Negotiating Fair Compensation

1 September 2019 No Comment

Stephen Simon is a part-time independent statistical consultant and part-time faculty member in the department of biomedical and health informatics at the University of Missouri-Kansas City. He writes about statistics, evidence-based medicine, and research ethics. Read more at his blog, PMean.

If I had to find fault with my colleagues in the statistics profession and myself, it would be because we sell ourselves short. I can’t blame the researchers we work with. If they offer us support at 5% effort on a research grant where everyone else is getting 20% effort or more and we accept, they are the smart ones and we are the dumb ones.

It is not just in the research arena that we sell ourselves short. In our outside consulting work, we don’t charge nearly enough. Much too low is the $130 average hourly rate listed in a 2006 newsletter of the Statistical Consulting Section.

You already know how much a typical lawyer or accountant makes because you needed their help getting your business started. Your training and experience are at least as good as theirs, so consider what you pay them a minimum for what you should charge.

I won’t go into the advantages and disadvantages of charging a flat fee versus charging by the hour. A discussion of both approaches appears in an earlier Amstat News article. But here are some tips for how to get the compensation you deserve.

First, if you are charging by the hour, post your hourly rate on your website. It will save you time by scaring off anyone who is trying to get statistics help on the cheap and give you something to point to if someone tries to negotiate a lower rate. Sorry, you can say, but my rate is what I have listed on my website. Non-negotiable rates are the norm in the legal and accounting fields, so you are not being unreasonable.

Charge a premium when the client asks for something unusual. Your client needs you to run SAS programs and you are much more comfortable with R? Fine, but that will be $75 more per hour. Your client wants to own your code and not let you re-use it for any future client? Same thing. Will you have to work odd hours to meet a ridiculous deadline? Let them know your evenings and weekends are valuable to you. You’ll sacrifice them for an important deadline, but it will cost 25% extra.

Every time you ask for more money, you do need to “up your game” to the same extent. Your SAS code will have to be every bit as good as the R code you normally write. The programs your client owns will be meticulously documented. And you won’t even think about being one minute late if you are charging a special evening and weekend rate for their tight deadline.

And please don’t raise your consulting fee because the client is asking for something you know is unethical. You don’t take a $10,000 bonus when you find a way to push that p-value below 0.05. There are some things that are not worth any amount of extra money.

Get some of your money up front. In legal circles, this is known as a retainer fee. Tell someone what your minimum cost is going to be and ask for half of this amount before you start your work. I had a client who cut me off after seeing some of the preliminary results. I didn’t ask for a minimum, so I couldn’t complain. But it hurt me much more than the loss of expected income. I take pride in my work and knew I had not provided a quality data analysis for this client.

Raise your consulting rates over time. If you were working for a big company, you’d see extra pay because you’re more experienced and produce better quality work using less time. The same must be true for your independent consulting work. So, think about asking for an extra $25 dollars per hour at the beginning of a new year. If it helps, you can offer the earlier rate for longtime customers. Hey, anyone who sticks with you year after year probably deserves a better consulting rate than a new client.

On the flip side, you are not anyone’s slave, and if a project isn’t worth it to you anymore (usually because the aggravations are not worth the money), just call it quits. Find a good stopping place that does not leave your client hanging. That’s the big advantage of being an independent consultant. In a big company, you might be able to get out of an aggravating project that isn’t worth your time, but more often than not, your boss will tell you to suck it up and be a team player.

Put everything in writing. I have never been burned by a bad client, but enough consultants have that they insist on a contract. Put a payment schedule in the contract and include a penalty if the company does not pay within an agreed-upon time frame (usually 30 or 60 days from receipt of the invoice). If you don’t like the idea of a penalty, offer a discount for timely payments and raise your base consulting rate to compensate.

If you have exceptions to your stated consulting rate, that is okay, but you should know what your exceptions are before you enter into negotiations. I offer a substantial discount to graduate students needing help on their dissertations. I was a poor graduate student once, so I can sympathize. I also offer volume discounts. For one client, I cut my normal consulting fee by 25% in exchange for a guarantee of 10 hours of consulting a week for a full year. But limit your exceptions to cases where you see the need.

You must have a stiff spine when you are negotiating pay with a new client. Any reasonable person will understand if your fee is non-negotiable. They may not like you for it, but they will respect you.

Roger Fisher and William Ury have a great book about negotiation, Getting to Yes. One of their top recommendations is to know your BATNA (best alternative to a negotiated agreement). Never say yes to conditions in a contract that are worse than what you would have if you didn’t reach an agreement.

Also consider what your client’s BATNA would be. If they got your name from a consulting list, they’d lose a bit of time by having to go back to that list and look for a different consultant. But if you are the only consultant they know who has the right skills and experience, then their BATNA puts them in a poor negotiating position. This is the case, more often than not. The cost to a client of leaving a problem unsolved is usually much greater than the cost to you of the lost business opportunity.

Don’t use this edge to win concessions that are excessive to the point of being coercive. You do want repeat business, so treat everyone fairly. When you have the negotiating edge, just use it to give yourself the courage and determination to keep your important conditions non-negotiable.

When you accept less than you truly are worth, you aren’t just hurting yourself. You are hurting every other statistician who is trying to get decent compensation for their work. So, go out there and get every last penny you deserve.

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