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Transforming a Professional Services Organization |
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- by Jeff Wilhelm, Vice President, Americas Professional Services, SupportSoft |
As leaders, we have all taken responsibility for an organization that "isn't running optimally". The initial goal when assuming ownership of the sub-optimal organization is to determine how sick the patient is. At this juncture in the assignment, it isn't uncommon to hear analogies such as "We might need to do surgery" or "This patient is on life-support". You may even observe an attempt to classify the problem into categories such as:
1) Mildly messed-up
2) The ship is sinking
3) Turn-off feeding tubes
Although analogies are terrific at painting a picture of the current situation, most CEOs will find them inadequate and will lean toward more specific and tangible analysis of the situation. Using analogy, cliche, jargon, and the occasional metaphor (albeit a masterpiece of English writing) will miss the mark.
Legendary football coach Lou Holtz, best known for his reign as Head Coach of Notre Dame in the late 80's and early 90's once said "In the successful organization, no detail is too small to escape close attention." This opinion is applicable when attempting to transform an under-performing organization. The real concern is "Where do we start?"
The reality is that most good senior Professional Services leaders can quickly recognize areas that need improvement within their organization. However, most recognize these problems through specific exposure to a situation rather than via a formal plan. In other words, you start to get involved in day-to-day activities ranging from (but not limited to) new deal negotiation, implementation issues, financial tracking, consultant morale/turnover, etc. As you bump into these day-to-day situations you begin to notice specific gaps. For example, the first time you engage in a deal discussion you may find that your team clearly doesn't have an estimating methodology or you don't have an effective Statement of Work process that sufficiently protects your organization. Or, as you wade into a crisis management situation with a project-that-has-gone-bad, you may discover that your implementation processes are severely lacking or non-existent. In short, these issues surface to you NOT as part of an organized approach - but as part of your personal involvement in day-to-day management.
If identifying areas to improve becomes entirely dependent upon you (as a leader) being involved in day-to-day issues and personally witnessing the situation...the timeframe for corrective action becomes elongated. Although I am a huge proponent of "working leaders" that are close enough to their organizations that they can personally see problems; dependence upon your involvement is clearly a limiting factor. You may be successful, but potentially over a longer time period than is acceptable to the Board of Directors or CEO.
A more rapid and thorough approach to organizational change is approaching the problem systematically by assessing various aspects of the organization much like...well...a third party consultant would if hired to fix your organization. This process would be managed and executed like a project and a single observation from you is not a gating factor (as I say this I can hear a few of you thinking "No Duh! This is common sense"). It may be common sense but reality is that many senior leaders do not approach it this way, and all too often get dragged into day-to-day issue management which eventually derails improvement plans.
The goal is to pick the right things to assess - and to assign individuals to assess each. Once you have analyzed each area you can determine the biggest pain points and decide on priorities.
I have outlined below a set of areas that should be considered for any professional services organization that is looking to dramatically improve performance. This is a sampling of areas to consider and will help you get started on the right path to analyze your organization.
| Assessment Topic
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Description
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| Effective Statements of Work
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Ambiguity is NOT your friend in professional services. You must have an effective SOW template that covers
common risk points. Your SOW must be very specific and define what you will deliver at a detailed level. Don't let
the salesperson convince you that you are better served by leaving it vague. The reality is that all of your financial
and legal risks need to be covered in your Statement of Work. Period. I have seen a $500k project turn into a
multi-million dollar loss due to a poor Statements of Work and no containment of risk.
Don't assume your process is solid. If you aren't comfortable that your contracts/SOWs represent an achievable project...then this should be step 1 of you improvement plan. Evaluate your process.
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| Implementation Methodology
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13,456,231 books have been written on the topic. I will summarize by saying that no military in the history of the world has attacked by saying "just go out there and do whatever comes to your mind". The reason is because they will die. You need a consistently followed process to attack your projects....or your projects will die. Assess your methodology and determine if you have hope. Even a simple process is better then no process.
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| Project Management Competency
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My experience is that many organizations are confused about the role of Project Manager. Some see it as a junior level role, some see it as a senior level role, some have less accountability to financials, others have more accountability, some require technical skills, some do not, some are "leaders", some are not required to "lead" etc.
Frankly, this can result in a terribly dysfunctional organization not to mention atrocious financials. If you clarify no other role in your organization.....you must define your vision for Project Management. I won't start the debate on the value of good project management but I will say that I've yet to see an organization with poor project management go on to financial bliss.
