June 25, 2013
King's Corner

The Company of “No”

I recognize that this newsletter has no place for political overtones. So, I’m only going to draw a brief parallel to a political expression that manifested a few years ago. During the first two years of President Obama’s first term as president, a phrase was coined to describe the Republican Party, who was consistently voting “no” on all proposals brought forward by the Democratic Party. The unanimity of the voting block of Republicans in Congress led Democrats and the media to refer to Republicans as “the party of no”. Before anyone gets concerned, I will not use this newsletter as a place to rant about my own political views. I am merely setting the stage.

This past September, Kenway successfully won work at a large client, one which we had courted off and on for several years. It was exciting for us to land work at such a prominent and respected company. We believed that the work we won would lead to more work, and potentially an ongoing stream of work. The potential could not be overlooked. However, we hit a bump in the road when the time came to sign a Master Services Agreement (MSA). MSAs can be large and filled with legalese, the vast majority of which is rarely referenced after signing. They protect both companies in the event of unfortunate circumstances, but aren’t at the forefront of anyone’s mind once work commences. Most companies have “boiler plate” versions, and once a new vendor is selected, the companies “red-line” back and forth some proposed changes, agree to compromises, and finalize the agreement. And then, Statements of Work are signed and work commences. It can be onerous, yet often times, it is a repeatable process. Anyhow, this new client of Kenway had a unique clause in their MSA that prohibited Kenway from doing any work on their premises except work that is exclusively for them. Since Kenway’s employees will sometimes receive phone calls and emails from fellow colleagues during the day related to work that is for Kenway, and not that client, we asked to have that sentence altered to allow for such interactions, and made it clear that none of the time spent on that type of correspondence would ever be charged to the client. After significant back and forth, we were told verbally that they were ok with that type of non-client work, but to “sign it as is….because getting legal to update this sentence could take weeks”. We chose to say “no”, and that if it takes weeks, we’ll wait weeks, but we couldn’t sign something knowing full well that we’d be violating it the day after we signed it. We had just communicated to the client our need to violate it and they were essentially asking us to sign a lie to bypass work. If we signed it, before performing one minute of work for them, they would know that we were liars. How could they trust anything we said or did from that point forward? The outcome was that we never signed the MSA, never performed the work we won, and it went to another firm who I suppose “signed it as is”.

One of Kenway’s Guiding Principles is to provide elite, premium-level consultative services at fair market pricing. We do this by keeping our overhead extremely low. We pay our consultants more than the salaries of their peers at larger consulting firms (which helps employee retention) and we charge our clients roughly 50% of the bill rates of those same larger consulting firms (which helps client retention). Thus, our “play” is to establish long-term trusted adviser relationships, minimize unstaffed time, and maintain a steady surplus of demand slightly greater than our supply. Premium equates to quality, so if we are providing premium services to clients, at half the cost of market, while compensating our employees at above market, the result is 9 consecutive years of steady growth, satisfied clients, satisfied employees and increasing market share. It also goes without saying that our profit margin is thin, but we are taking the “long view” towards our company’s future, recognizing that a small profit margin on a large, stable bedrock of work is preferable to a large profit margin on a small, unstable house of cards. Thus, when a client asks us to reduce our bill rates, our answer is rather simple. Our current rate is our best rate. We don’t play games by having inflated bill rates, and then create the mirage and façade of discounts. We find that behavior manipulative, unethical and untoward. We won’t do it. So, when clients approach us and ask us to decrease our rates (which they have), our answer is ultimately “no”. We believe that rewarding companies that have been overcharging you for years with more business, just because they were willing to reduce rates by x% is the wrong message. It’s like saying “thank you for gouging me with inflated bill rates for all these years, we are finally getting around to catching up with you, here’s more business thanks to your ‘reduced’ bill rates”. Of course, we provide all this background along with our answer, but it still angers those who ask us. The result (in their mind) is that we are “the company of no”.

I grew up hearing expressions like “the customer is always right”, “never say no to a customer” and “don’t ever let a customer walk away angry”. I’m glad I heard them enough to know how to ignore them. When faced with up/down votes and yes/no decisions, it is critical to recognize and hone the art of saying “no” when “no” is the right answer. And if it becomes apparent that there isn’t a market for a company that behaves this way, I’ll hone those bartending skills, where you rarely have to say “no” to anyone.

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