Thoughts and Insights on Business Excellence in the Energy and Heavy Process Industries
In our last posting we introduced the topic of incentives and consulting agreements by asking the question: It is possible to have so much skin in the game that the consultants start taking over how the client operation is run? We also described how a fees for performance arrangement differs from a fees at risk structure, highlighting the risk of driving unintended results.
In 2004, Forbes ran a story that talked about how consultants, keen to demonstrate their commitment to delivering results, were increasingly electing to enter into fee arrangements tied to performance. These typically involved setting aside a portion of the overall fees and tying their payment to the achievement of stated benefits for the client, and even providing for “gain share” arrangement for sharing in a portion of results delivered over the target.