What I Learned as a Management Consultant About Cost & Value

This book is a “must read” for people in the green building industry. It is well written, with good references and a clear message, certainly one of the most useful green building texts available. You hit the nail on the head!
— Eric T. Truelove, PE, GGA, LEED AP BD&C, Madison, Wisconsin

For about 12 years, during the 1980s and 1990s, I worked as a management consultant for small businesses, firms generally ranging in size from $5 million to $50 million in annual sales. All were privately owned companies. During that time I worked with more than 75 CEOs, examining operations and preparing analyses, and each week I offered detailed recommendations for improving operations—typically by cutting unnecessary costs and changing outdated (or lacking) management policies and procedures. I worked with manufacturers, contractors, distribution companies, service providers and similar companies.

Getting paid required showing immediate value: I came into a business typically on a Monday (sometimes with others on my team) and by Friday, when I had to collect the weekly consulting fee (we're not talking McKinsey & Co here!), I had to identify (and justify) enough benefit to the business owner not just to cover my fees, but to provide a first-year return of three times my cost for that week! If I couldn’t make that case, I often wasn’t invited back the next week to continue the assignment. Tough love, but that’s the real world!

In other words, I was not offering a “payback” on investment within two years or three years, i.e., a 33 percent to 50 percent return on investment (ROI), but instead I had to show a 3-to-1 first-year benefit compared to my costs for the week, i.e., a 300 percent return on investment, a four-month payback. That’s value, not cost!

This experience taught me that the decision-maker wants to see benefits that are real (to them) and immediate. This example shows that we need to completely rethink what green buildings (and especially certification) should cost. Rather than taking the (seller’s) perspective that the cost is justified by the need to meet various (always justifiable) requirements in the certification system, we should instead take the buyer’s perspective: What (net) value will I get from this service or documenting these design measures? What’s in it for me? Why should I pay more (to you) to do this?


How Much Should Green Building Certification Cost?

When examined from this perspective, the bottom line is clear: green building certification needs to cost far less than it does today, and certification needs to happen much faster. There’s no way to grow market acceptance without a radical revamping of the entire process, starting with dramatically cutting costs and review time. A system that needs specialized consultants and very high-level professional services to document results simply won’t work for the broad marketplace, as it doesn’t provide real value to building owners, who, after all, must underwrite the process. Let's aim to cut certification costs 90% or more (to $2500 or less) and shorten review times to 2 weeks - that's marketable! Then let's ask ourselves - what system would it take to meet these objectives?