Consulting Retainer Agreements for Ongoing Situational Access

Thousands of consulting firms lose millions of dollars because they make their decisions on partial information. Often objectivity and pure garden-variety pedestrian pragmatism get overruled by whims and wishes of people who are too close to their problems. Or some courageous visions and great goals are recommended to be abandoned by some anal-retentive folks whose sole objective is to cut costs by all means. I've met several mid-level managers who complained that...

"We've stopped high-ROI marketing programmes because the accountant convinced the partners that we had to cut costs to be more profitable."

The Purpose of Consulting Retainer Agreements...

...is to help partners and practice leaders to make the best possible decisions by discussing their issues with an objective outsider who has no emotional and political involvement in the firm's day-to-day operation but focuses on the firm's long-term prosperity and profitability. In doing so partners and practice managers have access to an unbiased perspective that can act as a good balance against the similar thinking of the inside people.

To better demonstrate the power of a retainer contract, here is a story from Tony Robbins...

Once the US Army requested Tony to speak to some of the soldiers. After the speech, one of the generals mentioned to Tony that many of the soldiers regard their military service as the pinnacle of their lives. The general lamented that, considering the great training these soldiers receive, after their military service they could go and achieve incredible things. Basically these soldiers should be some of the most successful people in the world. But that doesn't happen.

Tony had a short but pretty eye-opening response. What he said was that after leaving the army, these soldiers no longer have the environment and culture that hold them up to a higher standard of excellence and challenge them to be the best they can be.

Nuff said...

The Structure...

...of my retainer engagements is pretty simple. For a fixed fee my clients have access to me for a set period of time to get a second opinion on any issue they bring to the table.

However, what separates retainer contracts from normal consulting gigs is that we don't have a specific project to work on. Here is the best way to explain it...

The retainer agreement is the equivalent of having a gym membership and working out on your own. Whenever the gym is open, you can go and train. The equipment is there for you, and you can ask staff members to help you if you're uncertain about something. And they help you. But it's up to you when you go to the gym and what you do there. No one holds accountable to your actions.

However, when you decide to get serious about achieving something specific, then you engage a personal trainer's services. It's s no longer only a retainer agreement gig, but on the top of the retainer contract (gym membership), you start a specific project with a personal trainer. You set the objectives, the measures of progress. You also establish the value of achieving the set objectives.

There are two main differences between retainer agreements and consulting projects. Projects have specific objectives to achieve and metrics to measure progress. Consulting retainer agreements don't have them.

In my project work, my consulting fees are based on the value of improvement the achievement of the objective would mean to my clients. For my retainer contracts, my fees are based on the company's current performance level, and the financial weight of the decisions my clients want me to get involved in.

I use the firm's current performance, because one of the objectives of a retainer contract is to safeguard current performance level while also seeking ways to improve.

There are two main factors we set in consulting retainer agreements: Responsiveness and access levels.

Level of responsiveness is how quickly I respond, and the level of access is how often clients can contact me. As the sketch above explains, the clients' investments define both the level of access and the level of responsiveness they can obtain. In general, urgent issues require higher responsiveness, whereas, mission-critical issues need higher level of access. And there are firms that want to move rather fast, and they choose the combination of unlimited access and high responsiveness.

Fees, access and responsiveness levels are set in our agreement, and that's all to it. I never watch the clock, so you never have to worry about paying for the minutes.

In my retainer contracts, my clients contact me with issues like...

Can you review this proposal?

Can you critique this sales letter?

I'd like to role-play tomorrow's meeting with a "big gun" prospect.

We have a payment problem with a client and I'm not sure what to do.

Have you got a template for developing an "Ideal Client" profile?

Have you got some ideas on teleconference marketing?

We're hiring a new manager and we'd like you to be one of the interviewers.

The Intended Results of Consulting Retainer Contracts

Lots of our decisions are incorrect, and there is not a dickybird we can do about it. That's the bad news. The good news is that when we make decisions in isolation, under the worst circumstances, we know there are ways of improving our odds of getting it right. One of these odds is that we discuss our decisions with people from different walks of life.

Having been an aerobics instructor, a crematorium attendant, an embalmer, a gravedigger, a slaughterhouse worker, a soldier and hell knows what else, in one body I represent more walks of life than the whole population a small town.

Look at a retainer contract as a proverbial safety net for high-level decision makers for whom it's vital to get their decisions right, and they have very little wiggle room for guessing. There is always risk in running a business, but together we can make better quality decisions to do the right thing…

A few years ago I got an email from Anna, a retainer contract client. Her firm had had an ongoing annual contract with a large client. Her contact was replaced a few months before, and the new contact was dragging his feet to meet Anna to discuss the contract's renewal. He failed to respond to her emails and didn't return her phone calls. Anna, totally frustrated, contacted me and we discussed how to handle the situation. We created a letter, which Anna emailed to her contact. Within three hours the meeting was set, and within four days the contract was renewed at a 37% higher fee of $172,000 than the previous year's fee. The amount of work was even slightly less than in pervious years. Together we were able to better emphasise the value of the Anna's firm's contribution to the client.

Now, in order to avoid getting erroneous impression that I'm a smart bloke in any way, shape or form, here is the dirty reality, and there is not a sausage I can do to change it...

Creativity and the quality of our decisions is the function of the number of connections we can make between our brain cells. The more connections we make, the better the decisions we make. Now, let's say, for the sake of simplicity, you have four brain cells, so you can make maximum six connections. In isolation I can make the same six connections with my four brain cells. But together we can make 28 connections.

Here is a different explanation. I'm an ex farmer, so I love animal examples...

Chimpanzees have the largest brains among animals. They are individual geniuses. But their group IQ is basically idiotic. Baboons, on the other hand, have pretty low individual IQ but very high group IQ. Baboons are a great example of collaboration.

Total number of connections = (Number of brain cells * (Number of brain cells - 1)) / 2

It means the quality of our joint decisions is 366% higher than the decisions either of us can make in isolation.

Managing partners and executives usually garner the following benefits from retainer contracts...

• Better quality and politics-free decisions
• Increased speed of making decisions
• Better long-term focus
• Better avoiding expedient actions
• Enhanced discipline, commitment and accountability
• Enhanced sense of leadership and ability to produce better results

So, this is all about consulting retainer agreements. If you need a bit of help and support to make better decisions on an ongoing basis, this could be a solution. Let me know if interested. Remember, with a little tweaking and fine-tuning, your firm could be one of the brightest shining stars on your industry's highway of commerce.