Holistic management for profitable growth in Professional Services Organizations

Holistic management for profitable growth in Professional Services Organizations

Professional Services Organizations (PSOs) depend on the skills and experience of their employees for providing a range of services to their clients. In order to deliver on target margins, Practice Leaders at PSOs manage a few operational levers viz. fees, compensation, structure, manager-to-staff ratio, utilization etc. Making reactive adjustments to some of these levers with limited operational visibility and inaccurate grasp of inter-dependencies could create unintended long term effects. Instead, practice leaders must invest in timely and distinctive expertise that attracts new clients and sets the firm apart in the marketplace.

Observations:

·     Boosting utilization within an engagement and converting non-billable time into 

    billable time adds revenue and increases profitability

·     More precise management of individual staffing assignments helps to effectively 

    balance fees & compensation costs

·     Drastically lowering fees to win a competitive bid might get you locked to the low 

    rate structure for future engagements with that client

A PSO’s business framework comprises of these key priorities: 

Client Acquisition & Relationship Management

Practice leaders are concerned with better understanding their client portfolio and what they can do to expand the profitable segments of their portfolio most efficiently. To achieve company margin expectations, Practice Leaders need to control rate discounting during client-negotiation, and manage employee compensation expectations. For gaining new clients and cross-selling new services to existing clients, they must identify opportunities and coordinate a consistent, firm-wide approach to prioritization and pursuit.

Human Capital Acquisition & Performance Management

PSOs competency depends on their ability to attract, hire, retain, and motivate talented professionals. Delivering on commitments and building the firm’s brand depend on recruiting & assigning the right people to the right client service engagements. They have to balance the needs of the firm (engagement profitability) with the requirements of the individual (interesting work). Practice and Operations Leaders need to constantly recalibrate expectations about who will deliver services, and when & how the work will be done.

Contract Execution & Service Delivery

Planning and executing projects with phased milestones & deliverables is critical for predictable, repeatable, and ultimately profitable delivery of an engagement.  Practice leaders need to provision expertise and knowledge across the entire organization in order to optimize service delivery and drive operational consistency. They need to be responsive to each client’s unique service requirements, and manage the quality & efficiency within each project.

Financial Metrics & Control

PSOs need to focus on managing costs & maximizing the skills employed in client engagements. Maintaining intense focus and absolute control over expenses is an important condition for effective cost management. Financial executives need to scrutinize projects in greater depth and identify profitability and cost by client, project type, and project teams to better manage budgets & costs, and shorten billing cycles.

Benefits of an integrated software system

A seamlessly integrated software system is needed to manage processes associated with client relationship, sales & marketing, human resource engagement, project management, time and expense reporting, billing, and financial management. It helps Practice Leaders obtain an ‘apple-to-apple’ comparison of data between business groups and insight across the functional groups. Moreover, it helps practice managers effectively manage the human capital supply chain viz. rapidly finding competent & available resources and assigning them for the right assignment at the right time and place.

An integrated approach for paving the path to growth & profitability

In order to scale up to a higher business maturity and performance threshold, PSOs need a holistic management approach that integrates all key areas and roles within the organization. Practice Leaders need to find ways to breakdown the silos and make it simpler to identify human capital assets that may be leveraged to deliver services. In order to drive improvements in business performance, leaders need to connect changes in client demand with competency and capacity as well as address gaps in service delivery performance. By using a holistic approach based on integrated processes - firm leadership can optimize resource performance, streamline service operations, and fulfill profitable growth objectives.

Future Trends

PSOs face some long-term trends which will shape their future success and growth. They need to have a thorough contextual insight on how to engage and pursue new opportunities that arise due to changes in their client’s business model. Additionally, they need to use a collaborative and adaptive operational process for engaging a diverse talent pool that spans geographic distances.

Recommendations

· Attract and capitalize on the best available talent; and balance utilization across 

  time zones & business units

· Foster tighter communication & collaboration that help individuals work 

  smarter, optimize service execution, and catalyze innovation

· Provide distinctive services to clients and cultivate trusted advisory relationships 

  to enable long-term repeat business

· Monitor key performance metrics & identify risks before they become critical, and 

  take early corrective action

·  Take effective decisions and make differential investments for better ROI

· Maintain a balanced scorecard on the firm’s forecasted v/s achieved goals in 

  key areas viz. client satisfaction, financial performance, process maturity, and 

  talent development

Closing note: The strength of a PSO’s competency combined with a persistent commitment to deliver - is an unmatched value in today’s demanding market place.