Managing Non-Billable Work Effectively, Part 4 of 5

In parts 1-3, we defined the different types of non-billable work, who often "gives away" this type of PS work, and some of the challenges the PSO experiences when work is given away without the PS team's involvement. In this and the final post on this subject, I will discuss some of the ways in which non-billable work - and the chance that it will occur - can be managed.

How to Manage Non-Billable Projects and Commitments?
As I mentioned in earlier posts, most PSO managers with whom I have talked have, at one point in his or her career, had to find the balance between meeting revenue, bookings, and profitability targets with the need to support product sales or generate customer goodwill by providing customers with non-billable projects. While non-billable work can be managed in such a way to avoid the pain associated with missed expectations and missed KPIs, it often isn’t. My research shows problems arise most often when:

1. The PSO is not viewed as a profit center.
2. Sales does not truly understand the value the PSO provides
3. There is no agreement at an executive level of the amount of non-billable work that can be given away in a given quarter or year

So, how do you ensure that your non-billable workload does not become a problem for you or your customers? To start, there needs to be agreement at all levels of the organization that all projects are created equal. The PSO should be involved early to scope any PS project, even when a decision is made to deliver the project at no cost to the customer. In order to treat all projects equally, the following rules should apply:

• Non-billable projects need to be properly scoped by the PS team, just like billable projects.
• Even when a project is a no-cost project, an SOW is required - the customer and the PSO must sign the SOW representing the agreement. (This is the only way of which I know to effectively manage scope.)
• Customers only value those things for which they pay. If a decision is made to give work away, the value must be spelled out. The true cost of the project must be spelled out in the SOW as well as the discounted price and percent. (The value of this project is $50,000 USD, discounted 100% for a cost to Customer of $0.00 USD.) Showing the discount rate up front makes it clear what the customer is likely to pay next time.
• No scheduling of billable resources is confirmed until the SOW is signed.

This is all great on paper, but this process still has gaps. It says nothing with regard to how much no-cost work can be given away each quarter or year. It also says nothing with regard to who can agree to non-billable work or how non-billable work is approved. While it does, however, indicate that scheduling does not happen until the SOW is signed and that the PS team is responsible for scoping the work, it does not prevent individuals from outside the PSO from making commitments on schedules, even when they have no real sense of how much time is needed and when resources are available to begin work. Lastly, it does not provide a provision for the PS team to get “credit” for this work against key metrics like revenue, bookings, and profit margins. (The PSO's ability to achieve annual goals and get compensated for doing so is diminished without such provisions.)

I'll talk next week about how to close the gaps and what the eight (8) other components of a "give away work" process should be.

World Class PSO: Daily Thought

Building on yesterday's post...while one cannot truly hold another person accountable for the things s/he must do, there are steps that one can take to motivate people to do what they need to do. A couple of these things were discussed yesterday:

1. Be explicit about expectations

2. Ask the individual to confirm what s/he can and cannot get done

3. Be clear about the implications if the work isn't completed on time and to acceptable quality standards

Like I so very often say to my team, "If you don't tell me that you can't get something done...then you must get it done." The two items above can assist in ensuring that people do what they say what they will do and give you room to discuss and push them when they don't.

Additionally, a manager can use the following tools to promote the behavior and accomplishments that are required for the successful development of the team and the individual:

1. Develop a compensation structure that promotes results (individual and team),

2. Publicly reward those for their accomplishments; those who aren't getting rewarded will feel the pressure to be part of the recognized group, and

3. Review individual accomplishments and ideas with the team, particularly when those accomplishments could result in a process, tool, or template improvement within the business. Allow the team to provide input to key changes based on these successes - be careful not to manage by committee, though.

I still believe that only the individual can truly hold himself accountable, but it is your job as a manager to set proper expectations and set the individual up for success. That includes giving them a forum to discuss challenges and negotiate deliverables and deadlines, and reinforcing the implications when the work isn't getting done as expected.

World Class PSO: Daily Thought

I have been in conversations recently about "accountability." These conversations have gone something like this:

Sue said, "I asked Jane to get the integration work completed by Friday, and she didn't complete the work on time...again. This is the third time she has missed a deadline without telling me. I am the project manager! I can't manage expectations if the team isn't communicating and doing what they say they will do. How can I hold her accountable for getting her work done?"

