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The PS Charter: Beyond Financial Targets
- by Thomas Lah, author of Building Professional Services: The
Sirens' Song
Companies of all sizes are continuing their efforts to build professional service
capabilities. A majority of these efforts are not meeting management expectations. But exactly what does senior
management want the professional service organization to achieve? Revenue growth? Profitability improvement?
Customer satisfaction? Improved market share for other company offerings?
This article explains why a poorly defined charter significantly impacts the overall performance of the professional
service organization. The article also provides a simple, yet effective process the senior management team can follow
to establish a prioritized PS charter.
From “Mission Statement” to “Charter”
A mission is an assignment. It is a responsibility to perform a specified task. A mission
statement provides zero insight on how one should go about achieving the assigned mission.
By definition, a charter defines special privilege, immunity, or exemption. A charter grants something.
When managers are asked to discuss a concept like “mission”, they often begin to squirm.
As practical managers, they want
simple business missions like “Make money.” Their wannabe writers,
however, craft eloquent missions that involve optimizing the
resources of the company for the greater good of the planet. When the creative dust settles, we end up with the
ineffective mission statements previously mentioned. I want to introduce a process that takes the wiggle room out
of the mission statement by transforming it into a charter discussion.
Instead of attempting to write a flowery mission statement, I recommend the senior management team creates a charter
for the professional service organization. Instead of assigning a mission (or multiple missions), I want the senior
management team to grant a charter. Big difference. A mission tells you to go make stuff happen. A charter defines
what you should and should not do.
To create a succinct and effective charter for a business function, I recommend a simple three-step process:
- Identify the top four primary reasons the function exists.
- Force rank these four reasons in their importance to your business.
- Based on the force rankings, summarize the primary charter of the function.
Step 1: Why Professional Services?
I believe that every business function has a set of primary reasons for existing. In essence, there is a universal list of
potential reasons that exist for every unique business function. For example, the Information Systems function (I/T) at any
company has the following list of potential reasons for existing:
- To improve employee productivity through technology.
- To improve the customer experience through technology.
- To maximize the company’s investment in technology.
- To create a unique competitive advantage in the marketplace.
Of course, there could be some additional reasons the I/T function exists. However, the list of primary reasons this function
exists is finite, not infinite. Furthermore, it is unlikely the I/T function is charted to maintain high employee morale and
low turnover. That would be the charter of the Human Resources function. I/T would not be responsible for maximizing revenues
per customer. I/T could support this endeavor, but Sales, Services, or Marketing would be chartered to achieve this objective.
My point, once again, is that every business function has a finite list of reasons for being in existence.
To accomplish step number one of my charter process, a management team needs to identify the potential reasons a company would
want to expand their professional services offerings. To expedite this step, I would argue that the top four fundamental reasons
a company invests in professional services are:
- Revenue: The company is looking for additional sources of top line revenue growth.
- Margin: To offset shrinking margins in other business lines or service offerings, the company is looking for higher margin revenue sources.
- Satisfaction: The company views professional services as a vehicle to improve customer satisfaction and protect account relationships.
- Market Share: The company would like to use value add services to lead the sales cycle. Professional services are used to accelerate the adoption of new products, or to carry existing business lines into new vertical markets.
Once again, there may be other reasons a company invests in professional services, but I have found that in companies both large
and small, these are typically the top four reasons.
Step 2: Prioritize Objectives
Now that we have a working list of why the function exists, we need to prioritize it. The mud that manager’s fall into here is that
they want it all. “Hey, why can’t I have a professional services business that makes lots of high margin revenue, delights our
customers, and leads us into previously untapped markets?” I agree; it doesn’t hurt to ask. Besides, you may be at a company where
your brand equity and market dynamics permit services to meet all of those objectives. However, I doubt it. To make this charter
conversation meaningful, a management team MUST force rank the business objectives of the services function. If this prioritization
does not occur, the service organization may miss the objective that was most critical to the company.
To help facilitate this difficult discussion, I recommend a management team look at each potential objective and assign an
importance ranking to it. If the objective is mission critical to overall company success, assign the objective a ranking of “2”.
