Let’s face it, project fee discussions are never fun. But they are a critical part of doing business, both from a retirement plan management perspective and in building a strong overall partnership between you and your vendors. A consistent approach to fee discussions can build credibility on both sides now and in the future as needed projects arise.
The first key ingredient to a fee discussion or proposal is transparency. Being open and direct about fees helps to avoid the negative perception that can arise with surprises and confusion about why a fee is being charged or how much a request will actually cost. Removing uncertainty and proactively addressing fee questions will be an important step in building trust between you and your vendors. Your vendor should communicate early and often, allowing ample time for discussion, proposal review, and follow-up questions.
The second key ingredient is making sure your vendor is communicating with the proper stakeholders within your organization. Your vendors often work with many different contacts within your organization, and ensuring that the key decision makers are not only in the loop but are the appropriate contacts will prevent vendors discussing the proposal with multiple partners before getting to the right person who can provide approvals for the work—that person may not always be you.
The third key ingredient is for your vendor to work closely with its own internal business partners to ensure that what is being proposed is appropriate from an effort perspective, and that a high-quality product is delivered to satisfy the specific need. Chances are, your vendor contact may not be the expert in all the necessary detail needed for a successful effort. It’s important for vendor contacts to properly coordinate with their own internal resources to obtain what is needed to estimate the work and associated costs. This will go a long way toward efficiently getting the work done at the right cost.
A structured proposal should always be provided regardless of the nature of the project on the table. The proposal should be clear and concise, getting to the point quickly on what is to be delivered and the costs around it. A similar approach and structure each time allows you as the client to know what is coming, and to build a level of comfort with your vendor to avoid confusion and uncertainty. The main topics covered in a structured proposal should always include: what is being asked, what is being delivered, and a clear overview of the cost (hours worked, cost per hour, or cost per work item). Finally, it is equally critical to state what is not being covered by a proposal. This helps to set the scope and boundaries around the work product, protecting both you and your vendor from surprises during the course of the work.
Even with a smooth start to a fee discussion, things can go wrong. The scope of the project can change or timelines may require modification. In these cases, it is critical for your vendor to keep you informed through frequent and scheduled updates. This should be done at every stage of the project, allowing you and your internal business partners to digest and respond in a timely fashion as changes come up.
The positive Impact of consistently following this approach accomplishes several important goals. First, it ensures all parties will be clear about the scope of the work and the cost. Second, the credibility built through developing a structured process reduces future work and questions surrounding projects and proposals. Clearly said, you know what is coming, you understand the approach, you have the relevant details, and you can mitigate time spent asking questions around costs and the services to be delivered. Finally, and perhaps most importantly, this goes a long way in building confidence in your business partners and believing that they can be trusted to deliver fair fees and a high-quality work product.