DIFFERENT SITUATIONS require different rules. Social context determines when market or social rules apply, even for the same service.
In his 2009 book, Predictably Irrational economist Dan Ariely gives as an example having a wonderful Thanksgiving dinner at the mother-in-law’s place. To show appreciation for the roasted turkey, does the satisfied guest pull out a hundred bucks and give this to his host? The social context in such a well-meaning gesture becomes the height of bad manners. (Do I look like I need your money?) Yet the same meal at a restaurant is not concluded just by hearty compliments to the chef or good ratings on the customer feedback form. There is a bill that needs to be paid. (And don’t forget the tip.)
In one case, a social situation like putting clothes in the washing machine by the wife is provided for free. (Next time, it’s your turn.) In a market setting this same service (doing the hotel laundry) is charged.
Social relationships too can take on a commercial slant. Can the professional entertainer in a bar who becomes a regular partner still charge for her services? (We can do karaoke at home.) It is also possible for the fees to become even higher as the family expenses are folded in.
Even in business settings, not all relationships are covered by market norms where formal contracts usually define deliverables and fees. Thus, an expert can give solicited advice on a business issue, analyzing problems and providing ideas over lunch, but without the usual business props — can you see my screen?
Can a bill be charged for such advice?
To be sure the meeting is considered “purely social,” the talk is interspersed with extraneous topics like Trump’s tariffs or the latest gossip about former associates. (He’s looking for a new job.) No staff assistants are on hand. There is no taking of notes or designation of “next steps” and timelines. The lunch ends with a vague plan to meet up again with the spouses. The advice seeker picks up the bill — it’s your turn next time.
Informal chats over lunch are trapped in Dan Ariely’s social norms. Advisers feel awkward moving the informal consultations on a market norm, and putting some commercial value on the inputs provided, even when these have been acted on afterwards without credits given. If they even hint at possible compensation, the timid request to formalize some consultancy arrangement is met with an incredulous reaction. (Are you going to send me a bill for listening to your corny jokes?)
Lawyers, PR crisis managers, doctors, ghost writers, and tax accountants are experts in avoiding this predicament of an ambiguous market setting. These professionals have a ready response to anyone bringing up a problem for free consultation — I have this recurring ache in my big toe. Before the complainer removes his shoes and socks to show, he is quickly told not to take it up here at the party and just make an appointment with the secretary for a diagnosis at the clinic, so the problem can be more properly evaluated… and billed.
Still, the successful professional who gets paid by the hour for his advice can be generous with free comments. He understands where the line for the charging can be drawn as when contracts and pleadings need to be drafted.
In the realm of philanthropy and good works, market norms can be dispensed with. Legal and medical skills can be provided by a group pro bono in the service of disadvantaged sectors, using a purely social norm. These are called advocacies that enhance a professional’s biodata.
Relatives too like sons and daughters, or even nephews, are expected to give their professional opinions without charging. But even here there’s a limit in terms of referrals. (Can you also help my classmate?)
Formal and informal services are defined by the context of the engagement. Social situations, like family get-togethers, are bound to confuse the issue. It’s best to bring the one needing expert advice or service to a professional setting, and have somebody else in the firm to make the presentation… after clarifying the scope of work and cost.
Tony Samson is chairman and CEO of TOUCH xda
