One of the most competitive industries in Africa is the OHS Consulting profession and employers are literally spoiled for choice when it comes to OHS services. But what is the realistic expectation of how much an OHS consultant is worth? Before we can answer this question, one needs to look at the “need” in your business.
Demand vs Need
It is true that OHS Consultants are in high demand. This is mainly because every company would need someone with the competency to get them out of the “demand mode”. Examples of a “demand mode” request is a Safety File or an “compliance” audit just before the inspector is due to arrive. The mathematics behind this is very inviting to any person who wish to enter the consulting profession as an OHS “specialist”. When a thousand companies are in demand mode, it quickly creates a market of R1million. But a demand mode driven market is short-lived. Once the file is delivered, or the compliance audit is done, the demand is gone. The cycle now have to wait until it needs to be repeated.
Since the invention of the Safety file in 2003, the employment market has seen a boost in the need for OHS personnel. As the need levelled off, the consultants realised they reached saturation point, and created their own new “demand” by creating a perception that Safety Files are legally required by all employers. The truth however, is that these files are only required when performing Construction work.
Nevertheless, it was sustainable as long as the demand was there. Now that the Construction Industry is on life-support in the ICU, it is a matter of time, when the “artificially” created demand will cease to exist.
Demand is generally driven by the OHS fraternity itself.
On the flipside, a Need driven request for an OHS consultant is an intentional, voluntary and long term decision based on business principles taken by the CEO or Board of Directors of a company. Need driven companies have realised that OHS compliance is an imported tool to save costs and increase profitability. They have realised that “people” are their most important asset.
A Need driven company have two options when it comes to OHS management. Option one is to employ a full time OHS Manager – or even deploying a dedicated OHS department. Option two is to Out-source the function to an experienced professional with knowledge and experience in their own industry.
The Need is identified and driven at the highest level in the organisation, normally without fear of the law, because of its own moral compass.
Making an informed decision
Back to our first question, “what is the realistic expectation of how much an OHS consultant is worth?”
There are three aspects to this question that requires investigation before a mere thumb-suck answer should be accepted.
- Consultants vs Consulting Firms
The majority of OHS advisors operates as single individuals or sole proprietors. The benefit of using a single consultant is pretty much based on your business’ OHS Culture; demand driven or need driven.
An OHS Consultant operating as a One-person Consultancy has its benefit in the lower overheads, which reduces their own costs and allows them to charge less per hour than a consulting firm normally would. But there are some major pitfalls to these individuals and organisations with a need driven OHS culture will not benefit from engaging this group of consultants. Here are the reasons:
- A sole proprietor does everything in the business, from marketing to credit control, which takes up a lot of non-billable hours and reduces profitability.
- A sole proprietor often starts out as a consultant due to a lack of employment in the full time job market and will give up the consulting career when a lucrative permanent position presents itself.
- A sole proprietor often lacks the capital to attend Continuous professional development workshops and courses, and rely mainly on free events organised by professional associations.
- Most of the sole proprietors do not carry Professional Indemnity Insurance policies.
- The majority lacks the financial management skills to provide a properly defined cost accounting system and each quote is based on a perception of what the client is willing to pay for services.
Consulting firms (two or more OHS professionals with a business support structure) on the other hand have in all likelihood start out as a One-man-band, and have grown into a sustainable business due to a commitment to the consulting profession. Most of these firms have been running for 5 or more years and have built up a reputable list of clients.
These firms invest in their consultants and make sure their knowledge are up to date at all times.
The only disadvantage of using a consulting firm, is their higher rates and fees. Even among the OHS consulting firms, the level of competition is extremely healthy and prices have a reasonably good variation. But this also leads to “Professional Jealousy” and care should be taken not to judge a firm based on the opinions of their competitors.
Larger firms are obviously more immune to reputational gossip, but often lacks the “heart and soul” of the smaller firms and may not be “so” committed to their clients.
Regardless of your preference, be it a sole proprietor or an internationally established company, the service offering is pretty much on par. OHS is OHS, and there is very little to add in terms of a competitive advantage. Their only strong negotiating tools are experience and price. There is very little innovation, new concepts being introduced or embracing new technology in the OHS service offering.
- Qualifications vs experience
Another aspect determining the market value of OHS consultants is their individual experience. For the more experienced OHS Consultant, competing in terms of price with a start-up is impossible. Experienced consultants will never give you a quote over the telephone. They have learnt the hard way.
A question was recently asked on a social media group for OHS practitioners. “How much do you charge for a Safety File?”. Within a few minutes, offers from R2500 to R3500 emerged in the comments. But an obviously experienced consultant asked a counter question. “How do you know if you have not seen the “Scope of Work?” And at that moment the inexperienced revealed themselves by starting a debate on how “easy” it is to draft a “scope of work” and how difficult a Risk assessment is. The Scope of work referred to, was the “project scope” drafted by the project manager and the client. Yet the OHS practitioners did not realise it when quoting R2500 for a file.
So what exactly are you paying for? Knowledge or Paperwork? Need or demand?
- Cost vs Price
The final aspect to consider in determining a “fair market value” for an OHS Consultant is the cost component of their prices. Once again we can use the “Safety File” as an example. An experienced consultant knows that a decently presented quality safety file cost R1028. Here is how we get there:
- A four ring display binder – R85 (These files are paged through a lot, and normal two ring binders are not ideal as the pages tears out after prolonged use.)
- 350 sheets of paper @8c per sheet = R28
- One set of 10 file dividers – R40
- Printing 350 pages in colour at R2,50 per page = R875 or (R525 if you want your logo in black and white)
For R1028 you have a blank file, with no content. Just the pages.
If we now pay R2500 for a file, the value you get is only R1 472. And you think it is “site specific”?
It takes roughly 2 hours to print and assemble a “generically modified site specific” safety file. And it has to be delivered to site which requires both time and travelling costs. The labour cost is covered in the R1472, let’s say at R250 per hour. That leaves you with R972 worth of “valuable content” which includes a site specific Risk Assessment, a Health & Safety Plan and all the other “relevant” documents your file “demands” to contain.
You are in fact paying for nothing of value.
Now, let’s get back to that question again. What is the realistic expectation of how much an OHS consultant is worth? Click here to read on…