Your Workforce is Changing

Are you ready for it?
by David Hofferberth and Jeanne Urich, SPI Research

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The professional service industry is in transition. Service Performance Insight’s analysis of over 600 professional services organizations (PSOs) over the past four years has shown significant changes in the market. A handful of Goliath service organizations are no longer the only ones to offer everything from strategy to implementation to business process outsourcing. Now, in addition to the Goliaths, thousands of boutique PS organizations provide a comprehensive portfolio of high-quality services at extremely competitive prices.

Workforce trends

Professional service (PS) clients are changing as well. After years of uncertainty about whether consulting value equaled the money spent, clients now know how to use professional services. They are exerting greater control over consulting projects to ensure high return on their investment dollars. They demand faster response to issues as they arise. Their tolerance for waiting weeks or even days has lessened, leading to immediate problem resolution becoming the norm.

Coupled with industry and client change, the PS workforce is also changing. Employees right out of college or graduate school refuse to work 60 or more hours a week at a remote location with no social benefits. They look for the work type, clients and locations that offer the greatest skill and career potential. They demand a greater say in the type of projects they are assigned to and the amount of travel they will accept.

More experienced consultants look for a work environment that helps them balance career, family and learning objectives. Although consultants generally stay fewer than five years at any given firm, leadership, communication, growth potential, skill-building and long-term benefits are critical for keeping them engaged.

Creating the changing workforce

These changes, as well as many others, drive PSO executives to create a different type of workforce that offers technical and client management competency with equal parts of flexibility, autonomy and accountability. This means one of the most important challenges for today’s PS leaders is competing for top talent in a level, global, web-enabled playing field of “digital natives” who value collaboration and cool, new technologies more than security and remuneration.

Today’s human capital alignment challenges include:

  • Attracting, retaining and motivating top talent.
  • Managing through a technical labor shortage.
  • Managing a global, multi-lingual, multi-cultural workforce.
  • Managing a variable and/or contingent workforce.

Big changes

SPI Research has surveyed 600-plus PS organizations over the past four years and has observed the following:

  • Fewer consultants work from a central headquarters location, mandating the use of technology to support communication, collaboration and knowledge sharing.
  • Every year, a higher percentage of PS employees are billable, which means leaner management and lower administrative overhead.
  • Confidence in leadership and ease of getting things done have declined over the past few years, indicating the recession has had a profound impact on employee trust and confidence.
  • Average time to recruit and ramp a new consultant has increased to over four months, indicating the war for top talent has accelerated.
  • Average guaranteed training days per consultant have increased to five per year.
  • Bill rates for the top PS organizations average 25 percent higher than average rates, indicating clients are willing to pay a premium for superior skills and knowledge.

Some things remain the same

SPI Research notes several areas that should concern PS executives, some of which include:

  • Year-over-year headcount growth is consistently lower than year-over-year revenue growth, which means the PS industry is constantly ratcheting up productivity.
  • Each year, average project staff size and duration continue to decline, mandating effective resource management strategies to rapidly reassign and redeploy consultants.
  • The percentage of work provided by subcontractors and offshore resources has remained constant at 12 percent, which provides insight to the best mix of full-time and subcontract labor.

Effective recruiting, ramping and training make a big difference. Location is no longer as important as finding self-starting employees with good communication and organizational skills. The best firms develop core consultant onboarding and soft skills training to shorten ramp time and ensure consultants are able to listen, communicate and translate client requirements into effective project plans.

This effort helps shorten recruiting and ramping time while providing a sound framework for new hires to rapidly become productive. The best firms require their employees take more than a week of job-related training including a soft skills focus on consulting, communication and negotiating skills.

Happy employees, delighted clients

According to a Towers Watson Global Workforce Study, competitive base pay, an organization’s reputation as a great place to work and a senior management team who is sincerely interested in employee well-being are the top drivers of employee attraction, retention and engagement. Surveys continually show that creating a high-performance employee culture involves leadership, effective teamwork, access to high-quality training and career development plans rather than compensation alone.

