In consulting, the word "rate" implies measuring some quantity against units of time. Dollars per hour, meters per second, sick days per year, etc. For decades, the world-renowned consultant Alan Weiss has lambasted the use of time-based fees in consulting. I want to summarize his arguments using my own words, thought processes, and examples.

We bought a house in October 2018 as part of our family's wealth building strategy. We've paid professional contractors to complete many of the jobs for which my wife and I lacked the technical skills or tools required. In every case, the contractors arrived on time, completed the work to a satisfactory degree and very quickly, then billed me exactly what they estimated. Even when the plumber encountered a few fittings that took longer to remove than expected, the invoice didn't change. I hired them to solve a problem, that is, to deliver an outcome or a result. I couldn't care less how long it takes them to fix the problem, only that I want it done quickly and done right the first time.

Weiss claims (and I agree) that had these workers billed hourly, they would unquestionably be encouraged to work more slowly and do poor quality work so I'd have to call them back. This is why I act like an executive by hiring the best contractors who charge value-based fees that improve my condition. This is why I do not act like the purchasing department, completely removed from the company's strategic decision making but are wholly focused on stiffing their suppliers.

At the time of this writing, I am not a true independent consultant, but I currently write content for three different media companies. This is how I am compensated by each.

  1. Fixed cash payment upon signing plus live attendance royalties.
  2. Fixed cash payment upon completion plus video viewership royalties.
  3. Fixed percentage of the company's top-line sales for six months.

Notice that not one of these approaches is time-based. You don't need to be a consultant to operate in the value-based compensation world. Yes, my royalties are based on how long people stay in my courses, but I am never paid based on how long it took me to build content. What executive would ever sign a media deal to reward those who deliver slowly? Don't allow companies to penalize you for effectively operating your business. Paraphrasing Weiss, focus instead on how you can bring incredible ROI to your customers and equitable compensation for yourself.

All Blogs -- Main Page