Episode 45 Transcript
The Formula to Growing World-Class Professional Services Organizations w/ Ilan Gendellman
Banoo Behboodi: Welcome to the Professional Services Pursuit Podcast, featuring expert advice and insights on the professional services industry. I'm Banoo, and today I'm joined by Ilan Gendellman. Ilan has significant experience in building, scaling, and growing world-class customer success and professional services organizations in SaaS companies. He's worked for companies such as DBT Labs and Sisense, and recently went out on his own and started the consulting company, The Gendellman Group. Ilan, welcome to the show. I'm looking forward to our conversation. I think the topics are going to be very interesting to our listeners, speaking about great professional services culture, and ultimately what makes up a world-class professional services organization. So, thanks for making the time to have this conversation with me.
Ilan Gendellman: Thank you for having me. Very excited.
Banoo Behboodi: Fantastic. I know I introduced you to the listeners, but I'd like to give you the opportunity to do that even more justice and let them know what you've been up to.
Ilan Gendellman: Yeah, thank you. So in the last 12 years, I've been very fortunate to lead customer success and professional service organizations at HP Software, Hortonworks, Cloudera SE Sense, DVT Labs, and Splice Machines. I've worked in large companies, small companies, and everything in between and have the battle scars to prove it. My hope in this podcast is to share some of the lessons I've learned the hard way and hopefully that'll be helpful to the audience.
Banoo Behboodi: That's awesome. It's often said in SaaS companies that ARR is king and nothing is more important than ARR. And that's understandable. That impacts the bottom line. But what is the role of professional services in helping drive that ARR and the significance of the professional services, because that's usually undervalued and overlooked or underprioritized. And then why do you think PS is so important? And what differentiates a good PS org from a world-class PS org? I know this is a pretty loaded question, but we'll tackle it bit by bit.
Ilan Gendellman: That's a great question. So, if I take a step back, I generally agree that ARR is king. The margin on ARR is around 90% (give or take). Performing PS organizations get to a margin of 30 or 40%. So it absolutely makes sense for certainly a SaaS company, to invest more in ARR. Having said that, having a PS organization is absolutely critical. Why is that? Because enterprise-grade SaaS platforms don't implement themselves. I used to talk to customers about some of the products that I've led, and I would often say the best thing about the product – it's super configurable. But the most challenging part of the product – it's super configurable. And you can really hurt yourself if you don't do it right. And that's exactly where the PS organization comes in. I also think about PS as the long game. The sale is for here and now, this quarter, but the mission of the PS organization is to really focus on renewals, expansions, minimizing churn, and getting customers to success using the product as quickly as possible. So if you look at the company toolbelt, (PS) professional services is really the best tool, the tip of the spear in a company's toolbed to accomplish that. And that's really the value of professional services. In addition, the professional services organization can also identify opportunities with existing customers and bring that opportunity back to the sales team, and then upsell, cross-sell, and look for additional usage and consumption and value from the product.
Banoo Behboodi: I would agree and I think the professional services, the richness of knowledge, domain expertise, and product, bring credibility to any sales discussion as well. I completely agree with you on the importance professional services can play in both securing a sale and ensuring a great client experience and sustaining a client. But that being said, then what differentiates a good PS org from a world-class one? The latter is where we all strive to be.
Ilan Gendellman: Yeah, another great question. The way I think about this is first to define the professional services mission. What is the mission of the organization? Is it to achieve financial KPIs like bookings, billings, and marginalization? No, that's not very inspiring. The mission of a professional service organization is to accelerate success for the company's customers by partnering with them to implement their use case as quickly as possible. That is the mission of a professional service organization, and if done, all the other KPIs follow. So that mission is really important. Why is that important? Because it formulates how the professional services team think about themselves and their role within the company, the value they add to customers and to the company, and also how other organizations refer to professional services, such as sales, support, marketing, engineering, etc. So that mission, first and foremost, drives really everything. So the mission has to be communicated frequently to both the professional services team and to the other organizations to ensure that the company understands that mission. Second, of course, is the culture.
