When it comes to service costing, how would you know a good consultant from a weak one?

Try the "acid test".... If you're shopping for help with your service catalog, cost model, and investment-based budget, here are some tough questions to ask prospective consultants.

If their answers seem vague, confusing, or don't make sense to you, that's a good clue that they may not have sufficient experience, conceptual understanding, or teaching ability to provide the help you need.

Systems View

• What is "investment-based budgeting"? And why is it important?

• What is the linkage between business planning and budgeting?

• What is the linkage between budgets and rates?

• What is the linkage between planning tools and accounting systems that track actuals?

• Where is the best place to build a cost model: in the planning system, or the actuals tracking system?

  Service Catalog

• What's the appropriate level of detail in a service catalog?

• What are the attributes we need to decide for each catalog item (what do we need to know about each)?

• Give some examples of specific principles we should use when defining our service catalog?

• How should we handle levels of service?

• How should we handle bundles that clients buy (like applications hosting, or "on-boarding" a new employee)?

• What's the value of developing a service catalog for internal support groups (within the department)?

• Who should be responsible for developing and maintaining a service catalog?

  Cost Model

• What is the appropriate way to get funding for infrastructure and major innovation projects?

• What is the appropriate way to get funding for the "corporate-good" services we provide (like policy facilitation, enterprise security, and coordination of decentralized counterparts)?

• Is staffing a fixed cost?

• How do we pay for the time we need to sustain the business, such as professional development, process improvements, and relationship building? What's an appropriate amount for each of our distinct lines of business?

• How can we set rates at the beginning of the year, and hold them steady throughout the year despite fluctuations in volume?

• What's the right way to price discretionary projects that arise mid-year and require contractors?

• What is the difference between ABC, Cascade ABC, and 2nd Generation Reciprocal cost models? And why is knowing the difference important?

• Many internal groups serve others within our department (as well as clients). How can we get these internal costs in the right places? And how can we manage the resulting circularity?

• Do we need to get historic data cleaned up before building a cost model?

• Is it better to embed the cost model in a planning tool or in the actuals-tracking systems?

• What's the appropriate role for internal finance staff, and what's the role of the leadership team?

  Governance

• What data does our CIO need to scrutinize the cost model?

• What data does our CIO need to negotiate the budget?

• How do we deal with business demands that exceed our resources (demand management, managing expectations)? Are chargebacks required to empower clients to control what they buy and to manage demand

• What performance metrics come from a cost modeling process?

• What should we do when revenues do not equal costs (a positive or negative variance) at year end?

  Method

• How important is it to involve the leadership team, and what is their role?

• What documentation do we need to engage our leadership team in business planning, budgeting, and rate setting?

Of course, we'd be pleased to offer our answers to these and any other questions you may have.

To arrange a complimentary one-hour telephone consultation, please contact us.