Benevolent Dictatorship

A benevolent dictatorship, as defined in Wikipedia, is  a form of government in which an authoritarian leader exercises political power for the benefit of the whole population rather than exclusively for his or her own self-interest or benefit or for the benefit of only a small portion of the population.

A former work colleague defined it as “getting you to agree to my good ideas”. Even if we stick to the definition, which in and of itself promotes a healthy form of leadership, the title or phrase “benevolent dictatorship” still doesn’t sound too pretty. It is the latter word that throws the whole title into dismay but the underlying principle stands true and the idea of exercising authority for the sake and interest of the whole organization is a good one. In the agile and lean world we tend to react the same way to titles or references to management teams that we see in companies as well.

In Management 3.0, Appelo makes the point that the term leadership, used in the place of management, is not necessarily the right word since when referring to those in executive management as leadership we infer that others in the organization can’t necessarily lead or be viewed as leaders due to the way terms and titles are used. This point rings true and no matter how our organizations are organized we need to be conscious of how we apply titles and terms and how we communicate them across the whole company.

The challenge we face, however, is that in the enterprise space (unlike the software industry) we can’t simply shift organizational models to do away with titles and terms and replace them with what we might consider more agile leadership or lean executive management oriented ones, at least not yet and not as straight-forward as we might want. Titles and references to those titles and teams in large enterprises have meaning and reference to how things operate.

In one of Mike Cohn’s blog posts titled The Role of Leaders on a Self-Organizing Team, the statement that self-organizing teams are not free from management control is indeed true. Maybe at this point you’re wondering what exactly is the point, after all you understand the concept of self-organizing teams and you also get that managers are still needed to manage and run parts of the company. Yes, all true but perhaps this article is more for the enterprise executives and managers who are entrenched in the day to day grind of running an operation or a global business and are now equally entrenched in trying to figure out the right management model for adopting an agile/lean approach since someone told them it all has to change.

The truth is that every enterprise company I know and have worked with refers to certain people in the organization as the leadership team. Hierarchy still reigns supreme in most large global companies and when we look at organizational change and how to best shape it, doing away with this type of hierarchy is not likely or even possible. Refining it, however, in incremental, more focused ways is possible and is often the catalyst to adoption at the wider level. More simply stated, creating a flatter organization that is still managed well with structure and agility is possible when done at the department or program level vs. an attempt to do it en masse from the outset.

Embedding agile/lean thinking and leadership in a large, global company is not for the faint of heart nor is it to be handled like an ERP implementation. It is a series of quick wins that we can measure along the way and create a pull model within the organization rather than pushing it on everyone. Most of us go on our experience and mine tells me that it is okay to tell enterprise customers that their organizational change initiatives, meant to support the adoption of an agile/lean way of working, will still require executive/senior leadership that can lead and support the cause and still empower teams to get things done – it’s not one or the other, it’s both and while I do agree with the point of empowering people and communicating to them in a fashion that supports leadership at all levels, enterprise companies can actually leverage their existing organizational models to support adoption vs. needing to radically change them.

The idea of benevolent dictatorship then, in this case, could apply at all levels in the organization. This means that you have people contributing their ideas and insights for the betterment of the whole program/team/department/company but you still have a key decision maker that must take ownership to move the best ideas forward. It is exactly this emphasis on the whole team vertically from executive level to project level that we must ensure the thinking is applied and embedded.

One final point as this relates to enterprise companies. It is not the organizational models that we need to get hung up on and what they call people within them as much as it is ensuring that the right people are in the right roles. It is getting people to agree to the ideas that are good and right for the that company and aligning it to those that will get it done.

Pricing Models

I often find that the most challenging part of finalizing an engagement with a customer is determining the best pricing model. This isn’t because there is tension in negotiation or even on the cost of the engagement itself. It is largely due to shaping a pricing model that helps meet specific objectives without becoming a distraction well into the project. Part of it is expectation setting, another part is alignment with financial goals (for the customer and the service provider) and another part is the shaping of behavior since money often does influence how everyone behaves especially when it is written in a contract.

There are considerations to be made when working with a customer to construct an engagement supported by an optimum pricing model. Some of these considerations include:

• Clarity on the value currencies (drivers) that will shape the deal
  • Time to Market for the project
  • Specific KPIs (Key Performance Indicators) that will communicate progress/success/failure
  • Identification of risks that can alter the course of the project
  • Understanding of all costs that will impact project profitability and could potentially influence behavioral change
  • Pricing model flexibility to allow for changes as the project matures or the objectives change

In addition to defining these currencies there are a number of pricing models to consider. Below I’ve described the most common pricing models that service providers and consultancies use. There are some great books written on how to price engagements, including The Price Advantage by Walter L. Baker, Michael V. Marn and Craig C. Zawada.

Time & Material (better known as T&M)

This model is perhaps the most common and is often the most problematic since it is entirely based on the cost of people with no responsibility on meeting specific value criteria or deliverables in the contract. Characteristics of this type of pricing model include:

• Daily or hourly rate multiplied by the number of days or hours, sometimes referred to as “level of effort”
• Customer  is invoiced and pays strictly for actual services delivered
• The rate is a factor of differing criteria that will likely include:
  • Skills required
  • Competency and experience of the person and/or team
  • Geographic location that will impact the market value of the rates
  • Domain experience if industry expertise is needed
• Discounting is typical based on:
  • Supply and demand
  • Competition and the desire to win the work
  • Duration of the project (the longer the engagement, the more competitive the price)
• Low risk assumed by the service provider but also a lower level of control and influence over the outcome
• High risk assumed by the customer since deviations or changes are usually dealt with by Change Requests that can be costly

Fixed Time & Material (sometimes called T&M Not to Exceed)

This can be confused with Fixed Price, which is different and discussed below. The idea behind a Fixed T&M model is to create a little more structure and security around the contract. Characteristics of this type of pricing model include:

• An agreed price for the engagement in exchange for a defined scope of work
• There is still negotiation on the rate per person or per team and the level of effort (number of days) BUT there is a fixed or capped amount that is discussed with the customer
• Due to the exposure of the rates, adding anything to cover unexpected risk (contingency) is difficult. That said, I have found that discussing this with customers openly and honestly usually results in agreeing on some percentage of assumed risk added, e.g. 15% (although that number can be higher or lower and needs to be agreed and validated with the customer depending on the scope of work)
• The payment is usually related to actual work effort vs. deliverables or milestones, e.g.
  • If it costs the service provider more time to complete the project and they exceed the “fixed”  amount then they are responsible for the difference
  • If the service provider can deliver the project in less time and come in under the “fixed” amount initially agreed then the customer benefits from the difference in savings
• High risk for the service provider since the engagement is still priced on T&M but is controlled by a fixed amount
• Low risk for the customer – project amount is fixed (budgeted), early delivery is to their financial gain, late delivery is still to their financial gain although the impact on one or more of their value currencies could be negative

Fixed Price

As it relates to service contracts, more and more companies are opting for Fixed Price and many more are now considering Outcome Based mentioned below since both of these represent mutual accountability and responsibility and reflect the intended partnership that was desired to begin with. Characteristics of this type of pricing model include:

• The engagement has a fixed price for the scope of work required and is NOT based on T&M discussion but rather perceived value – in other words if the delivery of this new customer facing rating application will deliver an estimated £5M in new revenue then is spending £1.5M to build it sensible (I don’t know since there are other variables but typically you need some level of an economic framework to assess the value of a fixed price engagement)
• The service provider is responsible to determine the level of effort and the best team to deliver this work and then provide a fixed price to the customer that will often include some percentage of assumed risk (contingency). The assumed risk is predicated on certain factors:
  • The extent to which the scope of work is understood – doesn’t necessarily have to be fully defined
  • The gap between the technical and business requirements vs. the service provider’s ability to fully deliver it
  • External factors or resources that may be needed to make up skills, competencies or expertise
• Price can still be negotiated
• The contract defines not only the scope of work and the engagement methodology of the service provider but also clearly describes the assumptions from both parties, responsibilities for each and how issues will be resolved
• While possible, penalties/late fees are not typical in a Fixed Price although some customers want to see them and this lends itself more to the Outcome Based model described below
• The invoicing of a Fixed Price engagement is tied to an agreed payment schedule vs. billing for services rendered
• The degree of risk for the service provider is high but their ability to shape and control the outcome along with the client is equally high therefore the exposure is limited assuming that the partnership intent exists
• Customers can benefit greatly from this model if all parameters are well defined and communicated upfront

Outcome Based (often referred to as Risk/Reward)

Over the years I’ve seen several attempts at this type of contract. Most of them failed but not because the model doesn’t work but rather the setting of expectations is not thorough enough and neither is the ongoing communication that is necessary to maintain complete transparency and trust. Unlike the other pricing models we’ve discussed, Outcome Based engagements require a bit more love and attention to make them really work.

They are often approached the wrong way by assuming that the key criteria is setting an SLA (service level agreement) and associated penalties. While these need to be represented, approaching this model with the intention of forming a benefit driven engagement proves to be far more valuable. Characteristics of this type of pricing model include:

• The engagement is governed by rewards for performance and delivery of outcomes and the risk of losing or minimizing the total compensation if outcomes and deliverables are not realized
• Similar to Fixed Price, the pricing model is a set amount and related to T&M but inlike a Fixed Price engagement that is simply a capped T&M contract, Outcome Based models are all about achieving deliverables and outcomes:
  • The scope of work is directly linked to specific deliverables/outcomes for the project that can be related to milestones (feature/function delivery), performance metrics (time to market/cycle time, cost/waste reduction, etc.) or some combination of both
  • Other outcomes can include a discounted rate from the service provider in exchange for revenue or productivity goals associated with the project
• Establishing ceiling and floor scenarios so that there is understanding on how much reward a service provider can expect if they over-achieve and equally what is the worst-case scenario is something goes wrong.
  • You might find it hard to believe but it is this lack of expectation setting and math exercises upfront that often lead to broken contracts and relationships.
  • The degree of risk on the service provider’s side in delivering the project needs to be balanced with the degree of potential upside, influence and control and the customer’s objectives for the project.
  • Customer Value Analysis type work upfront significantly helps this discussion and can often help shape a mutually optimum agreement
• The degree of risk for this type of pricing model is typically very high but again, the ability to shape and control the outcome is also high.
• Do these types of contracts if you have an established relationship with a service provider that you know will put skin the game because your success is directly linked to theirs (not on just this project, which is obvious but in terms of overall long-term goals).

The best pricing model is different for each project and organization and is going to be driven by a company’s maturity and experience in contract and vendor management along with their willingness to be creative and even re-shape existing policies. This largely depends on what they want to achieve with each project or program and what are the governing factors for the company itself. The explanation of these models will hopefully help some to re-think how they are doing it today and find ways to minimize their risk and exposure and more importantly build better relationships with their partners.

Customer Evaluation Analysis (the bottom 15%)

One of the hardest things any company can do is win a new customer. There are lots of articles and books you can read on the steps and investment required to win a new customer. In fact, customer acquisition is a topic that is widely written about and discussed. One topic that is discussed a bit less is the cost of keeping a customer, especially one whose goals are not as mutually aligned with yours as they seemingly once were.

The truth is that the best services companies assess their customers annually and make tough decisions about who should stay and who should go. I can’t say with certainty that service providers release the bottom 15% of the customers annually but that is the metric I’ve heard over and over again. I’ve often said that there is good revenue and there is bad revenue. In a world where we often state that the customer is always right, it seems unorthodox to even talk about letting a customer go especially when we’ve invested so much to win them and perhaps they are a well known brand or enterprise that others can only dream of having as a customer of their own.

Relationships go both ways and they are personal, therefore they require time, commitment and an effort to shape them in order for them to work as best as possible. That said, too often the policies of large companies can make relationships with their service providers less personal by applying blanket policies across each provider. This approach has it’s place but it is not always appropriate or supportive of the specific requirements each relationship may have.

Nevertheless, service providers and consultancies work hard to win new customers and begin the process of establishing this relationship but they also arrive at a point after some time that requires reflection and an assessment of how things are working. Typically we expect this review to come from the customer side but it must come from both sides in order to maintain a healthy relationship that is truly built on mutual benefit.

How do we assess which customers meet this criteria without making a critical mistake or the wrong set of assumptions? It starts with answering a set of hard and soft questions. In this context, hard relates to the economics surrounding the customer in question and soft relates to relationship oriented questions about the customer in general, the less obvious things that are hard to measure but are apparent to you and the team. Some of these questions would include:

 

Economic Questions (Hard) – the data we should know

• Has the annualized revenue for this customer met our initials expectations and targets?
  • This assumes we have a minimum revenue target per account per region/territory
• Has the annualized gross and net margin been realized?
  • This assumes we have targets for gross margin on projects and a project budget
• Does our opportunity to increase business with this client exceed 35% for the coming year?
  • The percentage can vary but the milestone should reflect strong potential growth
• Are we spending more than 2% of the total contract value for each new opportunity we’ve identified at this customer in order to win it?
  • For example, for a $1M contract, are we spending more than $20,000 on average to win it or attempt to win it?
• Do the payment terms for this customer support our corporate requirements?
  • The cash runway for this account is visible and consistent and does not limit our investment if we deem the need
• Are we being paid on time or are we consistently having to monitor and expend cycles to get invoices paid?
  • Assess the risk of not getting paid vs. being asked to invest more

Relationship oriented (Soft) – less specific but equally important

• Are there stakeholders that we don’t or can’t have access to that we believe are needed to ensure success of our existing work and the ability to secure new opportunities where we can provide the greatest level of value for them and us?
• Do we have visibility across the needs of the organization we are supporting or are we limited to the project we are working on only?
• Are our efforts to position better services and solutions being neglected or halted consistently?
• Does the customer’s long term budget and investment reflect the change they are looking to introduce or is it mostly a project to project approach?
• Have we, as a company, met the expectations this customer has had of us and if not, is it too late to re-group or have we lost our long term opportunity and credibility?
• Simply put, can we establish a long term, trusted relationship with this customer?

This is not a call to start looking for customers to part with but rather a call to evaluate relationships, values and how we can build opportunity with those customers that see the benefit of working with us. The best approach if you have a customer that fits this criteria is to set up a review meeting and have an open and candid dialogue on what needs to improve.

Often times, having been through this approach, I’ve discovered that customers really want this level of dialogue and it is the very thing that allows the relationship to be reset and the issues and challenges to be resolved.

The Consultant

A few years ago there was a really good (most of them are) Dilbert showing Dogbert who said that he liked to con people and he also liked to insult them and by combining the two words he got “con-sultant”. You can click here to see the original comic strip.

While we all succumb to stereotypes, the role of a consultant needs a refresh in my opinion to raise it back up to the standard where it once was. Is it fair to say that when you shop for a new or used car, you get that initial flash across your mind of what might happen to you when you step into the car dealership?

You understand the stereotype of the used car salesperson and it is unfortunate, because there are many who perform that role with professionalism but often have to spend as much time deprogramming people off of the stereotype as they do helping them purchase a vehicle. The world of consulting has also suffered a similar fate over the last few years. Companies need help and expertise in meeting their goals and objectives and they turn to consulting organizations to help them but often the experience is less than expected because as with all areas of life, it involves people. People are fickle and can be inconsistent and companies spend untold sums to gain consistency and repeatability in how their people operate but there is always a risk that it won’t work for all.

The role of the consultant has many facets and this article is dedicated to describing some of them in an effort to rekindle the level of expectation companies should have from the consultants they hire and equally, to serve as a call to action to consultancies themselves to up the playing field of their people.

The Consultant

Collaborates Well:

• Understands the meaning of team and how to leverage stakeholders across an organisation at all levels
• Makes the effort to work well in a cross functional manner
• Becomes a student of the industry they serve and invests the time to understand the business
• Talks the talk and also walks it by building relationships that are credible
• Knows that it involves a dialogue not a monologue – they listen well and accept input and feedback
• Operates as a conductor, leveraging the resources available to put forth the best possible solution

Takes Initiative:

• Proactive vs. reactive – offers fresh thinking, new ideas and innovative methods to challenge the team and get people to see things from various angles and perspectives
• Demonstrates courage to share the truth with diplomacy and tact
• Goes the extra mile to encourage and shape direction
• Steps back to look at the whole picture and avoids the temptation to be myopic in solving a problem
• Understands that answers and contribution can come from many different places and therefore is open to getting new people and resources engaged
• Willing to take risks, fail fast and regroup rather than assuming things won’t work or that there is just one way

Communicates Early & Often:

• Establishes a safe environment where thoughts, opinions, feedback and criticism can be shared without risk
• Articulates the problems, challenges and possible solutions clearly and differently for each respective audience
• Doesn’t assume things but sticks to sharing facts as the old adage says “when you read a page just read the black part”. In other words don’t read between the lines all the time but know how to assess and read what may not be said
• Brings people together and is an effective organiser

Responsiveness to the Customer:

• Maintains an ongoing sense of urgency to get things done regardless of how trivial the task
• Helps the customer identify the options available to them to solve their challenge
• Invests the time and effort to cultivate a relationship not a transaction
• Sees things through to completion to ensure the highest level of customer satisfaction
• Interested in helping solve problems vs. just offering solutions
• Understands that saying “I don’t know” is often more helpful than offering the wrong advice

Technical Experience (if required):

• Stays up to date with the relative knowledge and skills required to do the job
• Knows what he/she doesn’t know and leverages the right resources to make up the gaps
• Understands application of technology well enough to understand its utility to a business
• Delivers consistent and repeatable value and quality

Operational Experience:

• Demonstrates understanding of the economic framework and impact that their work involves and what it means for the customer
• Shows leadership through the communication and reporting of program status and results
• Proactively involves external validation to support the effort and program (best practice, case studies, industry measures/white papers)

Results Oriented:

• Doesn’t confuse effort with results
• Consistently evaluates how to improve the work for the customer’s benefit
• Operates the scorecard/dashboard to highlight results, show gains and identify risks
• Understands the measures (value currencies) required for success and ensures that stakeholders are engaged and equally aware

Influential & Respected:

• Works toward a trusted advisor/partner status with the customer
• Willingly involves external colleagues, contacts and customers to share experiences, influence direction and maintain credibility
• Aligned with the customer vision to help shape the organisation’s thinking and direction
• Operates as an “enabler” to help people grow in their skill and experience
• Treats people and customer information with privacy and confidentiality

Adapts to Change:

• Understands that agility is a soft and hard skill and watches for opportunities to leverage, re-direct or shape a direction
• Handles challenges, criticisms, impediments, obstacles… all with poise, professionalism and with a visible desire to gain resolution
• Keeps options available and open to adapt to change
• Maintains transparency and trust with the customer so that the whole team can adapt as needed

Responsible & Accountable:

• Delivers on the commitments made without deferring responsibility
• Establishes a governance and escalation model upfront so all stakeholders understand the lines/levels of communication
• Takes ownership for the expected results and outcomes
• Their Yes is Yes and their No is No – avoid commitments that can’t be achieved or delivered
• Sets clear expectations with all stakeholders

While this is not an exhaustive description for the role of The Consultant, it does represent the areas that matter most and you can tweak this to your specific organisation’s liking. The call to action is for customers and consultancies to expect more.

Aptitude, Attitude, Altitude

I was prompted to write this article off the back of recent experiences and conversations with some colleagues involving the need to assess the building of teams especially as it relates to leadership teams and senior managers.

This is probably not the best title for this article but the underlying principle holds true. As leaders and managers we have a tendency to surround ourselves with certain people in our organizations rather than the organization we have in its entirety. We play favorites and exclude other team members who play an important role but may clash with our personality or style and therefore avoidance or neglect is often an easier path than investing the time to include them.

When we talk about optimum teams and management organizations we attempt to describe a group of individuals that have been selected to each contribute a specific set of skills and experience that together make up a well run machine that results in executing against goals and objectives. Think of the last manager you’ve known that changed roles and/or went to a new company. Chances are high that this person hired former colleagues they left behind at the former company. Most of us have done this because we’ve developed relationships with people that we believe we can trust and we have also established a set of expectations that we believe can be transferred to the new company.

In many cases, managers plan for the new hires they will bring weeks or months in advance of taking on the new role even if they have yet to fully evaluate and assess the team they are inheriting or have indeed inherited. So, this brings us back to the title and the point of this article. The emphasis of building our teams should be more about the diversity of skills and experience that allow us the best chance of success and less about how much we like each other.

The adage; aptitude + attitude = altitude rings true. The characteristics of a great, unified team involves the right set of skills/competencies and experience coupled with the right attitude. In this context, attitude meaning the views, opinions and beliefs one holds towards the team, the organization and it’s respective goals and objectives. It does not refer to whether the person on the team is our best mate or laughs at all our jokes. It also doesn’t mean that the attitude has to always be positive, just constructive.

It is much easier to hire someone on the basis of their skills and experience, e.g. their CV (resume) rather than their attitude simply because that is less visible and requires an investment of time and energy on our part to get to know the person. Some of the things we can do to ensure our teams work as best as possible include:

• First, well defined goals and objectives that are specific, for example;
  • Revenue growth of $X.XM that is defined by geography, service or product offering and maps back to how it will be fulfilled vs. just saying we need to grow by 30%
• Second, well defined roles and responsibilities that support the achievement of the goals
  • Clearly defined organizational needs (what roles do we need to do this?)
  • Detailed description for each role needed (what do we expect from each role?)
  • Organizational map (how will each role interact and what are the dependencies?)
• Third, honest evaluation of each person that can make up the team
  • Assess candidates (internal, external, colleagues/friends) on the basis of meeting the defined goals and respective roles/responsibilities
  • Be willing to trust your instinct and take a risk – the best teams are not all A players

As always, one article can’t do justice to an entire topic and the dynamics around organizational design and execution go much deeper but the emphasis here was to bring awareness to us about the basic criteria we must remember when forming teams.