PM Perspectives: Nickels and dimes
Costs add up, sometimes alarmingly, so be sure to discuss reimbursements.
Everyone says they don’t want to nickel and dime their client and yet getting paid for doing work and providing service is the reality of how your business runs. This idiom exists for a reason in this industry. It relates to the expenses, the extra work, the scope creep, and the small amounts that just add up and would be really nice to have reimbursed.
A very fine line defines how to handle these expenses and one can say that clients with budgets don’t want to be badly surprised with a bunch of additional costs. It’s like the documentation and shipping fees we’re tagged with when buying a car. It’s like the closing costs when purchasing a home. None of us like it. Sometimes they can be negotiated away; sometimes we just pay it.
I was at a firm recently where several project managers were unsure about the firm’s “policy” regarding the nickels and dimes. Here are few important things to consider:
PMs legitimately don’t know. Your team may really not know what to do – and this is especially the case whether you’ve hired new PMs or you have promoted internally. This isn’t the kind of thing that is immediately discussed the first day in the role. You’ve been in business long enough to have even the loosest of opinions or at least some general guidelines. Maybe it’s time to have a refresher discussion or at minimum a check-in to see how they’re handling these extras. Chances are good there is someone who can benefit from your advice and that of their peers.
Adapt to change. The way and cost of doing business has changed over the last few years and it has likely impacted you too. For the firm I was visiting, permits now take longer, and resubmissions are more expensive. This was something they absorbed without hesitation in the past but now the cost is three to four times that amount. The same goes for extra project meetings attended beyond what was estimated. Should the client reimburse for this? Or should you accept that as the routine of having the project?
One size doesn’t fit all. There is no easy answer to that question – and that’s why it’s good to have an initial policy and share some experiences around the table. With full disclosure of what might be required and approximate estimates, reimbursement of these extra costs becomes more palatable to clients. If they have worked with other professional service firms, they may even expect these charges. For my client, they asked upfront and discovered the agency did reimburse (albeit with some caps) but they respected the notion they should bear the majority of that cost. For other clients, their budgets won’t budge one dollar beyond what was slated so things like permit submissions and extra meetings have be woven in the final fee.
It adds up. Nickels and dimes can add up to large amounts of dollars for you. When working with firms on this issue, and doing some forensic accounting of project costs, we’ve often found alarming amounts of money given away in these small instances that were never reimbursed – or never even attempted to be reimbursed. It requires some digging but, when finished, you’ll be more informed of what these extras actually are costing you, which clients readily reimburse, and which items you want to target as part of a new policy. This review should never be undertaken to get anyone in trouble, but rather to measure what you are really giving away – and could be getting back.
As we talked about these scenarios and others, the faces of the project managers lightened up considerably. Armed with additional support from their leaders and advice on how to handle future situations they have greater confidence in their role.
Christine Brack, PMP, is a principal with ZweigWhite who specializes in business planning and project management best practices. Contact her at firstname.lastname@example.org.
This article first appeared in The Zweig Letter (ISSN 1068-1310), issue #1021, originally published 8/26/2013. Copyright© 2013, ZweigWhite. All rights reserved.
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