is the border between stratum 3 and 4. The X varies with market. But within a market, the multiples are accurate. An example estimate for current felt fair pay would be as follows:

    X=80,000

    Stratum 1 entry — TSD 1 day (Jaques’ differential pay formula 31%X=24,800)
    Stratum 1/2 — TSD 3 months (Jaques’ differential pay formula 55%X=44,000)
    Stratum 2/3 — TSD 1 year (Jaques’ differential pay formula X=80,000)
    Stratum 3/4 — TSD 3 years (Jaques’ differential pay formula 2X=160,000)
    Stratum 4/5 — TSD 5 years (Jaques’ differential pay formula 4X=320,000)

    So, therefore, if you are a consultant and your capability is just entering stratum 3, that means your total annual felt fair compensation would be around $80,000 or X. Obviously, you can do the math to get daily rates, etc.

    Now this doesn’t address when you are hired to do a project that does not require your full capability. Do you charge less? I don’t know. It’s hard to “leave your capability at the door”. You will bring your full perspective to a project regardless. I don’t know the answer to that one.

    Hope this helps.

  3. Post
    Author

    I’m pretty sure I heard that clip before on a tape. Or am I simply thinking of DA’s “Learning Through Film” or whatever that song is on DOPPELGANGER?

    I’m moving the conversation thread back to the main blog so that I have something to post. Because this is getting way cool.

Tell Forrest how wrong he is: