Situation: A company has grown through its expertise consulting for other companies. For its next growth step the CEO and Board want to shift to a project basis. This entails several changes, from compensation to organization and focus. How do you shift culture as the company grows?
Advice from the CEOs:
Risks & Challenges
Biggest risk – dissatisfied employees who see less billable income per hour and may not see the “more hours” part of the picture.
The biggest personnel challenge will be those who have been with the company for many years, and who will see the most change – maybe not to their specific practices if they can bring in business, but on the project side.
Communication is a critical challenge, and also the best way to avoid landmines. Put a velvet glove on the presentation of the opportunity: “This is good news – we know that the low hanging fruit is now mostly gone, and that the remaining fruit is higher; to counter this we now have more options.” Carefully prepare communications to both management and consultant team members.
Another potential landmine – the impact on the company’s reputation if it blows up after a year. Set appropriate expectations – the company is introducing a new program rather than a wholesale rebranding.
Countermeasures to Mitigate the Risks
Maintain a structural option that preserves the old model for those who can bring in new projects and who prefer this model. For them, the new model is just an option that can help tide them over if there are gaps between the projects that they bring in.
Present the project option as new opportunity. Give more senior and experienced consultants priority in choosing whether to participate or not in new project work.
Plan and create the ability to assess the old consultancy model vs. the new project model. This will be especially important when individuals are spending part of their time in each area.
Create a set of metrics for each business – the consulting and project businesses – to measure whether they are on track. Identify and monitor the drivers for each business.
Keep the title Consultant on consultants’ business cards – Consultant, Sr. Consultant, etc. Allow them to continue to take pride in their role.
Move to the new model through a planned phase-in but retain the option to adjust the speed of transition between the old and new models. This will allow sensitivity to changes in the environment.
Don’t consider an immediate and complete rebranding – think in terms of introducing a new product under the company’s well-known brand. Plan a gradual transition of business to the new model. Introduce the new product as a new offering. As it picks up steam, gradually move brand identification and promise to the new model.
For the new project model, create incentives for project performance. Show team members that while the hourly rate may be less, if they perform as a team they will share the upside through project bonuses.
A company delivers specialized consulting services. The founder CEO is also a
lead consultant. As the company has grown, the CEO has struggled to prioritize
her time as she shifts from consultant to leader. How do you reprioritize your
from the CEOs:
at the skill sets required to run the company and compare this with the skills
of current staff. While the company has excellent consultants, do some of these
people also have experience in business development or management?
the skill sets needed and focus hiring efforts on those that can’t be filled by
the CEO is also the chief rainmaker, then a top priority is hiring a manager/leader.
The next level of development within the company will require a level of
that the company can’t get an A+ grade on every project or detail. Learn to
accept a B when this is enough. It will do.
that as priorities shift, vacuums will develop. Identify what will be missing. For
job descriptions for the roles.
the leader’s roles with flexible teams instead of individuals.
financial resources to fund the transition as incentives for individuals to take
on new work and responsibilities.
at profit-sharing models. Use profit sharing to facilitate the shift in priorities
by adjusting payout incentives.
the risks within the plan. Think through these thoroughly and develop
CEO, you will not be able to do everything that you do now. In your new role you
won’t want to do everything you do now. Your view and responsibilities will
Situation: The CEO of a consulting company is frustrated by lumpy revenue and profits. From quarter to quarter it has been difficult to predict either number. Unpredictability reduces options in valuation and exit exercises, as banks and acquirers favor predictability. How do you generate a predictable P&L?
Advice from the CEOs:
The objective is to construct a revenue base built on predictability, even if this is at lower margins. Given a predictable base, the company can complement predictable revenue and profits with higher dollar and margin opportunities as they arise.
Analyze the projects that the company contracts for both revenue and profitability. Some projects will be bread and butter situations which are more common and predictable, but which generate less revenue and profit per project. Others will be customer crisis driven. These latter projects will have higher revenue and profit, particularly if the company is the vendor of choice; the tradeoff is that the frequency of these contracts is unpredictable.
If the objective is predictability, the company’s base should be built on bread and butter projects. As the company grows, focus on this base. Customer crisis projects can then be added as they arise to bump both revenue and profit.
The objective will be to become one of the top 2-3 outside vendors of the choicest clients. Target projects may be ongoing maintenance of older projects in the client companies’ portfolios.
How would this model be pursued?
Focus on the company’s top 5 customers. Reduce risk by optimizing customer leverage as a proven entity and offer them strategic deals.
The focus is long-term project based with guaranteed delivery at lower cost.
Identify the fear or insecurity that exists within the customer and provide sleep insurance.
This model works well in the new economy – get lean, manage infrastructure size and cost, and grow with the economy.
Alternately, identify an area where the customer may not have enough resources and provide a solution that allows them to address this without adding additional personnel or by using existing personnel more efficiently.
Another option is to develop a virtual office model. Provide resources for $X per month, with an evergreen provision.
Situation: A CEO is transitioning her role in a company that she founded to new ventures, while maintaining a part-time commitment to the company. The company seeks a proposal as to how she will split her time and what compensation she wants during the transition. The CEO seeks guidance on the focus and content of the proposal. How do you structure a transition proposal?
Advice from the CEOs:
This sounds like a set of half-decisions.
The CEO envisions a transition from the current position to a transition position to a new position. The more likely scenario is that the CEO will go straight to the new position. As soon as one new venture starts to solidify, this will demand 100% of the CEO’s time.
Given that this is most likely the CEO’s priority, the important question is what the company wants and needs from the CEO. Deliverables, time commitment and compensation should follow these needs.
Another approach is to look at an exit package, including a long-term consulting retainer. For example, full salary for 6 months with a retainer for another 6 months. This will allow the CEO more freedom and flexibility to pursue the new ventures.
The current negotiation is just a starting point. Here are the things to consider in the proposal to the company:
Does the CEO need income from the current company during your transition? Will a new venture benefit from financial or professional assistance from the company?
If the CEO is not fully engaged with the company, leadership will likely want the CEO out sooner than later.
The company mostly will want a non-compete and the ability to use the CEO as a resource as needed.
Situation: A company provides both contract staff and consulting services. They have a large client for whom they provide staff, but not consulting. The client routinely requests discounted rates on contract staff from the company. The CEO believes that the client requests lower rates because they, in turn, offers consulting to their customers, using the company’s staff, and want to offer these services at a competitive rate. How can the CEO better respond to the next requests for discounted rates? In addition, is there a way for the company to market their consulting services directly to the large client’s customers? How do you balance two businesses?
Advice from the CEOs:
Don’t avoid the conversation on your rates. Make sure that your client knows that they are getting top quality services and that this is reflected in your rates.
Make the issue a price / quality trade-off. If cutting costs is important to the client, offer lower quality options at a lower price and let the client decide what will fill their needs. This positions you as flexible and willing to work with the client, without losing margin.
Offer modest discounts for incremental business, but not current business.
Tell the client sooner, rather than later, that your prices are as low as you can make them. Don’t wait until you are in pain.
How can you promote your own business to end customers via the staff that you provide for this client?
Give them business cards to give out that reflect your business, not your client’s.
Provide them with wear nicely embroidered “Company” shirts to wear at work.
Be aware that your desire to approach the client’s customers directly with your services will be a threat to your client and may result in them firing you as a provider of contract staff.
Situation: To date, a company has performed a single set of services focused on collection and delivery of a stream of raw data to its clients. The CEO wants to add a consulting service based on the expertise that the company has developed over the years. The CEO seeks input on both how to position this new service, and how to organize it, either within or separately from the current business. How do you expand your business model?
Advice from the CEOs:
Consulting services can be offered at a premium to current services because the company will be offering analysis and recommendations for a solution, instead of just raw data. Intelligence is more valuable than raw data.
Offer the consulting service on a project rather than an hourly basis. For example, price a project at $10k for the consulting package instead of $200/hour for data collection and reporting.
To add weight to the consulting offering, provide final reports and recommendations as a professional, written document supplemented by a presentation.
Test the concept and early options for the consulting service with existing clients.
Create a new division for the consulting service so the customer sees it as an additional option and value that the company provides. This will change both the branding and image of the business.
To increase the opportunity for success, develop a full business plan for the consulting model.
Focus on the new consulting business with the same discipline as the current data business.
Situation: A consulting company has an employee who is a perfectionist. They can bill clients for standard work to complete a project to client specifications; however, this employee wants to continue working unbillable time to perfect the work and considers this to be of research benefit to the company. The CEO wants to impress the individual that the company is a business, not a research organization, without discouraging the employee’s enthusiasm for the work. How have you handled perfectionists within your own organization?
Advice from the CEOs:
If the employee possesses skills which are important to the company’s strategic direction it makes sense to work with the individual. One option is to focus this employee on future development rather than current projects.
An increasing number of companies allow employees in development positions 10% to 20% of their time to pursue pure research. Both product and software companies leverage employee enthusiasm to build their products or services. At the same time, they create guidelines to assure that the remaining 80% to 90% of these individuals’ time is devoted to current business.
Why not allow the employee one day per week to focus on research, but limit the focus on pure research to this one day – as well as any evenings and weekends that they want to devote to this on their own time? This way the individual is encouraged to pursue their ambitions, but within a framework that clearly states that we want 80% of your work week to be devoted to billable work.
Situation: The Company has a geographical sales and service organization. Much of the sales effort comes from the consulting reputation of the managing director of each geographical unit, but he directors’ core values usually favor consulting over meeting sales plans. How do we get these directors to meet sales goals?
Advice from the CEOs:
Experience turning around a consulting organization with no sales culture:
Ours was a 5-year process. It starts with a leader who sells successfully and teaches by example.
As we made the transition, we selected new hires for sales skills to compliment their consulting skills. This facilitated our transition to a strong sales culture.
You need to commit to build a sales culture.
Moving to an account manager team versus an engineering/professional team was a big shift. It takes time and patience.
Hire effective sales people to jump-start the process. Most of the successful seller/doers will be new hires.
Revise your reward and recognition structure around your objectives.
Make rainmakers your best paid people. This will bring others out of the woodwork.
Bias sales compensation for doer/sellers toward variable compensation. Allow successful individuals to make over $200K per year.
Consider a 3-year phase-in by not increasing base pay through raises. More than make up the difference in available variable pay. Directors will now have more incentive to hit their sales numbers.
This is a difficult change in both sales leadership and culture. You may have to make significant leadership changes.