Is anyone adjusting PS incentive comp plans with different measures or lower ute targets?
We've seen a number of companies start to de-emphasize utilization as a primary driver of incentive compensation for PS individual contributors.
Given COVID revenue and cost pressures, wanted to see if anyone is thinking through adjusting PS incentive plans - either lowering / changing measures and targets for this year and/or re-thinking utilization focus for 2021.
Answers
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Hi Neil! Great question. I know that Bo Di Muccio touches on this topic in his recent The State of Professional Services 2020 research report.
Dave Young and Bo Di Muccio also discussed this in their TSW Live! session, Professional Services Best Practices for the Pandemic … And Beyond
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Is a better approach to this to compensate customer success teams based on value delivered to customers? This requires some form of formal value model and a way to connect data collected by the platform to that value model, but customer success is the outcomes and not just use.
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I like the idea of focusing on value delivered to customers as well as focusing on behaviors. In general I try to stay away from numeric incentives. These often drive bad behaviors.
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We changed comp metrics pre-pandemic, to move away from utilisation as a driver and instead brought the team on to the company bonus plan, where metrics include revenue, growth and controllable cost, followed by a set of secondary 'soft' metrics such as tracking against goals which includes utilisation and customer sat/NPS, which is collected and tracked.
Mostly it's been successful. There is a 'pool' of compensation to distribute once the company-level metrics have been met and then individuals are adjusted according to the secondary metrics. But it can occasionally mean that someone consistently under utilised in a quarter can earn similarly to someone tracking over average.
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I always think of the quote from Dean Spitzer in his book transforming performance management "..Measurement may use numbers, but it is not about numbers; it is about perception, understanding and insight”. I think too often we lose sight of what the outcome we are trying to drive with metrics we use. Every metric for me should have a well understood action that needs to be triggered as a result. Can the consultants in your organisation actually impact their utilisation? Clearly there must be some impact driven by their skills 'worth' in the market and their perception of performance by the customer (and so wanting to extend them or re-engage), but it's potentially by the people selling the projects too - so is it fair to judge performance on utilisation in this way? So back to Spitzer's point, what perception, understanding and insight are you getting from the raw utilisation numbers? I'd also make the point that analysing trends in utilisation (or most metrics) are far better that looking at spot KPIs (potential blips maybe?) - so you might want to get people more focused on a trend in poor utilisation than a one-off poor number.
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@Mark Robinson Fully agree with your comment, "Every metric for me should have a well understood action that needs to be triggered as a result." In the Support Services Research Practice here at TSIA, I continually talk with members on how to improve their knowledge sharing culture since many are struggling. My first question is always "Do your performance metrics include a case/incident closure rate or absolute amount?" With that metric you already have created a conflict around adding knowledge so your customers can self-serve. The more issues customers can solve themselves, less "how to" incidents come into support lowering their numbers.
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It is worth reinforcing @Mark Robinson 's point "Can the consultants in your organisation actually impact their utilisation?" And if they can, is this in the client's interest or are they being incented to create make work?
I believe that compensation plans should be based on the value that is being created for customers, and that we need to find ways to do this.
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