One of the more interesting aspects of Service Performance Insight’s most recent research is the importance of an integrated human capital strategy. Finding, hiring, motivating and retaining key employees are just the beginning. SPI Research found human capital alignment metrics contain the highest number of performance indicators with extremely strong correlation to success — meaning how employees perform once onboard dictates ultimate success or failure.

Service Performance Insight’s research shows major growth in the use of flexible scheduling options — 40 percent more organizations have telecommuting programs compared to a year ago. And more than half of all organizations now offer flex-time so employees can adjust work hours to minimize commutes and accommodate required travel and childcare. Remote service delivery has rapidly become standard for PSOs; 40 percent or more of all PS work is now delivered off-site.

Organizations that use offshore resources regularly bring them onshore to accelerate customer knowledge and team communication. Best-in-class PSOs annually bring the global workforce together for training and collaboration-building. Supporting global workforce flexibility comes with a price and makes it impossible to run a PS organization by spreadsheet. Resource management applications are mandatory to accommodate global mobility, staffing and career management.

Take a new approach to workforce management

SPI Research believes you can alter your approach to workforce management in the following ways:

  • Provide career road maps and training to support career progression.
  • Reward beyond individual billable utilization to include “soft skills” like client communication, effective presenting and writing, developing needed methods and tools, contributing to the practice and mentoring.
  • Create balanced employee evaluations and compensation based on a combination of revenue, quality and contributions to improve the practice.
  • Invest in training because training benefits every area of the organization, from reduced attrition and higher growth rates to greater profitability and higher client satisfaction.
  • Invest in remote service delivery. Employees who work remotely, for instance from home, have higher satisfaction levels than employees who are continually on-site.
  • Clients are now acknowledging the benefits of remote service delivery due to the cost, productivity and responsiveness improvements it provides.

You may consider the creation of a “flexibility or adaptability” matrix. This means higher-level skills and openness to engagement options, the greater the potential compensation. This could motivate your workforce to continue personal development, while providing a balance between desire, knowledge and skills, willingness to take on tough assignments and compensation.

The need for change

The industry is changing, your clients are changing, and so is your workforce. Leading firms will adapt to these changes and create an environment where the likelihood of individual and team success is enhanced. The key is to listen to your workforce to understand its demands and make sure they are in alignment with your clients’ needs.

Offering your workforce greater flexibility, access to quality training and a higher variable component of compensation helps keep consultants motivated when the work, clients and location to where they must travel are not ideal. Greater management communication of the strategy and organizational objectives gives employees a context for their work which enhances engagement and commitment to the organization


How to Create a Billable Consulting Culture

What makes service transformations succeed?
by Jeanne Urich and Dave Hofferberth of Service Performance Insight

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One of the hardest, but most rewarding change efforts, is building a “billable consulting culture.” Sure, every professional service (PS) firm wants to increase the number of billable consultants, the number of billable hours and the consultant’s hourly rate. But how do PS firms build a culture so these behaviors are intrinsic?

According to a McKinsey 2010 survey of 2,512 executives, successful organizational transformations share the following characteristics:

  • Clear, measurable and aspirational targets to guide the transformation plan and initiatives.
  • A clear transformation structure or plan based on a thorough current-state assessment.
  • Employees engaged in the “need for change” and involved in identifying detrimental underlying mind-sets; employees empowered to develop and participate in the change effort.
  • Clear leadership focus on building capabilities while changing mind-sets and culture.
  • A sense of urgency maintained through clear, positive communication.

Why change?

Every PSO has a unique culture, typically reflecting executive leadership style and values. As the organization matures, people who stay take on aspects of the culture and accept it as the standard. If the current culture isn’t fostering company growth and encouraging employees to reach “billable” goals, the culture may need a renovation.

