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