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