In our experience, there are three primary levels of service organization transformation or change, and each level represents significantly greater complexity and organizational culture change:

  1. Straightforward performance improvement. This typically involves maturing business processes and systems to improve repeatability and scalability while reducing costs. It does not require significant change in the business model or the way people work; instead, it focuses on streamlining and improving core business processes and systems.
  2. Significant new growth. At the next level of complexity, the organization seeks to expand into new service lines, geographies or capabilities, either organically or in combination with acquisitions. This transformation involves developing a growth strategy and adding new skills and capabilities along with new business processes and systems to accommodate and accelerate growth.The hardest part of this type of transformation is developing a clear and compelling strategy. If the strategy is sound, execution will be exhilarating and will continually build momentum.
  3. Organizational cultural change. Service organizations undertake a major transformation when the current business model no longer fits the required new business model or when dissatisfaction with current sub-par performance starts to reach crisis proportions. PS organizations undertake this type of transformation when they move from cost centers to profit centers or from on-premise to software as a service (SaaS) business models.

The company’s original staffing model may be changing to become a high-value consulting model. Or perhaps the embedded PS organization started as an adjunct to product development and is morphing into a true billable PS model. Or maybe the organization began as a sales enabler or customer support organization and is now becoming a profitable billable consulting organization.

Whatever the reason for the change, one of the most difficult and rewarding service transformation efforts is shifting the way people behave and work. To undertake a significant transformation effort, the amount of pain from continuing with the status quo must be substantial enough to warrant and drive a cultural change effort.

Creating a billable consulting culture

Leaders of most PS firms know that the most powerful predictors of overall PS success are not bill rates, discount levels or utilization. In fact, the SPI PS Maturity Benchmark results prove it is “confidence in leadership,” “strategic alignment of goals and measurements,” “ease of getting things done” and a culture that empowers creativity and collaboration that marks the difference in high-performing organizations.

Organizational culture is the unwritten customs, behaviors and beliefs that determine the “rules of the game” for decision-making, structure and power. Culture is based on the shared history and traditions of the organization combined with current leadership values. In effect, culture dictates “the way we do business here” and models the organizational survival tactics that facilitate assimilation and personal success.

When organizational culture is strong, employees do things because they believe it is the right thing to do and the company will reward them for their actions. However, if the current culture was developed to support an anachronistic business model, which must be changed, getting at and changing the underlying employee mind-set can be a daunting task.

Because service organizations are 100 percent people-based, creating a billable consulting culture in sync with the new mission and charter of the service organization is of paramount importance in any change effort. Successful service transformations engage the workforce in defining issues and creating and enacting improvement initiatives. “Top-down” improvement programs rarely work in PS organizations unless they engage leaders throughout the organization to define problems and participate in the solutions.

Defining the transformation vision

Humans don’t like change, and the older we get, the more stuck in our ways we become. PS employees are human beings first and billable consultants a distant second or third. They are only willing to alter their mind-sets if they see the point of the change and can envision why it might be good for them and how they might benefit from growing or adapting to take on the change.

Why change? Develop a sense of urgency by confronting reality and realizing the status quo is no longer an alternative. The “why now” must include the benefits of success as well as the penalty for failure.

Leadership must come clean with the sins of the past, which led to the current crisis. If the service organization was originally created to do something different — staffing, adjunct to engineering, sales or partner enablement — and is now aspiring to become a high-value consultancy, transformation leaders should acknowledge the past and explain why it no longer works for the future.

Frankly, too many successful, billable PS organizations delight clients and achieve respectable financial results to operate a money-losing, client-dissatisfying organization. If this is the status quo, the organization must face the very real possibility of going out of business or being replaced.

Where to? This involves painting a clear and compelling vision of the future. If employees cannot visualize the new “promised land,” they will not be willing to undergo the terrors of the journey.

Here, using industry examples and benchmarks help define the possibilities for the future. But, at the heart of every successful service transformation, the organization paints a new and unique future state business model.

Examples include unique partner enablement advisory consulting services to ensure vendor involvement and oversight for partner-led projects; first-mover migration strategies with unique “centers of excellence;” “two-in-a-box” onshore/offshore models to provide the best of on-site accountability and control with the cost advantages of near-shore or offshore resources or leading product sales with strategic business value analysis capabilities.