I said in reply, "You know, at the end of the day, only Jane can hold herself accountable. You can give her all the information she needs to make good decisions, and you can provide an environment in which Sue is comfortable asking for help, but you can't make her do the work. When it comes right down to it, its the old adage, 'you can bring the horse to water, but you can't make it drink.' Have you clearly explained to Jane what is needed and when, asked her to confirm that she understands what is required and that she can complete the work on time, and explained the consequences to her, the team, the project, and the client if she does not do what is needed?"

In reality, most people don't really spell "it" out in that way. We assume that the other person can read between the lines, understand the urgency and the implications if the work isn't done, and can make the right decisions about prioritizing his/her time. As a project manager, or even as a staff-level manager, your job is to NOT ASSUME. Be clear, spell it out - whether to a client, a partner, or a team member. Be crystal clear about what is needed, by whom and when, and what will happen if the requirements are not met. Be sure to get the other person to confirm that he understands and is on board with getting done what is needed. Only then do you really have a leg to stand on if the work is not done on time. If the others don't get what is needed, you need to follow through on the consequences, which may be escalating to a staff manager, reassigning the individual less mission critical (and interesting work) or removing the person from the project.

Managing Non-Billable Work Effectively, Part 3 of 5

Last week (and the week before) I talked about work given away by project managers and work given away by PSO management. Those types of non-billable work are, in the grand scheme of things, easy to manage. As the PM or PSO manager you can decide how much to give away and can manage expectations accordingly.

In the next couple of weeks, I will share my views on the purpose and challenges associated with work given away by non-PS resources, such as Sales, Sales Management, and Executives. Additionally, I will share many of the ways a PSO manager can manage the often unexpected give-away work that gets promised.

This week, I'll start with a summary of what give away work - given away by non-PS resources, managers, and executives - looks like. Next week, I will start to delve into how you can manage non-billable work more effectively.

Work Given Away by Sales, Sales Management, and Executives
The nature of give-away work from Sales, Sales Managers, and Executives are really the same. So while I called them out separately in Part 1 of this blog series, it makes more sense to discuss the nature of this work from all these sources as one.

In talking with my peers on the PS Village forum, it is clear that embedded PSOs often struggle with managing the non-billable commitments made by individuals outside the PSO. The nature of these commitments tends to fall into two categories:

1. Using PS efforts to “sweeten” a product deal
2. Using PS efforts to gain goodwill with a customer when things go wrong with the product or with services delivered by other departments (such as tech support or customer care)
   

While I agree that there are legitimate reasons for providing PS services to a customer at no additional costs, my research shows that, like non-billable work agreed to by the project team or PS Management, these non-billable commitments are most successful when the PS team is brought in early to conduct proper discovery and scoping just like they would for a billable project. When the PSO is involved in the early discussions, applying their best practices for scoping and delivering a project just like they would for a for-fee project, the customer needs are met at a lower cost to the company and with higher-levels of customer satisfaction.

Problems do arise when commitments are made without the knowledge of the experts who need to deliver against the commitments. Often times, what seems like a "simple" project to a sales manager or executive is really a project measured in months and hundreds of thousands of dollars. When these commitments are made "unexpectedly" the disruptions can cause pain to other projects, the sales pipeline, and the morale of the team.

Additionally, without a proper SOW, managing scope is nearly impossible.

Tune in next week for my thoughts on how to manage give-away work more effectively.

Managing Non-Billable Work Effectively, Part 2 of 5

Last week, I talked about work given away by the project team and the various situations when it might make sense to do so. Also, I talked a bit about how to manage non-billable change requests (CR) from within the project team.

As a reminder, non-billable CRs are often issued by the project team as mea culpa when a mistake is made by the team. The non-billable CR can help get the team back in good graces with the client. Additionally, project managers may use the non-billable CR to build goodwill with a customer when s/he knows a hard discussion or larger CR is about to present themselves.

In this post, I will talk about work that is given away by the PSO management

Work Given Away by PSO Management
While it is rare, there are times when the PSO delivers complete engagements at no cost to the customer. Admittedly, most times these no-cost projects are usually initiated by sales and executive management, but there are times when PSO management agrees to a no-cost SOW.

In the case when one of the PSO's primary objectives is to support product sales, PSO management may defined small, promotional projects designed to highlight the benefits of the product while also promoting the value of the consulting team. For instance, I recently put together a program that I called (internally) the "Golden Ticket" program.

