Resource management matters to sustain growth and profitability
by Jeanne Urich and Dave Hofferberth, SPI Research
No one disputes the fact that people are the most important asset in the services industry. In the highly billable professional services (PS) sector, where many people charge between $250 and $500 per hour, how companies hire, train and compensate specific skills goes a long way to determining an organization’s long-term viability and success.
Recent trends in resource management demonstrate the balance professional services executives are finding between tactical and strategic resource usage, and how they are increasing the emphasis on building a workforce that optimizes growth and profitability both in the short and long-term.
Strategic, tactical resource management
Like most investments, human resources have both their strategic and tactical characteristics. In professional services, people are essentially “the brand,” and how an organization markets them goes far in meeting the organization’s financial objectives.
The hiring and retention practices of professional services organizations (PSOs) must mirror its strategic goals. The firm’s human capital management strategy should outline the types of people needed, their corresponding skills, their cost and subsequently their revenue potential.
Once the PSO develops its human capital management strategy and hires the resources necessary to carry out its strategy, it must then use the resources in a way that is tactical, as well as strategic. PS executives work to staff projects with people who can adequately meet the needs of the client, but do so at a cost that maximizes profitability.
However, there are cases in which a PSO should not maximize short-term profits due to the strategic nature of the client-consultant relationship. By placing the desired consultant on an engagement (even if it isn’t the most financially desirable alternative) can further build a long-term, profitable relationship, and therefore resource management must play both a tactical and strategic function.
Regardless of economic conditions, optimize resources
PS executives, like their manufacturing counterparts, must optimize resources in a way that maintains utilization levels that meet financial goals. These executives must ensure that their staff’s skills align with the short and long-term work to be completed.
While many PSOs strive to ensure they have adequate staff on-board to meet the needs of their client base, many have either too few or too many people. Neither situation is advantageous. Having too many people on-board limits profitability as well as introduces boredom into the equation. Consultants with low levels of utilization tend to feel underutilized and know they are not generating sufficient profit to warrant their long-term tenure with the company. They might also feel underappreciated and with the extra time, begin to look elsewhere for future work.
Consultants with high levels of utilization, while appreciative of their perceived impression that the organization really needs them, begin to suffer burnout, which manifests itself in other areas not related to their day-to-day activities. Many of these individuals enjoy the work as well as the long hours (if adequately compensated), but suffer outside of work, which in turn causes stress and eventual turnover in the organization.
Neither of these situations is ideal for the PSO. Communicating to staff a stated utilization goal will help them understand the PSO’s expectations. However, no consultant is utilized to a constant percentage as work fluctuations occur. The goal of PS executives is to keep their consultants on a utilization percentage with minimal variance to assure consistency and long-term employment.
Change happens: How you handle it determines success or failure
Regardless of economic conditions, the professional services marketplace continues to evolve. PSOs will offer new services and initiate new geographies, and turnover will occur within the organization. Even in leading PSOs, these phenomena occur every day. PSO executives must build a workforce consisting of people who can handle change in a positive, productive way.
Most people don’t like change, even if they say they do. If they succeed at one type of work, they will become less likely to aggressively pursue new ventures, preferring to continue on a path in which they have flourished. The PSO must work to continually develop attributes that make individuals less susceptible to problems as change occurs. Some PSOs initiate programs that continually have their people working on new initiatives outside of their area of comfort, or do training in areas where their skills and qualities might be a long-term asset to the company.
Initiate processes to optimize resource management
Many leading professional services organizations have implemented automated resource management capabilities that allow practice leaders and resource managers to efficiently deploy their workforce. These tools, in conjunction with project management tools, allow PS management to efficiently deploy the workforce to meet profitability, timeline and utilization targets.
They allow management to look beyond the four walls of their office, and to reach out to other areas within their organization — enabling the PSO to maintain a smaller, yet more nimble workforce. This situation allows staff to work with other people outside their office, creating a more unified and consistent service offering — all of which builds the brand.
Resource management tools let executives continually monitor projects to make sure both costs and revenue are in-line with project objectives. In cases where the project scope changes, PS management can use the resource management tool to realign the workforce to ensure other projects and their revenue goals are not negatively impacted.
Maximizing your unique resources
With changing client demands, PSOs must build a workforce that is intelligent, hard-working and adaptable. Every employee builds both the firm’s corporate brand and his or her own. Firms must utilize employees in a way that optimizes their unique skills while meeting the financial directives of the organization. To account for both the strategic and tactical attributes of each resource, many PS executives turn to integrated resource management solutions to keep utilization consistent while meeting client needs.
For numerous organizations, resource management has been more art than science. With the changing demands placed on PSOs to meet client objectives and profitability goals, it has become increasingly clear that more sophisticated resource management is required for long-term organizational success. PS executives who commit to such tools enable their organization to optimize levels of employee skills, while meeting the demands of their clients.
Resource management tools offer PSOs the ability to accurately look at their workforce to determine skill gaps as well as compensation inconsistencies. Resource management should be at the heart of a human capital alignment strategy that allows executives to more accurately predict and hire individuals who possess the skills necessary for long-term client satisfaction and financial viability.