VOLUME 9, ISSUE 2, DECEMBER 1999

Why Compensation for Referrals Makes $ense

Sean McElroy, Central Software Research, Inc.

It's probably safe to say that most of us in CNET are one-person operations. If you're like me, you contract your time to a client for an hourly rate. Of course, this rate covers only the time you're working on something that the client agrees to pay you for. Rarely does a client consciously pay those such as myself for time spent: marketing, paying bills, staying up on technology, relaxing in Hawaii, recovering in a hospital bed. "But that's why our rates are as high as they are," you say. And you'd be right if you constantly had enough work and mother nature didn't interfere. Wouldn't it be nice to have a small stipend of on-going income to carry you through those times when you either don't have work or can't work?

You know, there's a dark underside to this business. I'm talking about that subtle paranoid feeling that emanates when you hear about a contract opportunity at one of your precious clients, and freeze up on passing that information on to your CNET brethren because you think you're passing business on to the competition.

Anyone who has ever worked through an agency is probably familiar with the infamous NACCB contract. The last one I signed was 9 pages long. There's plenty of paff in there about how "the contractor is not an employee." And yeah, the contract covers other technical legalities. But the major emphasis seems to be the "non-compete clause." This is the part of the contract that prevents you from using any information obtained while under contract for your own (or anyone else's) gain for the length of the contract plus somewhere between 6 and 12 months. It's purpose is to prevent you from going into competition with your agency, supposedly.

At a recent volunteers meeting, a proposal to compensate CNET members for referrals granted to other members was finally agreed upon. As proposed, a lucky CNET member who is able to benefit from the referral of another would agree to cough up $500.00 when 100 hours of consulting has passed. This makes a great deal of sense to me. I've been on both sides of similar arrangements. While I can't say I've been able to endow my great-great-grandchildren with a sizeable fortune as a result, there have been times when such funds were the only ones coming in the door. Likewise, whenever I get a chance to work directly with a client, sans NACCB, it's worth a few bucks to me. In the past, I've paid people $5.00/hour on a gentleman's agreement for such a prospect and still feel it was a small price to pay.

Frankly, I think we ought to be paying our benefactors much more than a measly $500.00. Come on people, most of us have the marketing prowess of room temperature tofu. Maybe, just maybe, we've landed one or two decent clients. For someone to double that with a referral is worth a lot more than 5 big ones. I would have preferred to see the $5.00/hour notion carried through. At least then, it's on-going income in compensation of the legwork required to uncover a decent contract opportunity. And it takes a little bit of the bite out of the competition paranoia. I mean, at least you're getting something should your competition stay on long after you've used up your welcome with a client.

But rather than quibble over the amount, I'd like to throw down the challenge to the membership--let's get some referrals going here!! Heck, when we're all making the megabucks by getting direct contracts through member referrals, the $500.00 probably won't matter much. Or, there may be one or two closet marketers out there who see a supplemental (or permanent) income stream. I say good luck to them and to us.

Marketing or networking?

Carl Frost, Frost Technical Services

One area where engineers tend to be weak is precisely in marketing. Last week at the monthly meeting dinner, it was pointed out that the marketing mindset is totally alien to us. We certainly didn't show interest in hiring a marketing consultant when we were presented with the opportunity. Now that we are not restricted to IEEE members, maybe we can recruit marketing consultants as members.

The first problem is that we don't yet agree on what marketing we need. We have doubled our directory mailing from 800 to 1700 to a fresh database drawn from the IEEE Electrotechnology Industry (ETI) Database (http://www.ieee.org/eti/). It took six volunteers four hours to label and sort 1700 directories for mailing. I thank them all again. Beyond that initiative, though, we have not reached a consensus about the best way to invest our marketing funds.

The second problem is that we are not talking about just a little more money. If we were to support my dream of expanding our directory mailings to 4500, we would have to ask for $150 or more in annual dues. Who is ready for that?

Before increasing our expenditures on marketing, we need to gauge the efficacy of our current marketing effort. I don't feel we need to choose advertising over networking. I feel we should do both. I do not agree with Alan Naisuler that our marketing efforts have been ineffective. I have heard anecdotes to the contrary. What we need to do is turn those anecdotes into hard numbers.

Our marketing committee has been tasked with measuring the effectiveness of our marketing efforts. There are three additional actions we can take:

First, we should take a member poll and find out where we are getting our jobs. This could be our single most important metric.
Second, the web committee is working on turning our web site into a marketing tool. I am proposing that we take advantage of our web site to collect metrics and build up our client contact list. I would like to have potential clients register at our web site to get a free copy of our "Directory of Consultants and Consulting Services." The registration information would include contact particulars, information about how they found us, and if they represent an agency.
A third useful action would be for us to follow up on our directory mailing. We have a list of 1700 hiring managers that can be contacted. This will require a concerted volunteer effort. If all members were to participate in this effort, each member would only have to call 15 clients. Anybody interested in volunteering to develop a script and to help organize this effort?

One of the first things we are told about being a consultant, is that we should expect to spend about 30% of our time marketing. Collectively, we should be able to reduce that percentage. Ideally we should have a full-time sales staff, but we just don't have one right now. That leaves it to our volunteers to get our marketing work done. It's also up to each of us as individuals to network among ourselves.

