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What is the value of an idea that comes in the flash of a second but is based on a whole working life of experience? Basing the value of creativity on time spent is seldom correct.
Since time and capacity utilisation are so crucial for profitability many knowledge organisations have managed to avoid a direct link between time spent on a project and payment.
Here are some possibilities.
1. Payment per Assignment.
Some customers use tender procedures. The vendor thus offers a fixed price irrespective of the time involved. This is both a threat and an opportunity.
Head-hunters often charge a percentage of the salary of the new employee.
Some big consulting firms charge a fixed amount per team rather then per consultant. It is a method of lifting the charges of the lowest paid associates
2. Commission on Cost.
Advertising agencies often charge a percentage of the total space cost of an advertising campaign.
3. Profit Sharing.
Sharing in the profit of the solutions implemented is an attractive method in theory but often difficult to use since implemented results can be hard to distinguish. Advertising agencies sometimes use it when designing marketing campaigns and management consultants in cost cutting projects.
4. Ownership in Customer.
Instead of charging a fee in cash, the consulting firm might transfer the whole or part of the fee into shares in the company they advise. This is similar to profit sharing although the involvement and the risks become much greater. The knowledge organisation may suddenly find that valuable cash is stuck in a different business.
5. Insurance Premium.
Receiving the payment as a kind of indirect payment or insurance premium is a rather common system. The public sector can be seen as an insurance system. They receive revenues as an allocation from somebody else than the advised customer. It also common in the private sector, for instance in the financial sector. For instance, underwriters charge a fee to the new shareholders when they advise the company making a new share issue.
The retainer system applied by the ancient Chinese doctors also belong in this category. The patients pay as long as they are well but expect to be treated for no cost when taken ill!
6. Make the Solutions Visible or Tangible.
Many consulting firms try to make their solutions visible in order to simplify the sales process. Much of the conceptual development made by management consultants belong in this category. Concepts like "Total Quality", "Service Management", "7S", "Learning Organisation", just to mention a few.
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