Each account manager is given one (1) Golden Ticket. S/he has the option to give away a single two-day engagement during which the PS team will audit the customer’s use of our products. The client deliverable is a 30-40 slide Power Point presentation that summarizes gaps in the customer’s methodology and a summary of apparent Web Application performance issues. Our analysis is limited by time, and we do not talk directly with the client until the analysis was complete. This allows us to complete the engagement quickly, highlighting the value of our best practices (the value proposition being: “We saw all of this without even talking to you”), and indicating where we could go deeper in a "real" engagement.

As a result of this offering, the PSO has engaged in a handful of these projects. In one case, the Account Manager was able to grow the size of the account with the customer in the same quarter the Golden Ticket was delivered. We are also in early discussions with this customer about a potential larger (billable) PS engagement down the road.

These programs tend to be well defined and well managed because they are driven by PS management, who understands best what it takes to do the work. That said, there should be close collaboration with sales management to ensure that the program is designed to meet the objectives – help the sales reps sell more product and services.

Managing Non-Billable Work Effectively, Part 1 of 5

In my experience, non-billable work can be categorized in four ways:

1. Work given away by the project team

2. Work given away by PSO management

3. Work given away by the sales team and/or sales management

4. Work given away by the executive team

Regardless of where the ‘give away’ originates, a PSO must have policies and processes for managing and tracking what work is given away (and in what situations) and how the non-billable work is managed with the client.

Work Given Away by the Project Team

Project teams rely on the Project Manager to manage scope. Technical leads, business analysts, and other team members should never have sideline agreements with members of the client team to do work that is not clearly specified in the SOW. While the SOW defines the guiding principles – or project charter - for the project team, it is unlikely that every detail of every requirement will be uncovered during the pre-sales process. Therefore, an effective change control process should be implemented to allow the consulting and client teams to work together to change the scope of work as needed.

Many change requests are designed to increase or reduce scope, requiring the project budget to increase or decrease in kind. The consulting team needs to evaluate the change request and inform the client of the effect that the change will have on the project schedule and cost. (In my experience, many change requests that must be added to the project, are not so important when the customer learns what the added cost will be.)

At my core, I believe that all work performed by the consulting team should be paid for by the customer. However, having spent the majority of my career in project management roles, I have learned that the no-charge Change Request (CR) is a very powerful tool – allowing the team to give a little to get a little (or a lot). The no-charge CR allows the consulting team to develop goodwill with the customer. Issuing these change requests allows the team to approach the relationship with the client from the position of “partnership.”

So, there are times when a Project Manager may chose to write a no-charge CR. In addition to the opportunity to develop goodwill, as discussed above, there are times when the change does not add any additional consulting time to the project. This can be the case when the customer wants to change a requirement on which the consulting team has not worked and the change represents the same level of effort as the original requirement. Even when there is no change in the level of effort or cost to the project, the Project Manager should issue a Change Request to document the new agreement between teams, allowing all parties to understand the differences between the original agreement and the ultimate deliverable.

However, Project Managers should also be empowered to issue a no-charge change even when the change requires more work. This may happen if the consulting team has made a mistake that caused some amount of pain on the part of the customer. The no-charge CR may rebuild a, potentially, damaged relationship. It may also be advantageous to issue a no-charge CR when the project team knows of a larger request that is coming down the road - bigger changes result in larger bookings and revenues. The smaller no-charge CR may leave customers feeling like “this” team is willing to work with me. The customer doesn’t feel “nickelled and dimed” and the larger, billable CR, may be easier to get executed. A good project manager understands when it is appropriate to issue a no-charge CR versus one for which the client must pay.

That said, PSO management must provide project managers with a process for managing give away work:

1. All changes must be documented, even when the change will not result in additional charges for the customer.

2. Only the project manager can agree to a change, although s/he should solicit input from the rest of the team.

3. Only small changes can be provided as non-billable. Anything that puts the schedule at risk should be billable.

4. You may want to set a cap on the size of the non-billable CR to which a project manager can agree without management approval.

5. A Change Request Board (CRB) must approve all CRs, even the non-billable CRs. The CRB includes representatives from the client and consulting teams. You may want to have PS management on the board, particularly when your less senior project managers are running projects.

The next post will discuss non-billable work given away by PSO management.

Revisiting Non-Billable Work

Earlier in 2010, I started a series discussing the role of non-billable work. I wanted to revisit that series in the next couple of weeks. The first posts, starting today, will be a repeat from that series. Keep reading, though...more will come.

Thanks,

A