Banoo Behboodi: That's very important. Yeah. And we'll dive into that. I'd like to understand a little bit more about the cultural component. In your opinion, what helps create a real strong culture in a PS organization? And how do we get the PS organizations to define that culture and have that commitment to the culture?
Ilan Gendellman: Culture is one of those intangible things. If you're part of an organization, you can feel it in your gut, whether you have a great culture or you don't. I spent a lot of time thinking about this, reading, and came up with a few building blocks that helped me create what I think is a fantastic culture in the organizations that I've led. Here's what it looks like and how to create it. The first one is the mission. We spoke about the mission of the PS organization to accelerate value and results for customers. But beyond the mission, the first element of a great culture is trust. The professional services leadership team has to trust the team to execute and execute well. I would start from a hundred percent trust and give that trust to the team to execute and even sometimes fail or run into challenges. When the team runs into challenges, they can raise the flag and the help will be provided, but trust is absolutely critical. No high performing organization can function without a high degree of trust between its members. The second element of a high performing culture is learning. Everything that's been done, every process, every project, every tool, every offering is an opportunity to learn what's working well, what's not working well, how to do better, and that comes from the top and is taught by example. There's a tool that is frequently used in the military called the debrief. If anybody of the listeners has been in the military, you know this firsthand. The debrief is really simple, but it's difficult, and I'll explain why. The debrief includes three key questions: what went well, what did not go well, and how can we improve and do better moving forward? Really simple, right? But the difficult part is to instill that in every project, every call, every operation, and make sure that every single member of the team gets to speak. Sometimes you have those calls where only one or two vocal people speak, and everybody else keeps quiet. No, that's not how the debrief works. Everybody can speak, should speak, and articulate what went well, what didn't go well, and what can we do to improve moving forward. And make sure to document those lessons learned and share them across the organization. And that can be really anybody in the team. For example, if the leader of a team or a leader of a project didn't do anything, then they should absolutely come forward and share that so other people can learn. So, learning culture is really important. And over time, the organization will learn from its mistakes and do better. That's how high performing teams do extremely well, both in the business world and in the military. Another element of high performing culture is training. Continuously invest in training of the team. That can be both in a technical perspective and in what I call hero soft skills. So not just the ability to implement the product extremely well and know the adjacent technologies like cloud security, DevOps, what have you really well, but also how to work with customers, how to manage expectations, how to manage scope, how to manage escalations. That takes time and a lot of practice. It's really convenient for PS organization to focus on high utilization targets, to neglect that. What I would highly recommend is to take a step back and think about the long game and invest in training of the team ongoing every quarter. Spend a day or two training the team and making them better. Another element is team differentiation. The most high performing teams like to think of themselves as special, as unique, to differentiate from other teams. So, what I've done in the past that worked really well is to work with my team to design a hoodie, a jacket, a backpack that distinguishes the team from other teams in the organization. And you wear that in customer calls, in internal calls. That makes a lot of difference. So, the little things do matter, and having that unique apparel really helps differentiate the spirit of the team. The last element, and it can go on and on, but the last element is urgency. I'm a strong believer in urgency, so you can have a high performing team, but if there's no urgency to execute and do things now as opposed to a week from now, it's really important. So, urgency in everything that's been done. And that can be demonstrated from the leadership all the way down again and again. And the key thing really is to lead by example.
Banoo Behboodi: I love all those areas that you raised, and I think they're all critical to optimal client and employee experience, right? All of those are critical success factors to ensure that you're retaining a highly effective team and they're staying with you. They're not changing jobs every few months or a year, because as you invest in training and all the elements that you talked about, it's great to be able to have an environment for the team to prosper and feel happy in. All the aspects that you spoke about is going to create that environment, that cultural elements should be discussed, I think, to bring about a healthy PS organization that hopefully people want to stick around and continue to grow with great suggestions.
That being said, I want to pivot a little bit because we talked about culture and the elements of the effective culture within a PS organization, but I want to talk about something that is always a challenge, especially within embedded services within a software SaaS company: how do we formulate that PS culture to make sure that and influence the sales culture to be able to play well together and ultimately make sure the company and our clients are benefiting from us?
