Carl's Corner
by Carl Pritchard, PMP (September 1,  2010)

Reinventing Challenging Clients in Tough Economic Times

by Carl Pritchard, PMP, PMI-RMP

Consulting is tough business to begin with, but in challenging economic times, the traditional concerns of adequate margins, client base and future business are amplified multifold. 

This hardly seems like the time to be having a discussion about dropping clients.  And "dropping" is the wrong word.  But at a time when the temptation may be to coddle all clients in the hopes of ongoing business, tough times may mean that it's time for tough love.

I found myself doing the unthinkable the other day.  I was at a client site (we'll call them "Alpha") on a consulting engagement.  But even as the client walked into their waiting area, I was working on and obsessing about "Beta".  Beta is a smaller client with less revenue and less future growth potential.  But Beta will pay some bills, which makes them important.  The difference is that Beta sees themselves as the ONLY client and as the only folks to whom I should pay attention.  It is wonderful that I have fostered that attitude in them.  It is also a potential catastrophe.

They have begun making demands of me and my organization that no other client has ever made.  Believing the economic times are their leverage, Beta has demanded rebates, reduced fees, additional services and customization that far outstrip the profit margins associated with the engagement.  

So when Alpha walked through the door, my consulting time, energy and thinking was absorbed in the Beta project.  BAD PLAN.  As a result, I had an off-par day with Alpha.  I didn't feel fully engaged and knew that had I been on my game, I would have been able to contribute more to their needs as a client.  It's not that I didn't produce.  But I didn't produce at my highest levels.  

This drove home a powerful point that I have since acted on and have produced some surprising results.  Immediately after the Alpha engagement, Beta called again.  They wanted to know if I was going to acquiesce to their requests for lower fees, more customization, and additional services.  I explained that I would not, and I quoted them the charges for the additional fees if they genuinely wanted to pursue them.  My client contact, Bill, was clearly surprised.  Wasn't I aware that new business is hard to find? 

Didn't I know that others had given in to their requests?  Did I know that another consulting organization had charged them half of what I was charging?  

I explained that each consulting engagement is unique, and the services I provide are rooted in my organization's expertise, not in the rate schedule of other organizations.  As much as I appreciated their business, if they found the agreement as written unworkable, they were free to pursue other organizations.  I told them I would understand, and would draft a "hold harmless" agreement to let them walk away.

The response was very insightful.  Bill quickly relented on his requests.  He explained that he would make it work with the arrangement as drafted.  It is important to note that he did not back down.  He did not contend that any of his requests were unreasonable.  He did not acknowledge in any way, shape or form that he had been asking for out-of-scope work.  He did, however, recognize that I was willing to walk away from our agreement if he wanted to violate it.  

Clients cannot be faulted for attempting to maximize what they get out of any contractual relationship.  But in our roles as managers, consultants and project managers, we have an obligation to live to the foundation documents of the relationships.  If we fail to do so, we abrogate our responsibilities.   

And what if the client had dropped me? I actually would have to be all right with that.  Because I could ill afford another experience where I allowed myself to be distracted by one client's demands over another.  Allowing professionalism to slip is not a cost of doing business.  It can cost us business.  And in  times like these, that's something we can ill afford.  

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Carl Pritchard is the Principal of Pritchard Management Associates, a training and consulting firm based in Frederick, MD.  (c) Pritchard Management Associates, 2010, Right to reproduce in full and with attribution is granted freely for business purposes for members of the Silver Spring chapter of PMI.  All other rights (including reproduction for profit) reserved.