Three steps to reducing bench time in professional services
Posted by Graham Kimberley
As a COO, you need to know precisely how your projects and programs are performing at all times, while matching your people’s skills with the work, monitoring attrition and managing your use of subcontractors. But the ultimate question is: how do you maximize the time your staff directly generate revenue through billable hours? Here are three steps.
Optimizing billable resource utilization is a constant struggle for professional services organizations (PSOs). If it’s too low, it will lead to insufficient revenues and dissatisfied employees, especially if there are financial rewards tied to individual utilization.
If it’s too high, you risk lower margins through over-use of contractors, and not being able to meet demand, not to mention overworked people (which is not sustainable). In both cases, you risk low staff engagement and attrition.
More often than not, the biggest worry for chief operating officers (COOs) is having too many staff on the bench — especially the most expensive ones. So, how do you reduce this non-billable time so your team are spending more hours directly generating revenue?
The right tools
Reducing bench time means you keep revenue, margins and net profit high while producing the best on-time project delivery and more revenue per consultant. To do this you need the right tools to forecast, plan, execute, and analyze.
You need the ability to pull actionable insight from live enterprise-wide data and combine it with historical data. By analyzing the combined data you can react in the short term and predict, plan and execute in the medium and long term. Crucially, it would be best if you had the flexibility of an ERP to reschedule on-the-fly, adapt systems to change, and re-skill people to meet future demand, so you keep your staff off the bench.
1. Link data and systems
As a COO you need an accurate, ‘global’ picture of the performance of all programs and projects. To create this visibility, you must link business-wide data across departments, countries and entities through a real-time, single source of truth and a unified system. This should include data for project workload, resources, revenue, margins, budgets, profits and sales pipeline.
As industry analyst, Service Performance Insight (SPI), says in its 2019 benchmarking research: “Utilization is the consistently the most measured KPI but must be examined in conjunction with overall revenue and profit per person along with leading indicators like backlog and size of the sales pipeline to become truly meaningful.”
To do this, you need to bring together systems — for managing people, projects, finances, operational reporting, corporate performance and financial planning & analytics — within a modern, flexible, app-based cloud ERP platform powered by artificial intelligence (AI).
2. Analyze regularly and act
Once you’ve connected systems, you can analyze all data from anywhere in your organization through dashboards (ideally with people-centric, interactive and customizable interfaces). This will give project managers, and people in other roles, instant access to real-time, actionable, sharable data, presented as visual KPIs.
In the short term, this helps you spot trends early, such as under-utilization, so you can take action immediately, and make adjustments as you go. In the medium and longer term it helps you forecast workload, such as accurately predicting which opportunities are most likely to convert to actual projects. You can then recruit, re-skill or re-allocate to keep staff off the bench next week, next quarter, and maybe even next year.
Also, with access to historical data, alongside transparent, real-time, enterprise-wide workforce profile data (from a dashboard drill-down), you can use scenario planning to see how workforce changes could affect project performance, before taking action.
According to the Resource Utilization Trends Survey 2019, from the Resource Management Institute (RMI): “Real-time dashboarding is the future for reporting and monitoring utilization performance.” RMI recommends regularly measuring and reporting utilization data so “trends can be spotted and addressed early.” Although its survey found that only 11 percent of professional and consulting services organizations made them available daily; this shows there’s an opportunity to create a competitive advantage by deploying the right technology to report daily utilization results.
3. Put your people first
As a COO you need to balance available skills with what’s required on existing and pipeline projects. You need to monitor attrition — planned, realized and expected — in relation to project backlog. (This is important as, according to SPI, attrition has been steadily climbing.) And you must carefully manage your use of expensive subcontractors.
To achieve the aims in these three areas, an ERP that support your processes in : Financial Management, Project Management, Resource Management, Procurement Management,, and Human Capital Management –— is essential.
With the foresight of future opportunities converted into projects, and workforce dashboard drill-down, you balance skills with demand, minimize contractor use and monitor attrition (and even predict the likelihood of it).
And with streamlined tools for staff, like natural language digital assistants for time and attendance capture (like Wanda), and automated tools for completing repetitive HR admin tasks, you can also improve people experience to empower, enable and engage staff.
With better insight into your workforce and operations, the benefits are numerous. As SPI said in 2019: “HCM solutions provide greater visibility into employee skills, preferences, training and career potential. Key improvements show up in faster growth, larger pipelines, stronger backlog and higher per-person revenue yields. Higher billable utilization occurs because the right people with the right skills are available to do the work. Larger management span of control reduces the cost of non-billable management and enhances the bottom-line.”
Best of the Best
According to SPI’s 2019 report, billable utilization across the industry is declining (it hit a new low of 69.7 percent) while attrition is rising. It shows that the top five percent (Best of the Best) of PSOs achieve a utilization rate of 74.5 percent, compared to 69.4 percent for the rest; and an on-time project delivery rate of 88.2 percent versus 76.3 percent.
It adds that the Best of the Best rely on professional services automation (PSA) integrated with ERP to staff projects faster, adding that they “credit their PSA with improving resource, project management, time and expense capture and billing, leading to higher levels of billable utilization and on-time project completion”.
Improving operational performance
So, the three steps to reducing bench time are: link data and systems; analyze regularly and act; put your people first. The ability to pull and apply data gives you full visibility and insight into cost, value and performance across your organization so you can improve demand forecasting, resource planning and all people-based decision-making.
As a result you distribute work more efficiently (both in the short, medium and long term), which means you know when to use contractors, so you get the right contractor-to-employee ratio and higher margins. Additionally, you get better staff retention, which leads to improved utilization performance and reduced bench time. The end result is improved operational performance, better client satisfaction, plus higher revenues and net profits.
Learn more about reducing bench time through increased billable utilization visibility and data dashboard drill-down on the Put Your People First page.