World-class PSO: Daily Thought

As Stephen Pierzchala, Senior Consultant at Gomez (and one of my direct reports) so eloquently said in his blog yesterday, "One of the things that all consultants have to accept is that selling is a part of the territory." In my comment to Stephen's blog post, I reminded him that "selling" doesn't stop when the ink dries on the contract. As a consultant, you are constantly selling your abilities, knowledge, expertise, frameworks, and recommendations.

Good consultants are always persuading their clients: We persuade them to share ideas, answer our seemingly irrelevant questions, humor us as we take them through an exercise or learning program, and execute the recommend that we make. We persuade them to work together to find creative solutions to their problems, and we persuade them to see a new and fresh perspective.

Consultants are not sales people, but there is an element of selling in everything we do.

World-class PSO: Daily Thought

A Lesson in Civility: There's an old adage: "We hurt the one's we love." So, I asked myself, why is it we take risks in our communications with those who are the closest to us?

I don't know about you, but I know that I find myself, at times, putting important, close relationships at risk when I don't take a few minutes to speak thoughtfully and without emotion when working with colleagues. I know that I, for one, find myself approaching certain internal communications in a way that I would never do with my clients.

So...what do you do when you need to properly set expectations with internal stakeholders, you feel you have expressed these expectations more than once, AND maintain relationships and/or build bridges? I say...treat every communication, particularly the really important communications or those that are with "challenging" stakeholders, like those stakeholders are your clients.

Top 10 Qualities of a World-class Consultant

A world-class PSO is an organization with effective sales, marketing, delivery, and operational processes, tools, and resources that ensure customer needs are met, can achieve 100% reference-ability among its client base, and is able to meet financial goals such as bookings, revenue, and profitability goals.

To truly be world class, a PSO needs to attract and retain world-class consultants. Yes, these consultants need access to world-class tools and best-in-class processes that enable them to do their jobs well, but they also need to have the passion and focus that allows them to learn new skills and technologies and grow within the organization. Truly world-class consultants develop both the subject matter expertise required to deliver world-class services, but they also build the consulting, selling, and customer management skills required to build deep relationships with their clients and deliver profitable, repeatable projects.

I spent some time on a recent flight from Boston to San Francisco thinking about what makes a consultant "world-class." What are the qualities inherent in those individuals who can connect with their clients in a way that ensures that the client's needs are met, their challenges are addressed, and the necessary change is effectively delivered?

The following is a list of the top 10 qualities that I think are critical for a consultant to possess in order to be world-class. Admittedly, not all of these ideas are original, although some are, and I have done my best to site the original author who spoke of the quality. I apologize in advance if I missed anyone. So here is the list of 10.

A world-class consultant:

1. Communicates clearly and completely without bias, attitude, or judgement.
2. Remains a client advocate and keeps the client's best interests and needs top of mind at all times.
3. Seeks first to understand, and then to be understood. (I know I heard this somewhere, although I can't recall when or from whom.)
4. Asks questions designed to uncover the "real" pain, not just the "stated" pain. Jean DiGiovanna of ThinkPeople refers to this as "staying curious." (This is a common theme in many sales training and books, particularly those that espouse a "solution-selling" approach. It is also relevant to consultants who work to effect positive change in a client's organization.)
5. Is not afraid to tell the customer what they need to hear, rather than what they want to hear. (This is often difficult to do without being perceived as difficult or undiplomatic - its not what you say, but how you say it - and it is a place where sales and other groups may try to sensor the consultant.)
6. Is able to boil complex issues and situations down to simple frameworks that can be easily understood.
7. Is able to work across different departments and levels in an organization, be perceived as a trusted adviser, and can filter "baggage" and "noise" from the reality of the situation.
8. Can find advocates and evangelists within an organization who can help navigate the political structure.
9. Is able to ensure the client that she understands what is unique about this situation and that she can bring the breadth of her experience to help solve the problem.
10. Whenever possible, works to assist his client in finding their own solutions to the problem. (See Peter Blocks, Flawless Consulting.)

I will dig into each of these 10 qualities over the coming weeks.

Vision and Stragegy in 2010

Building a World-Class PSO requires many components of a complex system to work together to meet the needs and objectives of the client base, consultants, department, and organization in which the PSO resides. Hiring the best and brightest consultants, developing relevant and repeatable services offerings, and developing a repeatable delivery model that enables projects to be delivered on time, on budget, and at the highest quality are examples of some of the components that must be implemented to ensure that the PSO is, truly, world-class.

But how do you know what resources to hire, what services to offer, and what the delivery framework should be?

As with any other business, develop vision and mission statements for the practice is a critical first step. Now, I know there are a lot of nay-sayers out there who believe that vision and mission statements are "fluffy" and meaningless. I disagree, however. In fact, the process used by managers and the team to develop these two very important artifacts for the practice is as important, if not more important, than the vision and mission statement themselves.

My company is moving through the Professional Services Maturity Model quite aggressively these days. There are a lot of changes we are managing. For instance, we were recently acquired, we are planning significant growth in our business, and we are even changing many of the services that are delivered.

As we sat down to plan the new year, which starts on April 1, 2010, we quickly realized that we were in the midst of an identify crisis given the changing environment. This crisis was preventing us from make key decisions and reaching our fullest potential as a world-class PSO.

