The Death Spiral Of The Cheapest

I was in a meeting a couple of days ago with a non-profit organization that is doing great things ( or at least trying to ).  They are building out a donor platform that I think could be really interesting down the road.  The application is about 90-95% completed, but can’t be launched because they are having problems getting the current vendor to wrap things up.

This is so common, especially in non-profit organizations, that I think it’s worth talking about.  The classic tale is one where an organization’s leader asks his friends how they can get their application built.  Invariably one of their friends knows a guy who knows a guy that might be interested in “helping out” for a reduced rate or maybe even for free.  There is lots of energy and excitement at the beginning.  ”We are going to change the world!”  People give their time and effort away, and everyone is happy.  The founder can tell his board how much money they are saving by working with the friend of the friend.  Life is great!

Then, real life sets in.  The guy who was working on it has other work he can do that actually helps him pay the bills instead of costing him money.  He diverts attention, labor, and effort slowly away from the more “noble” work of saving the world to actually keeping the lights on.  The project slowly grinds to a halt.  The founder has to have conversations like “I know you give away your time to us, and I am really grateful for that, but could you just help out a little more to get us over the finish line?”  The parties’ interests are not aligned at this point, and disappointment abounds.  The founder then has the unpleasant task of finding another way to get it done, all the while diverting their attention away from what they do well, which is bringing their vision to reality.

It is my opinion, having watched a number of these go this way, that selecting a partner based on price is inherently flawed.  Price matters, certainly, and among equal choices taking the less expensive one makes sense.  However, what organizations need to think about is not simply what it costs, but if the organization or people have a history and track record of actually getting things done.  If they do, they will probably cost more at the beginning.  However, I will bet that it costs less down the road.

The cost of not getting something done is so much greater than getting it done the right way by people that know what they are doing.  The cost is not just dollars, but time, effort, mental energy and lost opportunity.

There is a reason why a Honda costs more than a Chevrolet.  One works, and one will break down on the side of the road.  Which would you rather be driving on the way to an important meeting?  Exactly.