You all know what a scope of work is. Every project manager does, even those people who don’t carry the title “project manager.” The scope of work encompasses labor, materials, manpower, and time. The scope of work factors in determining the cost of the project, to which businessmen then add a floating percentage to ensure a profit. But scope of work doesn’t necessarily determine the value of the project and may even work to keep fees artificially low.
In her blog, finance and business consultant Katherine Williams states, “Instead of estimating the charge for a job by calculating ‘number of hours,’ start by considering how much, and what kind of, value you will be providing your client.” In short, this means determining how much the client values the project. Bear in mind that protestations of limited budget have no bearing on your calculation for the project fee and scope of work. When the scope of work outstrips the client’s budget and when you still agree to perform that work, then you’re donating your resources. While not a viable business model unless you receive monetary donations to at least cover expenses, the occasional pro bono project builds good will and shows that your business has a heart–not such bad things.
Williams notes that the scope of value depends upon the scale and type of project and the needs and expectations of the client. These variables necessitate asking questions to determine the potential outcomes of the project. What is the completed project expected to accomplish? These goals can include increased sales, customer or employee satisfaction, improved brand reputation or awareness, increased website traffic, or an increase in new clientele.
According to Tim Williams of Ignition Consulting Group, the scope of value also includes definition of key performance indicators. He categorizes project outcomes into the following categories: marketing-related, customer-related, channel-related, and internal. Measurement of outcomes covers transactional, behavioral, and attitudinal metrics. Once you’ve determined the scope of value, then it’s time to calculate the scope of work.
Of course, the importance of the scope of value varies with the project or product. After all, why does McDonald’s charge so much less for a cup of coffee than Starbucks? Why do people willingly pay more for one burrito from Chipotle than three from Taco Bell? After rolling your eyes and replying, “Because they can,” think about it. Starbucks and Chipotle offer at least a much greater perceived value than the other two aforementioned alternatives in terms of service, choice, quality of ingredients, etc. Why does one editor charge $100 to edit a 50,000-word manuscript and another charge five times as much? Factors of experience, skill, and personal attention to detail play into those fees.
However, as previously stated, the value the client places on the project matters in determining the scope of value. A client may state he “needs” a project completed, but may not be willing (or able) to dedicate sufficient funds to pay for the quality of service and resources desired. If the client is willing to amend the scope of work to align with his budget, then he shows an understanding of value. If he does not show such willingness, then he doesn’t value the project and doesn’t value your skill, service, or time.
Understand the value of the project before determining the scope of work. Every proposal should include a scope of value statement that succinctly explains the desired outcomes of the project. So stated, you will have shown the enhanced value you bring to the project and justify the fee commensurate with the value you bring.