Ilan Gendellman: I've seen this time and time again, and I'm sure the listeners have too. I think the key point to think about is to position PS as a value add in the sales cycle instead of attacks. What does that mean? When professional services are introduced early in the sales cycle and perform discovery and understanding the use case, that could do a few things. One is instill trust and confidence in the team's ability to execute and deliver the project and deliver the customized solution that is needed to meet the customer use case and also to provide confidence about the outcome and the timeline. I've experienced firsthand several times in which, when the professional services team participated in the discovery phase and the sales call, a small use case turned into a much larger use case and increased the deal size, and that really provides significant value both to the customer and to the sales team.
When done correctly, it really infuses a sense of collaboration and partnership between the potential customer and the company. As I said before, the best software, the best SaaS, is highly customizable; it doesn't implement itself, and introducing that early in the sales cycle is absolutely critical. Another element that's really important is to enable and train the sales team on the mission and the value of the professional services organization so they too can understand that this is more of a long game. The focus is not just on selling the solution this quarter, but to provide a roadmap for implementation that the customer can then use, get value, and then renew, expand, and get additional benefits from the product.
Banoo Behboodi: Yeah, I wonder how many organizations, SaaS companies actually include their professional services team, or at least their professional services leaders, in their sales kickoff. Because we know that sales kickoff is a means to celebrate victory and energize for the future. And if the services team is part of the team that brings the win about, then getting them engaged and building team camaraderie between sales and activities like that seem quite important. But I was just wondering: I know there are different ways SaaS companies structure their service sales responsibilities. Do you have any ideas and thoughts around best practices? Would you think it's better to have a dedicated service sales team within sales or outside of PS, or have a certain role within PS that contributes a certain percentage of their time to productive utilization, but not billable utilization, providing input and estimating the services during the sales process? Any particular thoughts about how best to structure that within a success company?
Ilan Gendellman: Yes, and I've seen both models and experienced both, the good and the bad and the ugly. And where I'm at in that equation is that I strongly believe the PS organization has to contribute to sales directly and not have a sales team dedicated solely to services. Why is that? I believe the organization that delivers has to understand the use case, scope out the project, compose the statement of work, and work with the sales team to establish trust and sell both services and the product. When you have all this done in-house internally in professional services, and that can be done by a regional director or a senior architect that focuses some of their time on scoping, I found this works best because there's a sense of ownership. From my experience, if you have a sales team that's only dedicated to selling services and there's no accountability because they don't deliver, you lose some of the focus and details you need to scope out engagements and price them correctly. So I believe professional services should play a key role in sales and work very closely with the sales team to scope services and sell them.
Banoo Behboodi: Yeah. I wonder how you measure success for team members within PS that would engage in the sales activity. Clearly, sales is driven by sales targets because, in some ways, if you want teams to play well, there has to be some common elements of measurement. I think they are both striving towards the same objectives. And so I know we talked about ARR being king in SaaS companies. I wonder what that is? Any thoughts?
Ilan Gendellman: Yes. What I've used before is to provide a target of bookings, or services sales, to team members tasked with performing those tasks. So, every quarter, as part of a bonus structure, there's a booking target that the team strives to accomplish and hopefully exceed as well.
Banoo Behboodi: And I guess part of it is about how you look at utilization as well. I would be curious about where you have billable utilization. I know a lot of companies are looking at productive utilization and what they include and do not include in productive utilization. Any thoughts on that?
Ilan Gendellman: Yes, team members who are tasked with scoping and composing statements of work, the billable mobilization target will go down and that can be 30 or 40%, but the sales activities are absolutely part of the good utilization, for lack of a better term, and that absolutely falls in. It's an essential part of the services process. And a flywheel PS organization cannot function without a healthy sales pipeline.
Banoo Behboodi: To wrap up, I just wanted to see if you have any last great pieces of advice that you want to leave with a team on how they can build their world-class PS organization and how they can have that organization work effectively hand in hand with sales, because ultimately that's what's going to drive success for the company and their revenue targets.
