The WSJ Named the Problem. It Missed the Fix.
- 5 hours ago
- 3 min read
Consulting's billing crisis just made the front page. Here's the operating model nobody's writing about.
Last Thursday, the Wall Street Journal ran a piece called “Consultants Struggle Over Billing.” It described an industry trying to move off hourly billing under AI pressure, and finding the transition slower and harder than anyone expected.
It named the problem well. It didn't come close to the fix.
What the Journal Reported
Buyers still evaluate bids on an hours-times-rate basis even when hours aren't the pricing unit anymore, said Eric Miles, CEO of Baker Tilly — and firms that keep billing hourly anyway risk margin erosion, because AI is pushing the whole cost structure toward low variable cost and high fixed cost. Firms are cutting price to win outcome-based work before they've banked any of AI's own savings themselves, said James O'Dowd, CEO of talent-advisory firm Patrick Morgan.
McKinsey now ties more than 30% of its global fees directly to client outcomes — a share that's been climbing for years, according to senior partner Shelley Stewart, who calls it “a bet on consulting's future rather than a sign of its demise.” Catalant CEO Pat Petitti was blunter about why firms are actually moving: not a progressive philosophical choice, but an “existential scramble” to find a new way to make money as AI upends the old revenue model.
Naming It Isn't Fixing It
Here's what a trade story can't get into, because it's reporting on an industry, not running one: everything the article describes as friction — cash-flow risk, disputes over what counts as success, buyers anchored on the old unit — is downstream of a financial operating model that most firms simply haven't built yet. You don't fix that with a new invoice template or a line in the engagement letter. You have to build the plumbing underneath it.
I wrote about this exact mechanic in January 2025 — before it was a trade-press topic — because I'd already lived it as an operator, not studied it as an observer. That's the plumbing most firms are still missing:
● Revenue recognition against a milestone, not a timesheet. If your finance system can only recognize revenue against hours logged or a fixed delivery date, it cannot process a payment tied to a client outcome that lands months later — no matter what the contract says.
● A risk corridor instead of an all-or-nothing bet. Every outcome deal that isn't just a coin flip needs a middle — a range of outcomes that pays out partially, a cap on both the firm's downside and its upside — or nobody on either side of the table can responsibly sign it.
● A financing bridge for the gap between delivery and payoff. The cost of doing the work lands early; the value it creates shows up late. A partnership built around annual distributions has no natural way to carry that gap — which is exactly why outside capital has moved into this space as fast as it has.
● Incentives that actually match the pricing model you sold. You cannot price a deal on outcomes and still measure, promote, and pay the people delivering it on hours and leverage. That mismatch is where good pricing strategy quietly dies inside good firms.
None of that is abstract. I've sat on both sides of the conversation about whether a milestone triggered, whether an overrun gets absorbed by the firm or shared with the client, whether the deal structure survives contact with a partner's comp plan. That's the part of this the Journal didn't get into, and it's the part that actually decides whether a firm can execute the shift it's describing — or just talk about it.
If You're Living This Right Now
If your firm has hit its own version of that wall — a deal everyone on both sides wanted, that finance couldn't figure out how to book — that's not a reason to retreat to the billable hour. It's a solvable operating problem, and I've been on the inside of solving it. If that's live for you right now, I'd like to talk.
Originally adapted from “The Billable Hour's Time Is Running Out” (January 12, 2025) and “The Great Decoupling: Why Professional Services Must Break Free from Effort-Based Models” (January 27, 2025).
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