The "Value-Quality" Gap

Measuring value is a whole different game than rating quality.

During those last days, I've explored the value problem in the consulting industry. Demonstrating to clients that your projects actually generate value for money is not simple and must be looked at from different angles. One of them consists of analyzing the "value-quality" gap.

Here's what it is, why it exists, and what should consulting firms do about it.

What Is The Value-Quality Gap?

It's the difference between how clients see the quality of the work delivered by consultants, and the value created by them. According to recent research published by Source Global Research:

  • From 2017 to 2021, an average of 69% of clients spoke positively (gave a "high" or "very high" rating) about the quality of the work delivered by consultants.
  • During the same period, only 40% of clients spoke positively about the value created (the value delivered was noticeably greater than the cost of the project).

You might disagree but to me a 30% gap is quite big, and difficult to be ignored.

What Creates The Value-Quality Gap?

This gap is a natural reflection of the messy nature of our work as consultants. I see two main explanations for clients to recognize high quality but not high value:

  1. There's not a single way to measure value: Quantifying the value created can be extremely difficult, depending on the domain and outcome of the project. What's the value of creating an innovation roadmap? Of designing a new business model for the business? Of coaching the leadership team?
  2. There's not a single time dimension to measure value: In many cases, the real value of a project will only become clear years after the consultants have left. How can you judge the impact of a new brand strategy right after its development? How long do you need to see the true benefits of implementing a new cybersecurity system?

Measuring value is a whole different game than rating quality. You need to be rather naive to believe clients would naturally equate them.

But just because clients struggle to see and quantify value on their own doesn't mean we can't make it easier for them to do so. Consultants can and should take action to close that value-quality gap by increasing perceived value.

How To Minimize The Value-Quality Gap?

There are many ways to do it, but here are three initiatives that I've seen boutique consulting firms use to increase perceived value:

  1. Improve your ability to measure and quantify value.
  2. Rethink your pricing model.
  3. Have more and better conversations about value with clients.

Long ago, I've written about quantifying value here. Very few consulting projects can be measured with direct financial metrics such as revenue growth and cost savings. What you usually have is a number of indirect financial metrics (retention, customer satisfaction, employee turnover) and non-financial indicators (new capabilities, personal development, more accurate market insights, reduced risk).

You need to use a mix of those to ensure clients understand the full impact of your work. I recommend discussing success metrics with the client before any new engagement, building a model to convert indirect measures into financial ones, and using dashboards or reports to give clients visibility on how much value is being created with the project.

Second, you might want to rethink your pricing model. It's impossible to separate price and value since clients compare them to evaluate your net impact. As long as you price your project based on your inputs (hourly or daily pricing), you reinforce a transactional and commoditized view of your work as a consultant.

Ideally, if you want clients to see you as a value-adding partner you need to price your services based on the value you create, not the time or materials required to do so. Consider updating your pricing strategy to use more output-based (fixed fees) and outcome-based (performance/success fees) pricing.

Finally, if you want to help clients have a better understanding of the value being created the best way to do so is through clear and consistent communication. How often do you raise this topic during your engagements?

Many consultants think the value of their work speaks for itself, but that's not true. A couple of small publications suggested that there's a strong correlation between the clients who said that consultants raised the topic of value with them frequently, and those who were more likely to positively evaluate it.

Use your discovery conversations to discuss what type of value they are looking for. In your proposals, quantify value using a mix of direct and indirect KPIs. During delivery, highlight how much value is being created. When you wrap up, discuss how your client will continue to track value - and follow up after a while to help them do that.

Thanks for reading. You can get more specialized and actionable growth insights for micro consultancies in our newsletter. Every Tuesday, you get one idea from Danilo, one quote from other experts, one number you need to hear, and one question for you to level up your consulting practice.

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