If the potential objective has no value to the company, assign a “0”. If the potential objective has some importance, assign it a
“1”. Table 1: Business Objective Rating summarizes the importance ranking values.
Table 1: Business Objective Rating
| Ranking Value |
Description |
| 0 |
Objective is not important to the management team or the
success of the company. |
| 1 |
Objective is important, but is not mission critical
to success at this time. |
| 2 |
Objective is critical to the overall success of the company. |
Once this is done, the management team should generate a summary table that lists each potential objective in forced rank order.
Interestingly, the acceptable and defendable answers can vary widely here. A management team may state that incremental revenue and
high margins are the critical reasons for expanding services. This answer is perfectly reasonable. On the other hand, a management
team may consider improved customer satisfaction as the primary reason for having services. Additional revenue is simply a nice
additional benefit of having services, but not the primary reason for carrying the function. Table 2: Priority Summary Table shows
a completed summary table.
Table 2: Priority Summary Table
| Forced Ranked Order |
Objective Area |
Importance Ranking |
| 1 |
Customer Satisfaction |
2 |
| 2 |
Market Share |
2 |
| 3 |
Revenue |
1 |
| 4 |
Margin |
1 |
Step 3: Summarize Charter
The final step is to review the data assembled in steps 1 and 2 to generate a charter for the professional services function.
Before a management team attempts to write out the charter statement, I recommend they graph it.
Figure 1: Professional Services
Charter Graph takes the data from Table 2 and generates something I call a “Professional Services Charter Graph”. This
graph conveys why the PS function exists in the eyes of senior management. In this example, the management team views services as
much more of a sales enabler as opposed to a stand-alone profit and loss center that drives revenue and margin.
 Figure 1: Professional
Services Charter
Looking at Figure 1, the management team can craft a charter statement that supports this graphic. A charter statement for this
particular services function may read as follows:
“The charter of the services organization is to assure our existing customers are satisfied with our products and to introduce
new customers to the capabilities of our outstanding product portfolio. The services function will be profitable, but never at
the expense of the customer experience.”
Behold, the Power of Charter
This three-step process to document a concise charter for the services organization is not an academic exercise. This is not
about generating flowery charter statements. This is about granting clear business priorities that will guide management
behavior.
To emphasize the criticality of prioritization, let’s operationalize the conversation:
Your company is launching a new product. One of your existing customers has agreed to migrate to this new product.
However, they are concerned about the pain and costs associated with migration. If they do migrate, the product revenues will be
significant.
During the weekly sales call, the account manager reviews this deal with the district sales director. The district sales director
decides that the services organization should become actively engaged. If necessary, the sales director feels services should
donate a project manager and technical consultant to offset any concerns the customer may have with migration.
The next week, the regional services manager receives a request to allocate a project manager and technical consultant to this
account. No, the customer will not be paying for these resources.
How should the services manager respond?
Using the charter documented in Figure 1, the services manager must consider the fact that the primary reason PS exists is to
facilitate product sales. Yes, a financial impact discussion should occur, but at face value, the services manager should be
working to fulfill the request.
What if the executive management team had decided upon a different charter for the services function? What if the charter looked
like the one shown in Figure 2?
Figure 2: Different Services Charter
If this were the charter the services manager was operating to, the response would be very different. The services manager would
push back on the sales director. The services manager is chartered to meet financial objectives first. Greasing the tracks with
this customer is not even on the radar screen. If the sales director wants assistance, there better be some cost AND margin relief.
Otherwise, the service manager needs to apply precise billable resources to accounts that pay.
I am not judging what charter is more appropriate for a professional services organization. I will not comment on what response
from the services organization is most helpful. However, I am predicting that with no charter in place, service managers and
sales managers throughout your company will spend hours upon hours arm wrestling over how to interact and engage.
Without documenting the charter of the professional services organization, a sales force will be unclear on when and how to use
the services organization. Without documenting the charter of the services organization, service managers will be unclear on how
to respond to requests for free sales enablement activities. A clear charter puts a stake in the ground. A clear charter
communicates to the company what business objectives the management team expects the services function to achieve.
