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Types of Business Engagement Models

Building an efficient and healthy business relationship with your partners, clients, and colleagues is essential to a business’s success. Many businesses may not understand how to build an effective strategy for business engagement as it can be complex, especially in highly collaborative environments. It’s vital to provide a general framework for communication and engagement to be used by everyone involved in the project. 

There are several business engagement models used by organizations in different industries and business environments. The ideal engagement model for a business is usually decided according to the organization’s needs and interests. This is a decision you should make with serious consideration as it sets the tone for whether or not the contract/task/project is successful. Allocate enough time to study and understand the various engagement models as part of your organization’s marketing communication strategy to ensure the best one is selected.

Types of business engagement models

A business engagement model is the guiding principles and policies that dictate how individuals interact and collaborate throughout the duration of a partnership, task, or project. Let’s explore the four major business engagement models. 

Fixed timeline and cost model

The fixed timeline and cost model establishes an agreement between every party involved in a project. It states that the vendor will finish the project at a set date and according to an agreed, preset financial budget. You decide every aspect of the project’s execution and completion before commencing. Its terms and conditions are structured and rigid in that you can’t make many changes to the contract after the project begins. 

Time and material model (T&M)

This engagement model is more flexible and suited to projects where the scope of work changes and evolves often. The client agrees to pay for the resources (material) and time spent executing the project. It’s also suited for teams that lack in-house expertise on the subject matter or organizations with financial limitations. It also works for large-scale complex projects like consulting assignments.  

It’s also known as the resource augmentation model since the company uses external resources to augment its internal teams to execute a project. Modifications can also be made to the projects’ scope of work since there’s no set budget, and the client is responsible for any additional time and resources used. 

Agile Model

The Agile model is suited for larger organizations with a flexible budget and project scope. Resources are allocated per sprint since it’s usually used in projects where the scope isn’t predetermined. Vendors complete the project in line with multiple iterations where requirements for its success are determined and developed as it evolves. Each sprint is planned and approved by the client before the vendors proceed, and billing is charged per the time spent on the sprint. The cost of each team member is decided, and the company is billed according to a set rate. 

The Service Level Agreement (SLA)/milestone-based model

This business engagement model is ideal for organizations that have process-oriented projects. Completing the project is based on preset milestones, and SLAs in a document agreed on by the client and vendor. It details every service/milestone product or activity the vendor is to provide as well as the resources required for them. 

Both parties should understand each milestone and set clear expectations of what they expect to achieve. It’s also ideal to clearly define the responsibilities of all parties involved. The SLA also includes what steps to take when either party defaults on fulfilling their duties, response and resolutions, escalation procedure, and more. 

How to choose the model type for your business

Below are four model types to consider.

A Fixed Cost Model is perfect for clients with a prefixed plan, timeline, and budget for their requirements. These projects have clear requirements, and the client relinquishes control to the vendor to execute and allocate resources as they deem necessary. This model is perfect for small or medium short-term projects no longer than a few months. It’s ideal for contracts with an established plan where clients know exactly what they want and need an organization’s resources to execute them. 

The T&M model works for businesses with prefixed designs and a business plan but requires additional technical expertise to complete it. The client may not have the knowledge or skills or know what it takes to execute the project perfectly, so they rely on the vendor’s expertise. It’s also suitable for vendors who want to have some control of the project’s resources and how they allocate them. 

This model requires conscientiousness to avoid falling into risky situations. The client is usually involved in management and decision-making to prevent circumstances, such as incurring extra costs the organization can’t afford to spend on the project. It’s also easy to discontinue the model once the duration ends and project deliverables are in hand.

Agile Model is suitable for projects where the scope is unknown. It works well for projects based on interactive strategies and organizations where the in-house team can collaborate effectively with the vendor to complete the project

The SLA model fits well when the project is process-oriented. It allows both the client and vendor to assess the project’s performance based on what they planned for it to achieve or complete at a predetermined date. It’s also ideal for organizations with a flexible budget willing to adjust resources based on what’s needed to complete each milestone. 

Knowing the suitable engagement model to apply for a project or partnership can determine its success or failure. Contact us to learn more about finding a suitable model for your business’s needs.