Stephen Shu, PhD

This is an answer to a question I was posed on Quora.

I’d avoid collecting money entirely (i.e., 100%) on the backend except for the shortest and smallest engagements.

Here’s one anecdotal story: I once managed a business advisory practice as part of a large, international and diversified products and services firm. To get this practice off the ground we subcontracted to a number of consulting firms to fill in for delivery gaps we had. And some of these firms didn’t collect their fees that regularly since we were a massive firm with worldwide recognition and history. We always paid our bills, no problem. However as additional context below the surface, the company I worked for apparently had a variety of issues, in particular high levels of debt caused by years of merger and acquisition activity. The CEO had hired one of the big MBB firms are part of efforts to turn our company around.

One day the CEO announces that the company would proactively declare Chapter 11 bankruptcy even though we had cash and lots of assets. What did that mean? The consulting companies that I used as subcontractors could not be paid. The telephone calls I had to make hurt to make. At the time that damaged my reputation even though the whole situation was something that occurred at a much higher level. I do wonder what happened to the fees that were owed to the MBB firm that was helping at the strategic level. Were these paid off before the bankruptcy? Or did they get in line like I had to waiting for my severance pay to make it through the the courts? I have a bad taste in my mouth after that whole experience, especially since the CEO got a parachute whereas suppliers and trench workers comparatively did not.

There are many other examples that I could come up with. However, consulting firms have cash flow considerations to make. And they take some risks, so it is quite fair to pay consultants up-front or along the way in a timely manner. Things can happen that slow things up. For example, if you are doing business internationally, the client may need to do tedious checks on corruption and money laundering that can take time for larger deals but they may be able to release some money up-front to cover the consulting firm services being floated. Or other (probably rare) things can cause complete train wrecks such as working with a distressed firm that might declare bankruptcy out of the blue.

So as a consultant perhaps I have some baggage, but I’d avoid opting for the “complete payment after you’re done” option unless you acknowledge, however remote, the risks, uncertainty, and potential unknown unknowns that there are.

I was posed on Quora a question similar to the above question, and below was my response. I highlight in bold, a key insight drawn from behavioral science.

One the one hand, case competitions leverage a lot of skills that career consultants end up using, such as problem solving skills under pressure, teamwork, communications, creativity, and persuasiveness. But there are also many other skills to master in consulting which are not part of case competitions such as street smarts, empathy, functional excellence, engagement management, leadership, industry knowledge, and advisory orientation. In consulting, you serve your client, not case competition evaluation boards.

Recognize that at the core of consuting is mentorship, apprenticeship, teamwork, and learning from experience. Namely, people learn how to become better and better consultants by starting the profession with enough core skills and appetities to get started. After being involved with a number of projects, one learns from others in the firm how to develop more and more skills and one’s professional identity. You may start in one place and find yourself in a very different place at a later point. Of course, the flavor of the firm and how you experience this may vary a lot from firm to firm.

I wouldn’t overindex and project too far into your future how much you would like consulting based on a single indicator. People are not that great at forecasting in complex situations where they have little prior experience and little feedback. On the other hand, if you are getting multiple warning signs, such as you dislike teamwork, dislike 99% of the people in consulting, have gotten feedback from other consultants that you are the wrong for the profession, have gotten feedback from people that know you well and know the profession that you are not a fit, dislike business, dislike companies, dislike people, then I might reflect a bit more. Remember, you might just start consulting with a strong skills and proclivities in a few areas and flourish over time. My keys to success in consulting (as evidenced solely by my ability to stay in the profession for decades) were probably my appetite for variety and my ability to adapt. I also had supportive managers at key pivot points in my career.