The Charter Life Cycle
When I present this charter approach to senior managers, they consistently ask the following question: “Can the professional
services charter change?” The answer, of course, is yes. In fact, I would argue there is a natural progression of the PS charter
as the organization matures. Initially, there is an incubation phase. Initially, a PS organization prioritizes customer
satisfaction and market share are the top objectives. However, as PS matures, the function is tasked to become more profitable.
In this maturation phase, the senior management team is less comfortable with giving away high priced capabilities just to keep
customers happy. Also, the fundamental question becomes “Can we make money at this endeavor?” Finally, if PS is indeed getting
traction and can be profitable, it is becoming a more significant portion of the revenue mix. As this happens, the senior
management team will actually invert the original charter and tasks PS to make top line revenues and bottom line profitability
the priority. This final phase is all about optimization. Table 3: The Charter Life Cycle documents a common evolution of the
PS charter over time.
This transition even holds true for companies that have no product portfolios but have a service portfolio centered on support or
outsourcing services. When these already service-centric companies want to move upstream into professional services, they too need
to incubate and mature the capability before it can be tasked for high profitability.
Table 3: The Charter Life Cycle
| Phase |
Dialogue |
PS Charter Graph |
| Incubation |
We need to develop professional service
capabilities to address critical customer needs!
PS capability should be used to improve customer satisfaction and drive our traditional
offerings.
PS will always follow our existing account reps. |
 |
| Maturation |
Yes, we have a PS function, but why does it lose money?
The function needs to get its house in order.
Can this function be profitable or not? If not, should we keep it? |
 |
| Optimization |
Now that PS has proven it can be profitable, it needs to grow!
We are counting on PS revenues and profits to make the quarterly numbers.
PS DOES NOT have to accept unprofitable projects just to get the sale. |
 |
The Charter Conversation Challenge
Compared to crafting a mission statement, creating a charter graph is a much more tangible exercise for senior managers. Despite
this advantage, I still encounter predictable resistance. Senior executives want to avoid this conversation for several reasons.
First of all, they may not truly see the value. Despite ongoing friction between PS and other business units, the executive staff
may not have internalized the correlation between charter clarity and operational efficiency. Secondly, the executives may not be
in alignment on this issue. This lack of agreement causes them to delay the conversation to avoid confrontation. Finally, the
requirement to set definitive priorities for PS may be uncomfortable for many executives-especially executives that are unfamiliar
with managing a professional services business.
Despite these reasons to avoid the conversation, the conversation must eventually happen if PS is to succeed as a business function.
The requirement to prioritize objectives for the professional service organization is nonnegotiable.
When discussing charter, we are facing a management challenge where there are no easy outs - no silver bullets. When creating a
viable service strategy, a management team must make difficult choices. Something must be given up to achieve a greater end game.
This is the inevitable consequence of attempting to take the easy way out when facing difficult decisions. This path of least
resistance at first appears painless, but the results are ultimately catastrophic.
In today’s American style of management, we are all looking for silver bullets. Quick fixes. Impact today. But for some challenges,
there are no painless choices. Whether it is the price of admission, the price of success, or simply the price of survival - building
a successful PS business requires sacrifice. We may not like that answer. But the sacrifices should be calculated and strategic.
Every item given up should result in a larger, long-term gain. It is an illusion to think any company can build a successful
professional services business at no cost.
Setting clear priorities for the professional service organization is a nonnegotiable cost when building a professionals service
business. If the management team chooses to delay or entirely avoid the charter conversation, there are significant economic
consequences. If you doubt this, look at the current financial performance of your PS organization. Go out and talk to front line
PS employees. Convinced now?
Thomas E. Lah
is the Executive Director of The Technology Professional Services
Association (TPSA), author of Mastering Professional Services and Building Professional Services: A Siren's Song,
and currently consults with companies to establish or improve their professional services organization. Thomas is actively engaged with The Ohio State University to host an executive education program focused on frameworks and strategies to successfully build professional services at product-centric companies.
He received an undergraduate degree in Information Systems and holds an MBA from the Fisher College of Business at The Ohio State University. |
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