What’s in it for me? Leaders must translate the “need for change” and the “benefits of change” into a personal and compelling picture of the new work required. This is a typical failure point for many change efforts because employees are not engaged in defining the change or the role they will play in making it happen.

Often, consultants battle a losing product quality war. They face working obscene hours to overcome product defects or to hide missing product functionality. If a not-yet-ready-for-primetime product is the root cause of runaway projects, employee attrition and lackluster financial results, a key transformation initiative may involve creating interlock between services and engineering. In this scenario, senior solution architects may become the core change initiative owners to provide feedback to engineering. As a result, additional investments in pre-release quality assurance or train-the-trainer programs led by consulting experts may produce real change and improvement in both the product and consulting engagements.

Driving behavioral change

Once employees understand what’s in it for them, multiple interlocking elements and structures must all be in sync to drive and support the new behavior of creating a billable consulting culture. PS leaders must:

Empower action. Here is where the rubber hits the road. Employees must be enfranchised in both defining the reasons for change and the scope and impact of the change itself. For change to happen, employees must have the opportunity to practice the new work and see role models of the new behaviors. Employees need to experience and internalize the change personally.

A good example of moving toward a billable consulting culture is for senior project managers from around the world to be part of a service transformation focused on improving repeatability and scalability. This initiative team may be responsible for creating and rolling out a consistent, global methodology or defining how employees will store, share and use knowledge. If the transformation involves moving to a streamlined, centralized resource management model, core managers may own the selection and roll-out of the new resource management application including local training and consistent adoption.

Create pilot wins. Significant and lasting change will not happen overnight, nor do organizations have the luxury of abandoning their current business processes in favor of a new model. This is why successful transformations focus only on a few, critical initiatives.

If a catalyst for the transformation is poor client satisfaction and runaway projects, key solution architects and program managers can become the owners of creating a project management office (PMO) charged with improving quality initially on the largest, highest-risk projects. Once the pilot is successful, the core transformation initiative team can turn the PMO pilot into a new way of doing business to ensure quality and repeatability across all projects.

Communicate constantly. Significant change initiatives run the risk of starting strong, filled with passion but losing steam or dying completely over time. For a transformation to a billable consulting culture to succeed, the reasons for the transformation must be clear, and the PS firm must reward and celebrate consistent progress towards the new state and desired billable consulting behavior.

Quarterly global calls allow staff to review transformation initiative progress and reconfirm why the transformation is critical. Transformation plans and time for initiative teams to accomplish transformation tasks become part of the organization’s fabric. Field rotational assignments are the norm to ensure widespread leadership of key transformation initiatives and projects.

Implement broadly. Companies should only undertake transformations if senior leadership is committed to making significant and lasting change. Once the transformation occurs, engaging employees throughout the organization in understanding, defining and driving change is the only way for a service transformation to succeed. The focus must be on big issues:

  • Lackluster financial performance.
  • Dissatisfied clients.
  • Failure to achieve growth objectives.
  • Ineffective systems, tools and processes inhibiting growth and scalability.
  • Transitioning to a billable consulting culture.

Only a few (no more than three), broad, well-supported transformation initiatives should be part of the first year plan. After defining the key attributes of the new billable consulting culture, the company must support them with reward, recognition and compensation systems as well as recruiting and on-boarding practices.

For the new billable consulting culture to become “the way we do business here,” all of the human capital processes must support and reward the new desired behavior. Managers must give change-resistant employees an opportunity to understand the requirements of becoming billable consultants and enable skill training and mentoring. Celebration and reward for highly billable consultants must become the norm.

Fostering a billable consultant culture

Effective leaders model the values and behavior they expect from their employees. They work with their cross-functional counterparts to develop a shared vision of the future and the role the service organization will play in achieving that vision. They then create clear goals and measurements that drive alignment and empower employees to act and make decisions.

Management must provide clear and open communication to enfranchise employees to become part of the solution rather than the problem. Because employees emulate leaders, it is critical for them to demonstrate and reward a billable consultant culture. That way the culture will not be top-down, it will flourish organization-wide.