Professional Services incentives

Any firm that has a Professional Services capability will be familiar with the contradictions and competing priorities that are a part of everyday life.  For example, the C-suite are often focused on revenue and profit – no surprises there.  Sales leaders want customers who will reference and help them sell more.  Service Managers want to retain staff, avoid overruns and keep costs under control.  Consultants want to avoid burnout and feel fulfilled in their career.

With these conflicting priorities, it’s no wonder that many are tempted to devise incentivisation schemes to nudge things in the right direction.  Sadly, most schemes fail or deliver results that are unexpected and counter-productive. Let’s examine some scenarios and how they can be good, bad or indifferent.

1. Incentivise Consultants to be more billable

This is a commonly used method.  On the surface, it looks great – you want your people to be out earning money, being chargeable and delivering projects.  You don’t want them sat on the ‘bench’ or engaging in free work for clients.

Incentives can include a percentage of billable income, a bonus over a baseline number of hours, or a variety of team targets based on a combination of the two.  However, there are two major problems with this approach.

Firstly, Consultants rarely have a say in whether they are billable or not.  Of course, they have a duty to commit to working a number of hours and perform with skill and diligence.  However, if they are asked to perform work at no charge or they are not assigned to a project and left on the ‘bench’, there is little they can do.

If the motive to drive up utilisation is rooted in project failure and lack of Consultant maturity, this is an entirely different problem that won’t be solved by whipping people to work harder.

The biggest downsides of this approach are the negative effects on Consultant morale.  They will see some people (those who are on long-term almost permanent assignments) earning full bonus, while they are scrabbling around for work.  This breeds resentment.  They will also be very reluctant to work on projects that are not billable – be that agreed re-work, sales incentives or simply investing in themselves by taking time out to attend training and development.

Lastly, every project they work on will be focused on delivery within time budget – not on the quality of the outcome.  It’s not their fault – it’s human nature.

2. Incentivise Consultants to achieve high NPS or Customer Satisfaction scores

Again, a perfectly reasonable proposition at first glance.  However, as I wrote in my previous article ‘I don’t care about your NPS score and neither should you’, this can drive exactly the wrong kind of behaviour.

In a Consulting environment where customer satisfaction is the main measure, there is a tendency for Consultants to turn into yes-men (or women).  They fear upsetting the customer and getting a low satisfaction score, so live for the here-and-now - bending to the customer’s ever-changing requirements and ending up with tangled mess that simply doesn’t deliver.  It is entirely possible to have a high satisfaction score with a terrible outcome for the project!

3. Pay commission to Consultants and Project Managers when they sell more hours

I mention this because, despite the fact that it doesn’t take much of a leap of imagination to consider the downsides, I’ve seen it in more than one organisation.

One example I saw was a company who paid Project Managers and Consultants a commission for additional project time sold to the customer. Guess what? Some Project Managers (despite the fact they had a very diverse portfolio) almost doubled their salary in commission, and for some reason nearly all of their projects required lots of additional time which the customer was obliged to pay for...

The rule here is simple – don’t incentivise someone to do the wrong thing because they invariably will, to the long-term detriment of everyone involved.

So, what is the answer? Some may think that in an ideal world everyone would turn up and give 110% for the salary they are receiving.  Of course, many will, but there is a lot to be said for people feeling invested in their work and having an active interest in the best outcome – the best outcome not only for the customer, but for the firm and the individuals involved.

For this, I believe that project profitability should be the measure.  As you already know (or you should know) what the planned profitability is before you engage your teams, it is a neat way to align the interests of all parties.  The next question of course is – ‘what type of mechanism can be put in place to do this?’. That’s a whole different subject, and one I will cover in a later post.  Designed well, it will supercharge performance.

Finally, and perhaps most importantly, the most effective incentivisation schemes place trust in the participants (Consultants) to use their skill, judgement and knowledge to perform at a high level.  For this to work, the maturity of your Consulting function needs to be sufficiently advanced to allow your Consultants to operate as true Consultants and not just product-certified technicians.

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