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| Sales Collaboration
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Do you create your pricing via requirements sessions? Do you provide a "Price Book" to Sales so that they can price work accordingly? Are you comfortable with Sales setting expectations for services? Do you have an internal sales team? All of these need answered. I tell my team "Although battles can be won after the contracts are signed....the war is won at contract signing". Clearly sales collaboration must be reviewed in conjunction with your assessment of the SOW process, but the involvement with the Sales organization is a slightly different animal to assess.
Winnable projects are key to professional services success therefore you must be comfortable with your process for constructing your offer. Investigate whether this process is working in your new organization.
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| Forecasting Process
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I have seen huge organizations use the "back of the napkin" approach to forecasting. You need to develop an approach and follow it consistently. Develop a process for accurate bottoms-up forecast of revenue. Your organization may have a system for this - or not.
You would be surprised how this fundamental goal is inadequately addressed in organizations. Assess whether this process is clearly understood and effective.
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| Finance Process
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Do you have a month-end or quarterly (services) financial close process that is well understood, efficient, and successful? Or is your financial close process a nightmare of 18hr days as you track down milestone signoffs, forward to finance, review with Finance etc.? There is no greater killer of productivity than spending 5 days at the end of the month/quarter trying to gather the relevant materials so that your CFO can close the books.
Assess the efficiency of the financial process. Spend the time developing a process whereby your team understands the required documentation to recognize revenue on services work - including but not limited to milestone acceptance materials.
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| Revenue Capacity
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Do you know what your organization has been achieving in the past versus what they could/should be achieving? Does your CEO know? Is the CEO's perception based on tangible facts or prior beliefs of what you should be able to do? Does the CEO or Board of Directors understand how many resources you have? Do they understand historical utilization? Do they understand challenges that impact both?
Review historical actuals. Not only will it allow you to show how you improved the organization, but it will help you set expectations based on past data. Most importantly, it will allow you to understand the organization's capability if/when you drive improvements. And no matter what - understand when the board asks for the unachievable.
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| Services Automation Tool
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The fact is that time reporting drives most of your metrics. Yes "time reporting" is just one of the many benefits of a professional services automation system, but time reporting is the engine to your business Understand the process and the system. Is it being used? What are its faults? Does it proved the data you need?
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Metrics
- Non bill
- Utilization
- Project
Profitability
- Realization
Rates
- Bill Rate
Project Performance
- Red, Yellow, Green
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There are hundreds of potential metrics. We could write 1000 pages of text just on professional services metrics. In fact, here is a good article: Metrics that Matter: Measuring Professional Services Business
My goal is to simply touch-on the fundamentals. I am a firm believer that small professional services teams (under 100 people – 8 to 14 million in revenue) can be managed and be VERY successful with a few key metrics rather than a huge list. Larger organizations obviously require more, but even that could be debated.
In short, you must develop a "metrics package" at each level of your organization. Make sure that these packages are reviewed and understood. Don't encourage management by the "seat of the pants", but challenge your team to drive to "management by metric". If properly set up, metrics will drive behavior change. If your team doesn't have a metrics packages in place...then it is likely that your team is not focused on the same goals.
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| Non-Bill
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Develop a process for identifying and approving non-billable investment. It isn't uncommon for leadership to authorize (in a direct or indirect way) non-bill in specific cases. Develop a process that identifies these upfront. Don't make it a consultant or a Sales decision - make it a management decision.
Surprisingly - many Global Services organizations don't understand their non-bill. Is it bench time? Is it Investment? Is it sales support? Is it project overages? Is it poor product quality? Is it new-hire ramp up?
If the organization is historically under-achieving then it is likely that all of the above are contributing to your non-bill....however it is my belief that project overages (exceeding budget) is the single biggest non-bill contributor to most organizations. Project overages may be hard to notice when all other aspects of the business are in chaos - but if projects are done within budget then business results follow.
Quantify the biggest non-bill contributors on a quarterly basis. Measure it weekly. When you look at the areas where you spent non-bill time during the quarter, strive for that list to mirror where your CEO would like you to spend the time.
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| Utilization
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Many organizations are unclear how it is measured at their company (sadly this is true). For small organizations, it wouldn't be uncommon for individual Managers or Project Managers to use their own personal calculation – causing further confusion.
