Common Pitfalls in Professional Services Organizations & How to Avoid Them (1/3)

The professional services organization (PSO) landscape is changing — employees are harder to recruit and retain, a globalized marketplace increases competition for clients, clients want more for less, and management is often too focused on short-term firefighting instead of long-term strategy. As Thomas J. DeLong (Senior Fellow at Harvard Business School) puts it, “In the past, the work of [PSOs] was a gentleman’s game — and now it’s a blood sport.”

This is the first article in a three-part series that isolates three major pain points for PSOs today, and offers actionable steps you can take to address them.

Problem 1: Project Planning

The ability to accurately estimate a project’s costs, necessary resources, and completion date is critical to both corporate growth and customer satisfaction. Still, effective project planning is prioritized less often than many of us would care to admit, and is only made more difficult by new challenges emerging in the professional services space. There are a few ways inadequate forecasting could have hidden costs (financially and otherwise) for your business and your employees:

Increasingly risk-averse clients are turning to fixed-rate jobs

According to a TSIA Professional Services benchmark, the number of fixed-bid projects in the PS space has increased to 50 percent in recent years, signifying a departure from time and material compensation. This change reflects a growing client interest in shifting the majority of risk and accountability to the service providers themselves, most notably in the SaaS and Hardware/Networking spaces (with fixed-rates set for 56.8 percent and 54.3 percent of all projects in 2015, respectively). Because of this, PSOs today risk significantly costlier consequences in failing to make informed project forecasts.

The fluctuating needs of the market can make it hard to hit targets

A steady flow of customers seeking projects is never a given — as projects of varying sizes come and go, demand naturally fluctuates. In addition, project flow will never be readily predictable because customer needs are constantly changing and depend heavily on current market trends.

PSOs are oftentimes balancing sourcing new projects with effective project delivery, which is why resourcing is so important. If you don’t anticipate an influx of projects, then you won’t have time to acquire enough resources and adequately prepare for your company’s increased workload.

Lack of oversight can increase employee attrition

On average, it takes about a year to recruit, hire, and train an effective new consultant – and the same is likely true of the hiring process for other PSOs as well. Because of this, attrition has the capacity to be an incredibly expensive issue, and it’s important that employees don’t feel stretched too thin, or ill-suited for their assigned projects.

While it’s often difficult for managers to keep a pulse on workload distribution across the board, doing so is vital to proper resource allocation (and, in turn, happier employees). In general, employees that are mismanaged, overworked, or feel that their best assets aren’t being utilized are naturally less likely to want to stay at your firm, and can be costly to replace when they’re gone. It should be no surprise, then, that the ability to accurately match employee skill-sets to appropriate projects is listed as the third-highest pressure facing leaders as they manage projects, just under “managing customer expectations,” and “poor communication with clients.” In not taking the time to understand and utilize your employees’ individual strengths, you both fail to optimize the abilities of your workforce, and risk making employees feel less valued.

Best practices

Access to historical data allows you to give informed, realistic deadlines and quotes

According to an Aberdeen Group study, the best-in-class PSOs are 66 percent more likely than all others to “be able to allocate resources for precise time ranges, due to their visibility into resource workload across projects.” The easiest way to achieve this visibility is to track historical data for all projects — including initial estimates, additional costs incurred, and total resources allocated. In particular, look for solutions that delve into real detail on how blocks of time were spent — you want to be able to look at individual specifics to improve your forecasting.

An informed, data-driven approach to project planning is unparalleled when it comes to managing fixed-rate projects. Are your project costs typically underestimated? Do you historically need more resources than initially anticipated for a particular client? This kind of consolidated information can enable your shift from responding to challenges and setbacks as they arise, to anticipating them before they occur.

A holistic view of all employees’ individual projects and skill-sets encourages thoughtful human capital management

Employees vary in both skill-set, and, at any given time, workload, and this needs to be perpetually and purposefully managed. 58 percent of best-in-class PSOs claim the ability to model individual resources across multiple projects for precise time ranges, as opposed to just 35 percent of all others, and this can’t be done without complete oversight of and clarity around employees’ current and upcoming projects.

The easiest way to optimize your workforce is to implement a skill-set matching system, and maintain a holistic view of all projects at any given time. With access to this information, you can match employees with more relevant projects, ensure that no individual is overworked or underworked, and improve resource allocation across the board. This arms employees with appropriate assignments and challenging-yet-manageable workloads, and can go a long way in making them feel valuable within your organization. Look for solutions with intuitive planning tools — you should be able to craft, review, and amend plans collaboratively and in the context of already-existing projects.

Check back on Friday for Part 2 of our series, or subscribe to the blog by entering your email address below.