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This chapter is from the book

Guiding Principles

We use the term "guiding principles" in the way many people use the term "policy." Guiding principles are the general rules that guide the decisions of your organization. They set the boundaries within which sound business decisions can be made. Authors Michael Lissack and Johan Roos provide a wonderful working definition for guiding principles:

Guiding Principles: Simple rules interacting within a defined area starting with some goals.5

Lissack and Roos also provide insight to the problems with old rules:

In the traditional "decision making is everything" business model, rules are used as a shortcut. In a complicated world, the trick was to cram more into less and to hide things that were uncomfortable. Rules provided a heuristic device so that thinking was less necessary and more time was available for deciding and acting. The intriguing thing about your rules of business is that we succeeded in creating vast corporate empires in spite of them.

Rules don't allow for autonomy or for a context-dependent reaction to each situation. They do not allow room for interaction.

Guiding principles are designed to allow managers to make context-dependent decisions based on the specific issue at hand. They also require interaction between managers to discuss and determine what action to take. Guiding principles are clearly more vague than traditional rules and procedures, but they are much more effective in complex and rapidly changing business environments. Also, they have a much longer life span than standard rules that must be updated for each new exception.

Now that you have the definition, let's work through an example. Let's say your new PS unit has started offering new integration services. When delivering these services, the PS team often implements third-party products (i.e., products from other vendors that complement your product). Now, customers are asking your company to support some of these third-party products. PS management sees these custom-support plans as a new revenue opportunity for the support-services organization. However, the support-services team sees this as a massive headache because they have no idea how to support the other products. How should these two management teams solve this issue? There are no current processes or rules for dealing with the scenario. If it is not addressed, customer satisfaction will be impacted and the relationship between the two service units will become strained. The answer: guiding principles. Before this issue becomes a problem, the senior management teams of both professional services and support services should establish a set of guiding principles on how the two service units will work together. A sample could look as follows:

  1. Professional Services and Support Services will function as a global-services business unit.

  2. Professional Services and Support Services are committed to providing support for the custom solutions the company develops and implements for customers.

  3. All custom-solution support contracts will be held and managed by Support Services.

  4. Support Services will define all custom-solutions support options.

  5. Professional Services will engage Support Services as soon as possible in the opportunity to assure the support solution is provided, ideally in the requirements-definition phase.

  6. Support Services is committed to a timely response to all Professional Service engagements throughout the bid process.

  7. Professional Services proposals will not be sent to the customer without Support Services involvement, where appropriate.

  8. Where possible Professional Services and Support Services agree to use existing processes, tools, and services in order to leverage existing investment, capabilities, and what is already working well in the environment.

  9. The entry point for all delivered support will be Customer Support Centers (CSC). Delivery of services may be provided using partners or other third-party providers.

  10. Both Professional Services and Support Services are committed to working together on all custom-solution support activities through agreed processes.

With this set of guiding principles in place, the professional-services unit and the support-services unit could work through almost any business issue that comes between them. With the birth of a new PS business unit, there are at least nine key areas where the company now needs firm guiding principles in place. Table 2-1 provides an overview of the topics around which guiding principles should be established when the senior managers of the various business units and functions sit down together. The table also provides insight on what the potential issues are and who should get involved when setting the principles.

Table 2-1 Guiding Principles.



Potential Issue(s)

Senior Management Involved


1. Account Management

How will the traditional product sales organization and the new PS sales organization work together to manage customer accounts?

Poor account planning. Uncoordinated sales efforts.

VP of Professional Services, Regional PS Directors, VP of Product Sales, Regional Product Sales Directors


2. Business Development Funding

Who will fund business development investments with strategic customers?

Professional Services will be asked to perform services at low or negative margins for strategic customers. This activity will impact PS profitability.

VP of Professional Services, VP of Product Sales, VP of Marketing


3. Compensation

How will the organization compensate its staff?

Compensation plans do not drive needed results.

VP of Professional Services, VP of Human Resources

1. Establish a program that is consistent with the goals and objectives of the organization.

2. If the goals and objectives of the organization change, then change the program at the same time.

3. Pay for performance not seniority.

4. Link program to job type. Sales compensated with revenue targets, delivery based on project performance, and operations based on targeted deliverables.

5. Establish realistic expectations and strive to always beat them.

4. Internal Transfers

What will the policy be for transferring staff from other organizations into Professional Services?

With no guidelines in place, animosity can be created if PS "cherry picks" sales and delivery staff from other organizations.

VP of Professional Services, VP of Human Resources, VP of Product Sales


5. Intellectual Property (IP) Transition

How will new intellectual property be gathered and developed?

Failure to collect and develop new intellectual property will hinder new solution development.

VP of Professional Services, VP of Marketing, VP of Engineering

1. Senior management must demand that IP be captured and reviewed.

2. Staff should have incentives to capture IP.

3. Guidelines should be established that are globally and consistently applied throughout the organization.

4. A simple, well-thought-out process should be implemented that minimizes collection time.

5. IP must be captured as quickly as possible to avoid personnel changes and loss of information.

6. Existing IP should be periodically reviewed to ensure relevancy to business objectives.

6. Partner Management

What process will the company follow when identifying, qualifying, negotiating, and signing new partners? What variables is the company trying to optimize when signing new partners?

Business units will sign up partners that create direct conflict with other business units within the company.

VP of Professional Services, VP of Marketing, VP of Product Sales, VP of Engineering

1. Find, qualify, contract, and manage a select group of partners to further expand the company's current offerings and opportunities.

2. Do business with the partner as a consulting customer.

3. Jointly develop and deliver new high-value services that generate incremental revenue.

4. Jointly develop and possibly cobrand new high-value services that enable customers to focus on their core business, instead of technology.

5. Through committed reciprocal business, highly leverage the scarce human resources, the comarketing funds, the equipment pool, the training capabilities, and the management time.

6. Supplement the company PS workforce with skill sets not yet available.

7. Revenue Recognition

How will revenue be recognized between Professional Services and the other business units? For example, if PS sells product as part of a large engagement, does PS receive revenue recognition for this?

With unclear guidelines, it becomes difficult for PS to predict revenue if it is unclear what should be included in PS revenue.

VP of Professional Services, VP of Product Sales, VP of Marketing


8. Solution Development Funding

How will the overall company fund new solutions?

Failure to develop and invest in new solutions will inhibit progress through the four phases.

VP of Professional Services, VP of Marketing, VP of Product Engineering

1. Use incentives at all levels of the organization to bring ideas forward.

2. Create a simple way for new ideas to be articulated and include preliminary business case.

3. For ideas that could become solutions, develop a comprehensive business case.

4. Have executive team review, approve, and fund solution.

5. Establish accountability for solution back to the company.

6. After instituting solution, have period review to ensure solution is still in line with objectives.

7. Fund only those solutions that provide greatest return to the organization.

9. Support Contracts

How will the new Professional Services unit and the existing Support Services interact?

Professional Services implements third-party products that Support Services can- not support

VP of Professional Services, VP of Support Services


If you successfully completed the objectives of this chapter, then you have successfully set the parameters for your new business. This is time well spent on the front end. As the saying goes, "garbage in, garbage out." If you slouch on the design, if you shortchange the parameter-setting process, you greatly increase the potential for failure. If you truly did need to skip some of the above issues, don't worry; you'll have a chance to address them at a later date—because these are issues that don't go away!

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