If it were left to me to define membership requirements, my first choice would be to require volunteer service from all members. One thing I can personally offer to all members who volunteer is a copy of the directory mailing database that I extracted from the ETI database last spring.

Alan Naisuler, our Referral Service Coordinator has prepared a proposal designed to increase referral sharing and networking among our membership. Alan has proposed his idea at our volunteer and marketing meetings, and has received support and approval for formalizing his proposal for presentation to the membership.

This is a simple idea, presented in a clear and structured fashion. What Alan is proposing can help us be more effective as a network, develop working relationships among ourselves, and satisfy more clients as an organization. Please take the time to read it over and respond with your comments. If you wish, please feel free to go ahead and offer the proposed $500 honorarium for a good lead via cn_members@qualware.com.

I want to thank those who have responded with their thoughts. Thoughts are useful, but they are insufficient by themselves. Now we need to take action. In this organization, that action starts at the volunteers' meetings. The volunteers meetings are generally held the first Monday of the month from September through June at 7:00 pm at Stone Soup Restaurant in Lexington center. See you there.

Proposal for increasing Member to Member Referrals

Alan Naisuler

This is a request for comments on a proposal to increase member to member contract referrals.

Purpose of the Proposal

To institute the voluntary/optional CNET custom of paying other members for referrals that yield contract work.
To motivate members to pass on referrals by assigning a dollar value to contract opportunities that they cannot use and otherwise would not have the willingness to pass on.

Background

Contract referrals is a common reason for membership in CNET. But the potential for member to member referral is usually not realized. People think of CNET more when they need work than when they can provide some. Often members don't know many other members and don't think of giving referrals to "strangers." The emphasis is on the referrals that come from CNET group marketing efforts. If you ask the more experienced consultants in the group, however, they will tell you that most of their work comes from person to person referrals.

Many of us have been in meetings at a client's site at which it is announced that the client is looking for one or more contractors with certain skills. Since we are by definition under contract at that point, we usually let the information stay in the room. At other times, we may get a call from a friend or an acquaintance (not headhunters) at a company where we are not working. They describe an opening and ask if we are busy. If we are already working or if we are not a match, we often let the topic drop.

In these situations, many members just don't think it is worth their while to: (a) give out the URL to the CNET website/database, or (b) pick out a matching member in the database and send them an e-mail, or (c) send a contract description by email to cn_jobs@qualware.com, or (d) call the CNET referral phone number and leave a description, or (e) call or email the contract description to the referral coordinator.

This is a misconception because it requires little effort and we would all benefit by having a steady flow of referrals coming into the group. However, rather than fight this viewpoint, we should accept it and work with it (the customer is always right). The proposal is to raise the value of the immediate reward for referrals from members from zero to $500.

Attributes

It is voluntary. If you don't like it, ignore it. You don't pay anything unless you get contract work from the referral. The cost is very small compared to the benefit to the recipient. The reward is reasonable considering the small effort required.

Description

The initial reward will be $500. This level of reward has worked in another organization. It is a fixed sum, not a percentage. This is not a get rich scheme. It is simply an attempt to get people to put a job description that they hear of into an email. It should represent 10 minutes work. If you are making the referral and you don't believe in this proposal, just tell the recipient member to forget about the payment. Or mention it in the email if you post it to the group. If you are the recipient and you don't believe in this proposal but the referring member does, just say thanks, no thanks. Or don't respond to a posting.

The payment is made after the recipient works (and is paid for) his 20th day or his first $10,000 on the job, whichever happens first. This proposal has helped referrals in one other consulting group with which I am familiar.

Feedback

Please send all comments and questions on this proposal to:

Alan Naisuler
Referral Coordinator
acn@world.std.com

Ron Goodstein lays down his editorial duties this fall to concentrate on his activities as vice-chair of the network. The newsletter has been an excellent source of high-quality information and publicity for the network during his tenure as editor. Both CNET and the newsletter have benefited very much from the editorial work he has done over the years.

Ron has agreed to stay on to assist with distribution of the newsletter this fall, but CNET News badly needs an assistant editor to take his place. The assistant editor has an opportunity to contribute to the writing and publication of the newsletter as a whole. Please contact the editor at twp@techwrite.org or 617-232-9810 if you want to learn more. The time commitment is not great, and the work gives you an easy way to stay in touch with fellow members.

The newsletter also needs your written contributions. One marketer says that the publicity you get from writing an article for a newsletter is more effective than the publicity you get from placing an ad. Where else do you get so much free space to introduce yourself to so many people? CNET News encourages submissions of interest to members of the network. It also serves as a place to publish articles of value to prospective clients. Engineers and project managers are interested in what you have to offer. If you like, call or write the editor to check out your ideas before you write the article. Also, write letters to the editor to respond to articles that appear in CNET News, or to comment on other matters related to the network and its goals. Please send your letters by e-mail to Steven Greffenius at twp@techwrite.org.

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Have a fun holiday (and don't forget to renew your membership in the midst of everything else going on this month)!

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