Early Termination – How and When is Best to Do It.
Let’s start by highlighting the main idea about the purpose of a Consulting project. Sustainable solutions that boost your competitive edge is the goal. Procuring the consultant and working through the project isn’t simply the goal.
Early Termination – How and When is Best to Do It
Meeting your goals requires you to lead the company through a follow-up phase once the consulting team leaves to ensure the highest return on your consulting investment.
When and if the project does not go as expected, you can consider termination.
“The very essence of leadership is that you have a vision. It’s got to be a vision you articulate clearly and forcefully on every occasion. You can’t blow an uncertain trumpet.” – Theodore Hesburgh
Terminating early – How to find a middle ground and agree on early termination?
Typically, contracts are considered terminated when the Consulting firm has delivered all the deliverables agreed in the initial contract, or the addenda, and has been paid in full. However, contracts can also be terminated by the client or the Consulting firm earlier. In that case, the two parties have to agree to facilitate the termination and prepare the transition.
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1- Adapt the new scope to your needs
The pace of change is getting faster and faster. Between the moment you decide to engage a Consulting firm and the kick-off, many things can happen in your company. Think regulatory change, merger or acquisition, turnover in your senior management team. All these events could have an impact on your project, and very likely on the scope.
The first thing to do in this situation is to gather the stakeholders of the project and discuss the potential consequences of the termination.
Have a close look at your contract to see your obligations, particularly if you are required to provide a paid notice period to the Consulting firm. The notice period is meant to compensate for the drop in revenues on the Consulting firm’s side. If the project was expected to last several more months, the loss could be considerable. However, it is always negotiable, and you have to prepare a transition scenario.
Analyze the different options you have at hand and the potential costs associated and make your decision.
2- Don’t hesitate to stop the project
You have noticed that the Consulting firm is not delivering at the level you expected, and you gave them feedback and asked them to fix the issues. Too many executives turn a blind eye on underdelivering projects, especially if there is no obvious alternative. However, if the project is still not on track, you should consider terminating the contract.
When you decide to take that route, you will need a well-documented timeline showing the lack of performance, your warnings, the inability of the Consulting firm to improve the quality of the delivery, and the associated potential damages to your company.
Before you engage in the termination, confer with the stakeholders to find a solution such as changing the team, including the partners in charge of the project, reorganizing the governance, or rescoping the project.
If you decide to go through, your best leverage in the negotiation is the threat of negative publicity that a lawsuit could bring to the Consulting firm and the time to get paid. Analyze closely the performance of the consulting firm on the different deliverables included in the contract and define a fair exit scenario. Include the planning of the transition in the negotiation, as a final due deliverable. Also, always react before the end of the project. It will give you some room for manoeuver and leverage.
3- Other reasons for termination
There are other reasons for termination, such as breach of confidentiality or damage to the company. You will still need to trace all your decisions, the mistakes made by the Consulting firm, and their unwillingness to fix the issues. We recommend gathering with your legal team to discuss how to proceed on a legal standpoint, and with your stakeholders to find a solution that has the highest impact of your company.
Unless the damages caused you a significant financial loss, you would probably be better off avoiding legal actions and finding a compromise with the Consulting firm. Provisions for arbitration and mutual agreement on termination can be defined in the contract.
4- When the Consulting firm wants to terminate.
In rare cases, a Consulting firm may have the right to terminate the contract due to extreme circumstances. In particular, when they have misevaluated the project (e.g. find the environment significantly different than anticipated, mispriced the project, etc.) or face force majeure.
In most cases, the termination causes will have already been embedded within the contract, and there is not much you can do to convince them to reconsider their decisions.
Therefore, it is important to define in the contract the Consulting Firm’s obligation to transition their project responsibilities to your staff or a third party in an orderly manner and to clarify how to handle the associated fees.
5- Prepare your termination.
Carefully review your termination rights (as predefined in the contract) before purporting to termination to ensure your valid right.
The costs of termination can be very high, in particular, if you have to start again with an internal team or another consultant. Besides, the loss in time and realized value would never be completely recovered whatever your alternative might be.
When evaluating the cost of termination, take into account the cost of engaging with an alternative provider, such as those associated with conducting an RFP process, through to selecting the consultant, and after that, the costs of transition and transformation.
In the case of confirmed project cancellation, it is important also to give marketing and public relations people sufficient notice for them to plan and manage messages to internal and external stakeholders.
6- Pay the Consultants what you owe them.
The payments should also be aligned with the deliverables, not the time spent on the project. When you are reviewing the invoices, make sure they reflect the work done.
When you have launched a project, don’t forget to accrue the fees in your budget. If the project is launched at the end of the year, you can split the budget over the two years period.
If you are working with a performance-based bonus, determine the probability of success regularly to accrue the additional fees just like you would do for a Sales bonus.
7- Aim for a win-win situation – wrapping up on good terms
The purpose of every Consulting project is to produce mutually beneficial outcomes for both parties. That’s always preferable but not always achievable. The completion of a project is sometimes more complicated than just submitting the last deliverable. Once the project has drawn to an end, it’s time for a thorough evaluation. Now is the time to compare your end-results with your initial goals, which enables you to understand and begin to prepare the adjustments that are still necessary to make to reach your ultimate goal.
At this time, you can also evaluate the relationship with your consultant and whether they delivered on the initial promise. There are several elements that you must absolutely verify before you close the project and pay the last invoice:
All the deliverables must be submitted and complete. Do you have all the deliverables, as stated in the RFP, or the last version of the SOW? Were they delivered on time? Complete?
All stakeholders must agree that the project is over. Are the other stakeholders satisfied with the work delivered? Do they consider the project complete?
Your teams can take over without the consultants’ support. Do your teams know what the next steps on the project are? Has the consultant prepared and implemented a transition?
No project or professional relationship will be flawless. The project closure is an opportunity for you to give feedback to your project suppliers about your thoughts on the results, the relationship dynamic, and any other dimensions you covered in your project closure review above.
Giving feedback to your consultants will help them improve their business by gaining a clearer understanding of client expectations and identifying potential blind spots.
Clients rarely take the time for a complete debrief with the consultants, leaving the consultants with very few data to fuel their continuous improvement engines. Don’t hesitate as well to ask for some feedback from the Consulting firm on what could have been improved on both sides to start a common continuous improvement initiative. It is particularly important if you want to work in the long-run with this particular Consulting provider.
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