So, we took a step back and started by defining a vision statement for the practice. We decided that the vision statement would define some future state - what we aspire to be. We also decided that it would be written from out clients' perspectives. In other words, there is no mention of internal metrics or growth numbers. What role do we want to play in assisting our customers through their own evolution to greatness? We held up in a conference room for a couple of hours, and we pulled something together that really speaks to why we get up every morning.

We are still working on the final touches of the vision statement, which includes reviewing it with key managers from across the business as well as with the consultants themselves. So I won't share the vision now. However, having this vision enabled us to make significant progress in defining our plan for the new year. We have identified a set of a dozen or so initiatives that align with the vision to assist us in improving how we go to market, work with sales and marketing, and deliver the services we offer.

Having a strong vision is a key component of SPI's Professional Services Maturity Model. Without it, PSO managers will not succeed in getting on the road to building a world-class PSO.

Managing Non-Billable Work Effectively, Part 5 of 5

I recently reached out to my colleagues at PS Village and reviewed a number of posts on the LinkedIn group, SaaS Professional Services Executive Forum, to inquire about how others deal with give-away work. It seems that many respondents experience the same challenges. The trend across all of the proposed approaches to dealing with this situation is that the solution will work if, and only if, executive management places value on the work of the PS team and on the importance of managing projects properly .

Here, then, is a summary of some of the best suggestions that came across the PSVillage and Linked In Discussion Boards:

1. Manage non-billable, client projects like a billable project by involving PS resources in the discovery and scoping discussions early and using the SOW and CR process to manage the agreement and work effort.
2. Tracking non-billable work in a number of categories. For instance, one may consider tracking and reporting the percentage of PS time spent on:
   
   - Non-billable commitments made by management (PS, Sales, and Executives)
   - Project overruns due to missed estimates on fixed-bid projects
   - Project Management approved no-cost CRs.
   
   
3. Charge back systems can be used to highlight the amount of non-billable work delivered (and on behalf of whom). For instance, if a sales manager commits to including five days of PS work at no additional cost in order to close a larger product deal, the Sales budget pays for the PS time. PS reports the booking and revenue like any other, but Sales takes a hit on its budget. In this model, Sales would be very aware of the value of the no-charge work and would understand the deal size that would need to be closed to make the PS work worthwhile.
4. Financial Reporting can be used to highlight the amount of non-billable PS work delivered to customers. One member of the PSVillage worked directly with the head of finance to change the way non-billable PS work is reported on the company’s financial statements. With this change, the financial statements reported both the “Gross PS Revenue,” the discount rate for the period, and the Actual PS Revenue. Gross PS Revenue equaled all time spent by PS on client projects at the normal billing rate (whether billable or not). The discount rate represented the value of the lost revenue of the hours that were discounted or given away. The Actual PS revenue is the difference between the two. This type of reporting put a spotlight on the value of the no-charge PS work that was being delivered.
5. A formal approval process ensures that all parties are aware of the need for and agrees to the no-charge work before the commitment is made to the customer. This approval should include the CFO, VP of PSO, and VP of Sales. The process should be well defined, and all parties in a position to give away PS work should be required to follow it. I would that approval should be required before any agreements on schedules and work effort are verbalized to the customer and should require an initial discovery by a qualified PS consultant or manager.
6. VSOE, or Vendor Specific Object Evidence, is what determines how a business can recognize the revenue associated with a deliverable or work effort based on the fair market value of that work effort when sold as a stand-alone item. Some members of the Discussion Groups suggested that VSOE can be used as a baseline to which discounts are compared. Any discounts that bring the deal size below the VSOE would be flagged for review by finance before there is a contractual agreement between your company and your customer.
7. Where the primary contributor to non-billable customer work is the Sales department (and assuming reps are paid a higher rate on product sales than PS sales), some suggested that the value of the discount come out of the license cost, in turn reducing the commission to the rep. it is thought that if the rep. feels the loss in his commission check, he will think twice about making the promise in the future. This often happens when VSOE is in place.
8. In most cases, participants in the discussions felt that executive-level support and structuring the PSO as a profit center are the two primary drivers for reducing the pain associated with unmanaged “give away” commitments. With both in place PS managers can reduce the number and frequency of those commitments and ensuring that proper project management processes are followed in the pre- and post-sales efforts. Additionally, many thought that determining a budget for non-billable client work was important to ensure that these opportunities were scrutinized appropriately during the review and approval process.

Conclusion
PSO managers need to expect that non-billable work as a nature of the business in an embedded PSO. Getting agreement from the top with regard to how and when work will be given away is critical. Showing executive and sales management how unplanned, non-billable work - without PS involvement - disrupts the apple cart, including short-term and long-term effects, is critical. Solutions for managing non-billable work exist, but they work best when supported by the executives.

Managing Non-Billable Work Effectively, Part 4 of 5

Well, it took a while to get back into the swing of things as Q4 ended and the holidays rapped up, but I'm back on track, and here is part four of my article on Non-billable work.

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 provided
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.

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.

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
   

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 dollars. When these commitments are made "unexpectedly" the disruptions can cause pain to other projects, the sales pipeline, and the moral 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.

Happy Holidays!!