3 Ways Professional Services Firms Can Prosper

In my last blog, I reported on how the professional services industry is at an inflection point with many key performance indicators (KPIs) in decline. I recommended five KPIs for professional services that firms could use to track performance and steer through these challenges.

With the release of Service Performance Insight’s “2017 Professional Services Maturity Benchmark,” it’s clear the professional services industry continues to face challenges. Both revenue and headcount growth continue to decline while workforce attrition is increasing.

Yet with the moves, firms can buck these negative trends. Per the benchmark study, careful investments in workforce planning, employee engagement, and talent-driven innovation are distinguishing top performing professional service organizations.

Here are three ways that leading professional services firms are moving their organizations forward, as highlighted in SPI’s 2017 benchmark study: 

Optimize Workforce Planning to Increase Productivity

Professional services firms used to put most of their focus on revenue and utilization—that is, capturing enough revenue to carry overhead costs such as compensation, training, and travel. This enabled them to deal with issues like long sales cycles, higher-than-expected operational costs, and challenging customer delivery.

But today, firms are under pressure to do more with fewer people. According to SPI, headcount growth dipped to 6.5 percent (compared to 16.5 percent in 2007) and has lagged behind revenue growth indicators by more than 2.4 basis points over the last five years. This is in large part due to the shortage of skilled professionals. As the report points out, “the gap between the demand for technology consulting workers and the talent with the requisite critical thinking, analytic, and communication skills to fill these roles is widening.”

By gaining insight into the capabilities, capacity, and cost of their employees, firms can redirect resources to high-value activities to ensure that the right people are serving the right clients. According to the SPI report, with this insight, leading firms have larger projects, more rigorous quality processes, and fewer project overruns and canceled projects—and credit their professional services automation (PSA) systems with improving resource, project management, and time and expense capture and billing.

Many firms still run on legacy systems that are disconnected, manual, and lack proper implementation and ownership.

Improve Employee Engagement with Technology 

While all organizations should have an employee engagement strategy, it’s even more imperative for professional services firms since their business models are dependent on the provision of people for billable revenue. Key people metrics look even bleaker than previous years as attrition rose to 13.6 percent, the highest in 10 years.

Losing billable people can have a direct impact on customer satisfaction, project margin, and company revenue. SPI reports that leading professional services firms are curbing attrition by investing in training and newer technologies to better attract the growing numbers of millennials in the workforce and ensure their firms are the best places to work. One critical effort is employee development. On average, leading firms guaranteed 11.5 annual training days for employees compared to 8.1 days for average firms.

In somewhat of a paradox, professional services firms have not traditionally done a sufficient job of keeping up with technology to support their own businesses. Many firms still run on legacy systems that are disconnected, manual, and lack proper implementation and ownership. Engaging a multi-generational workforce throughout the entire employee lifecycle requires a consumer-like platform that provides for the enterprise needs of leadership and the collaborative, mobile experience expected by more junior professionals.

Technology will fuel business growth and enable agility as the business changes, but only for organizations that are able to continuously innovate.

Make Innovation a Standing Agenda Item for Leadership 

In today’s digital age, firms will no longer be able to get by doing what they’ve always done. Traditional consulting services models will be replaced over time by newer subscription, usage, and consumption models, and digital services products will introduce new revenue streams. Technology will fuel business growth and enable agility as the business changes, but only for organizations that are able to continuously innovate.

Leading services firms should not only make innovation a priority but also regularly discuss how it impacts their strategy and develop a plan that includes operations, employees, and go-to-market. According to SPI’s report, the best professional services firms are using systems for human capital management (HCM) and PSA—often integrated with other systems—more than their peers. Firms need to make the right technology investments now to fuel their next 10 years of growth.

At the same time, it’s important to understand the lead-time and investments required to form your own services innovation plan and embrace emerging technologies. SPI reports that IT leaders in North America anticipate information security, cloud computing, business intelligence, and big data analytics will have the biggest impact on their businesses. Firms investing in these areas can expect to see their revenue and margin growth outgrow their competition.

It’s clear that the professional services industry is at an inflection point, but change brings about new opportunities. Is your firm ready to forge ahead?