TERMS OF BUSINESS


The commercial aspects of the client relationship are embodied in a practice's terms of business. Unlike terms of reference, which are usually designed for each client project, terms of business are likely to be similar for different projects. Thus far in this chapter, we have considered only the basis of payments made by the client to the consultancy, but there will be other matters that might be routinely included in terms of business, such as:

  • intellectual property rights;

  • conditions affecting the liability of the consultancy;

  • expectations of what the client is to provide;

  • other contractual terms, such as how the assignment may be terminated before its completion.

A consultancy practice may have standard terms of business that are included in each proposal, with variations, or optional clauses, which are tailored to a particular contract.

Intellectual Property Rights

With the growth of the 'knowledge economy', intellectual property rights (IPR) are of increasing importance. This is particularly the case in consultancy, where - presumably - consultants are hired because of their know-how. It is the exercise of this intellectual property that clients are buying, and it would be difficult for a client justifiably to insist that a consultant's know-how became the client's own intellectual property.

IPR becomes a particular issue in matters of specific intellectual property generated on a project, for which a client might reasonably suppose they have paid. This might include, for example:

  • product design;

  • software development;

  • operational processes.

What in theory might happen, for instance, is that a consultancy is paid six months' fees for developing a piece of software for a client A. Another client, B, needs similar software, which would cost six months' fees again, but the consultancy could sell the software developed for Client A. Maybe it might need a month's worth of adjustment, but the consultancy could sell it for five months' fees. Client B would be happy because they have their software at a discount, and the consultancy would be happy because they have five month's revenue for one month's effort. On the other hand, Client A may be less happy at funding this!

Of course, this is a feature of consultancy: consultants acquire learning and experience with clients, which is then deployed to the benefit of later clients. The most that clients can do to protect their interests in this situation is to agree a restriction on future work with direct competitors (see 'Clients' terms of engagement', below). Where intellectual property is developed as a specific product of a project, however, the rights to this should be agreed as part of the terms of business. This, of course, equally applies to the consultancy's intellectual property provided to the client, who may be subject to restrictions on its use.

The Liability of the Consultancy

In the same way as it is unwise to enter marriage with a divorce settlement in mind, you should never start any consultancy project contemplating its failure. Even so, there are risks associated with all consultancy work, and it is important to have thought through the arrangements if things do not work out as expected.

Although there have been a few court cases in which major practices have been sued, those are exceptional. It is important to have an 'escalation' rather than a 'tripwire' strategy (to use phrases from the Cold War!). In other words, there should be a series of measures in which consultancy and client can engage before resorting to the courts, which is rarely to commercial benefit, although it may apportion blame.

It therefore makes sense to have some form of dispute resolution procedure. In my experience, disputes tend to be about misunderstandings rather than breach of contract, both parties being convinced of rather different things. This reinforces the importance of establishing clear terms of reference at the start, and maintaining effective communications with the client (and documenting agreements) throughout the project.

Expectations of What the Client is to Provide

Consultancy projects are joint ventures between the consultancy and the client, and it is rare for the client's contribution to be limited simply to funding. Clients' staff will be involved and their time and cooperation will usually be critical to success. In addition, there may be other obligations on what the client is to provide, which may be incorporated within the terms of business, such as:

  • office accommodation and facilities;

  • secretarial and administrative support;

  • logistical help (for example, booking flights, accommodation);

  • provision of information.

The detailed nature of these will vary according to the type of work being carried out. For example, in running in-house training courses, a consultancy would want to establish responsibility for:

  • making administrative arrangements for participants to attend;

  • booking the training venue;

  • providing copies of training materials;

  • hiring equipment, films, etc.

Other Contractual Terms

Other contractual terms might include:

  • The basis on which fees might be varied. For example, in a time of high inflation, a consultancy might wish to review fee rates during the course of a long project.

  • Client confidentiality. This is usually a matter of ethics, and an aspect of each operating consultant's personal contract of engagement. Strictly, it should be superfluous, but clients often take comfort from the confirmation that these arrangements are in place.

  • Early termination of contract. There may be circumstances in which a project is rendered no longer necessary, or other occasions in which a client wishes to terminate a contract, or a booking. Cancellation and termination terms should be clear. From the consultancy's side, they will have promised to make the designated consultants available for the required time, and thereby have, usually, turned away alternative pieces of work on which they might be deployed. Cancellation or termination at short notice may mean that it is not possible to find alternative work. Some penalty is usually agreed beforehand; for example, in our training business, we usually insist on full payment if a bespoke training course is cancelled within two weeks of it being due to run. This type of penalty means that clients make cancellations only for serious reasons.

There may be other contractual terms to be placed in your terms of business. Sometimes, however, clients will have their own views of the terms of engagement for consultants.




The Top Consultant. Developing Your Skills for Greater Effectiveness
The Top Consultant: Developing your Skills for Greater Effectiveness
ISBN: 0749442530
EAN: 2147483647
Year: 2003
Pages: 89

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