It’s a dilemma that almost all consultants face: How to persuade a potential client to hire you as a freelancer without giving too much away during the pitch.
That delicate courtship dance often ends badly for consultants unless they’re strategic in their approach, according to new research.
In a paper titled “Selling Information,” Andrzej Skrzypacz, an economics professor at Stanford Graduate School of Business, says that the best way for consultants to guarantee fair compensation for their ideas is to engage in the art of gradual persuasion.
Understanding the Dilemma
The problem is a complicated one that involves intellectual property and a pitching process that is fundamentally adversarial: Clients demand legitimate expertise and want to hire people they can vet, while consultants worry that if they share everything in the sales pitch, the client won’t need to hire any experts after all.
Skrzypacz says he first came upon this issue seven years ago, when a company looking for help with advertising brought him and two colleagues in to discuss a potential freelance arrangement. “We met with them, spent a whole day, then we never heard from them again,” he remembers. “I had this feeling they just took our ideas and used them to go in a different direction. It upset me.”
Though Skrzypacz never found out if the company leveraged the expertise he and his colleagues shared, the experience enraged him enough to investigate the overall interaction further. To do this, he decided to do what he does best: Conduct research. Skrzypacz and Yale economics professor Johannes Hörner, who coauthored the paper, applied game theory to come up with the math behind the scenarios.
A Gradual Workaround
Their recommended approach employs incremental persuasion, a gaming concept that begins with a trial period in which the consultant gradually reveals information through a series of “tests” or “tasks,” each of which is regarded as a separate transaction. During this trial period, the client has the power to renew or terminate the agreement after every engagement. The one stipulation: The consultant is paid incrementally upon wrapping each task.
“There’s no perfect result,” Skrzypacz says, “but with this situation, you resolve key questions through a process that enables both parties to weigh in on direction and design.” Because the process takes an idea and divides it into separate engagements, Skrzypacz and Hörner call it “splitting information.”
Such a gradual approach benefits capable consultants, Skrzypacz says, as they stand to earn more money for more of their ideas over an extended period. At the same time, it enables clients to weed out incompetent consultants without overpaying, since they can terminate the engagement as soon as they realize the consultant is not performing as promised.
Though these examples were devised for consultants, Skrzypacz says they can translate to almost any independent contractor. For instance, he envisions it helping freelance writers, who often have little protection against pitching an idea to a publication and having the outlet co-opt that idea for its own.
Ultimately, Skrzypacz and Hörner see the trend of gradual persuasion becoming more prevalent across all industries and setting up a scenario where contractors are forced to renegotiate contracts to incorporate incrementalism. Of course, the process raises risks for contractors as well, in that they might end up being hired, but not for as much work as they’d hoped.
“For me it’s all about information flow,” says Skrzypacz. “It’s similar to telling a good story in a movie or a book: If you tell people at the beginning exactly what’s going to happen, they’ll lose interest. You’ve got to keep it interesting. The model hinges on the notion of clients always paying for new information.”