You need to develop your calculation (consult PSvillage and others for your preferred formula), and get your entire team understanding it. Make sure that all of your team as well as the CEO use the same calculation.
Assess the following: Is utilization driven to the lowest level within the organization? Do consultants feel ownership of it? Drive it to the individual!! Ensure it is understood. Measure it weekly.
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| Project Budget versus Actuals
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Services "lives and dies" by projects. If projects are delivered in the number of hours that were estimated….good financials will follow. If I could stress no other goal for my team it would be "complete your projects in the time you estimated" and don't worry about all the rest.
Assess your project budget vs. actuals reporting. Is it clear? Is it being used within the organization? Do your project managers feel accountable for it? Once the individual team (not just the PM) has ownership...things will improve.
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| A Players
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No single event can change the capability of an organization more than turnover. For small organizations it is the prime killer. For large organizations, it may take longer, but it will have a material negative impact on your ability to deliver with quality.
There are tons of ways to recognize high performers, from award programs related to successful delivery on projects to financial rewards for achievement of other metrics to keeping a personal relationship with your key people. Pick one and roll it out. Don't forget, don't put it off, and don’t steer clear of it because it is hard.....just do it.
Are A players recognized and rewarded for their efforts and contributions? Find out.
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| Analysis of Competencies
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Do you know the skills of your team? If your team is 20 people, you will probably say "yes". But anything beyond 20 people will challenge your ability to memorize the skills of your team. .
Assess the process for identifying, capturing, managing your consultants skills. Professional Services Automation (PSA) software provides this capability - but if you don't have a PSA - then develop another approach.
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| Career Ladder
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Retention is all about having a future. You must develop a career ladder within your Services team that allows consultants to understand the levels, the requirements, the experience needed in order to advance. Assess if individuals see a clear path of advancement?
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| Incentive Compensation
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The reality is that you get what you measure. If you measure utilization - you will get higher utilization. If you measure customer satisfaction - you will get higher customer satisfaction. Incentive compensation is the one area that I see the most lip-service provided by senior leaders, however it is one of the biggest areas of impact for a Services organization.
Assess whether a services incentive management program exists that provides consultants with tangible financial rewards for making specific (utilization or other) targets? If not - develop it.
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| Team Building and Fun
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For gosh sakes, can we take a couple of hours to enjoy ourselves!!!!!! Many years ago Anderson Consulting led the charge for our profession. "Work hard - play hard" was an unofficial motto. No one apologized for the occasional off-site event to enjoy each others company or just have a good time.
When was the last social gathering or team building event for your new organization? Does your team know each other personally? Has there been a chance for your team to bond?
If you have ever read the book "Band of Brothers" by Steven Ambrose you will understand that they were driven by love of their fellow team members. Although it is a bit pretentious to compare an organization inside of a company with a battlefield unit in life-threatening situations, you absolutely can strive to achieve a form of corporate love or camaraderie within your organization that mirrors "unit pride" and a feeling of "We are in this together". I have experienced it and I can tell you that not only does it result in a feeling that surpasses anything in your career, but your organization will achieve heights never thought possible.
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| Published Customer Success
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Assess whether "wins" are published and recognized? If your organization is under-performing and in chaos, I would bet that wins are not being noticed. . Start a program where customer rollouts are widely published. Describe the complexity of the rollout so that peers, Sales, and the CEO understand the complexity. We have a very tough job - show how tough it is.
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| Customer Relationship Development
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Most PS organizations have a large customer base with key services people that work with that account. But is it clear in your organization who owns that customer from a services perspective? Is there a person you can hold accountable to customer satisfaction and/or new follow-on work? Is there someone who truly has "ownership" to the customer?
Assess if clarity of ownership is communicated. You would be surprised how many professional services organizations have confusion on who owns the customer. In a product company it is even more complicated as Account Managers, Hosting, Support, Sales, and others complicate how Services is involved.
Make sure your team understands who owns the customer. After all - mining accounts can fuel a business for years.
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Transforming organizations can be a career in itself. There are people in our industry who are energized by the ability to change chaos to order, to change bedlam to calm. However, even if you aren't a person who seeks-out the "fixer upper", I can assure you that at some point in your career you will be faced with accepting responsibility for a team that needs a transformation. When this happens, I hope that this article provides some perspective on the right way to approach the situation and the right topics to consider in your assessment.
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