Ilan Gendellman: Think about professional services and sales as a team—they work together as two sides of the same coin. So, in order to make a high-performing PS organization, there has to be a concept of what I call the flywheel. Sales brings PS into the scoping discussions, professional services scopes out the engagements, the sale is made, the project is started successfully, and then professional services identifies additional opportunities and brings sales into the discussion. The flywheel continues on and on, and when done extremely well, magic happens. I've been very fortunate to see that magic in action, and it's phenomenal. So, my word of advice, my recommendation is to try to create the flywheel between sales and professional services and amazing things will happen.
Banoo Behboodi: I have to ask this question with respect to Flywheel. If every SaaS organization now has a customer success team, whatever that team may be called, I want to ask you about your thoughts on where they fit in as the third wheel in their role.
Ilan Gendellman: Yes. According to my experience, the customer success organization is responsible for renewals and expansions. We haven't touched on this so far, but there are certain professional services offerings that are geared specifically to renewals and expansions. One of them is what I call a solution review or health check, which is to come in six months before the renewal. Pop up the hood on the customer implementation, see what's working well, what's not working well, provide recommendations for alignment, and build that pipeline. So I see customer success in this model very similar to sales. Sales is responsible, in a lot of cases, for new customers, and customer success is responsible for renewals. Preventing churn, professional services is the best tool that allows the company to accomplish both: get new customers successful, onboarded, and ensure that existing customers are successful. If there's misalignment between the implementation of their practices, do a solution review, get professional services, and make the customer successful.
Banoo Behboodi: Maybe we can do another session and dive into that a little bit more in the future, but that's great. I've really enjoyed a lot of the ideas that you've shared with us. So Elon, tell us, you've obviously had amazing experience leading PS organizations and customer success, and now you've taken this venture into your own hands. Tell us a little bit more about your company and what you're intending to accomplish with it.
Ilan Gendellman: Yeah, thank you. So I recently decided to give back to the community and use my experience to help early-stage and mid-stage companies build and scale and grow their professional services and customer success organizations. So what I do is meet with the company leadership and understand where things are and help them improve. I understand where the gaps are, provide a plan and roadmap, how to scale the professional services organization, how to build processes, how to build a culture, how to create a mission, how to create go-to-market offerings. And just work with them very closely to achieve results as quickly as possible. I love it. It's super exciting for me and I can't wait to work with great companies and make things happen.
Banoo Behboodi: Sounds really great and exciting and I hope it all works out for you. But before we get into it, I also have to ask you about the guitars. I don't think the listeners will see your background, but you're obviously a great player. I must assume you're a fan. Tell us a little bit about that.
Ilan Gendellman: I always wanted to play the guitar, and when Covid started about three years ago, I ran out of excuses and started to learn online and practice every day. I really enjoyed the process. It's really similar, in a way, if you think about it, to professional services. Because if you start playing an instrument, any instrument, it's really a journey—it's not a destination. That journey never ends. Three years in, I still learn a lot and still practice. I wouldn't say I'm a good guitar player, but I'm the best I've ever been, and that's a long way to go. Yeah, that journey is really impactful, not only to learn how to play the instrument, but also how you look at life, how you look at challenges, how you look at professional services.
Banoo Behboodi: I love that. I never wrap up before asking something that's a little bit personal and tells the listeners a little bit more about you. So, I wanted to know what it is that you're reading right now and any particular recommendations that you may have for our listeners.
Ilan Gendellman: Oh yeah. I'm an avid reader, so one of the last books I've read is called ‘Who?’ By Jeff Smart and Randy Street, and the purpose of this book is to provide a method to identify and hire A-players. Why is that important? Because the book really states something really simple and really profound: the number one problem businesses face is Who? Not What. What refers to the strategies we choose, the products we offer, and the services we provide to customers. The book provides a great methodology to identify and hire A-players. I highly recommend it. Go read it. You'll be happy you did.
Banoo Behboodi: How relevant to the topics we've discussed? You have your A-team, build the culture, and lead the way to becoming a world-class PS organization. So, that's awesome. Thank you for that. I will definitely be reading it. We'll catch up with you on what I've learned and your learnings later. But, on that note, thank you again. We really appreciate your time and all your wisdom that you've shared with everyone. Thanks so much. Thanks for having me. As always, we love to hear from our listeners. If you have any follow-up questions for myself or Ilan, reach out at podcast@Kantata.com. Have a great day everyone.