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)