In many businesses, while building the end product of an agreed contract, changes occur. While some of these modifications get classified as “in-scope” and don’t require any additional resource, more often than not the opposite is true and some form of change management is necessary. This is where many companies struggle. Were the project deliverables clearly defined in the original contract to prevent confusion when a change is introduced? Was the concept of a Change Order (or something similar) clearly defined in the original contract? Is the account manager performing extra work “under the table” to avoid submitting a Change Order, making the customer happy and themselves look like a hero, all the while sacrificing profitability? Is there a well-defined process by which the account manager can document, communicate, and seek approval (on both sides) for the change properly?
While it’s critical to consider all of the above when implementing a successful change management process, we’ve found that a more philosophical change from one where employees are required to execute ‘Change Orders’ to one where employees are incentivized to create ‘Add Orders’ better aligns the three major stakeholders as follows:
- Customer: The name ‘Add Order’ more appropriately positions the work being requested by the customer (remember, they just asked for something outside the original contract scope) rather than a ‘Change Order’ (they’re probably not changing out one like-value thing for another). Labeling the work as an Add Order also tends to make raising the concept of an additional fee less controversial!
- Employee: An incentivized Add Order motivates employees to view changes in project scope as an opportunity (cash in hand) versus a hurdle (having to manipulate the system to push a customer request through). They now have documented proof of the incremental value of the work that was performed (whether it was charged to the customer or done pro-bono) that makes them eligible for incentives (prized competitions, quarterly bonuses, etc.).
- Company: If employees are incentivized to submit Add Orders, the company will now have more opportunities to make conscious decisions to (a) realize incremental customer revenue, or (b) perform the work pro-bono (or at a discount) as a value-add to the customer (and communicate that value back to the customer via the Add Order). The company will also have more data on the impact (positive or negative) that Add Orders are having on annual revenue and flow-through.
In short, changes in project scope should be clearly positioned externally as an ‘Add’ (unless it is a true like-value change or deletion) and internally as an opportunity for the company AND the employee to achieve incremental value from existing customers (this is low hanging fruit, people!). Proper implementation of an Add Order program will result in fewer customer billing surprises, lead to happier, more motivated employees, and increase company top-line revenue and profitability. Win-Win-Win.
TAB Boston members:
Greg Loeber Henry Lombard
Surgent Networks Roomscapes Inc