Financial and leadership performance in 2021 – a snapshot | Unit4
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Financial and leadership performance in 2021 – a snapshot

from  June 28, 2022 | 4 min read

Insight for business and finance leaders in this year’s Professional Services Maturity Benchmark Report from Service Performance Insight on overcoming obstacles in the new world of work.

Service Performance Insight (SPI) have been publishing their Professional Services Maturity Benchmark for the past 15 years. Following on from the disruption of 2020, this year’s report provides a crucial strategic snapshot of an industry returning to growth. And the challenges it faces ahead as a great majority of workers in the sector work remotely and enjoy more power than ever over where they work, how they work, and how they’re compensated.

In this blog, we’ll take a look at financial and leadership performance – the two most important pillars of SPI’s Maturity Model. And how you can understand their drivers to help your business perform at the highest level.

Leadership and planning – the key pillars to success

15 years of SPI research reveals one consistent theme – a powerful connection between financial success and leadership success.

Optimizing two areas of your firm’s operations can drive significant improvements in performance. From project profitability to client satisfaction, employee engagement, and staff retention.

Here’s a snapshot of what the report has to say.

Good leadership has a big impact

According to SPI, good or poor leadership impacts all facets of business more than any other factor. Strong leadership drives stronger growth, higher utilization, better on-time project delivery, more winning proposals, or higher levels of customer satisfaction. Poor leadership does the opposite – sabotaging cross functional alignment, alienating staff from the organization and creating functional silos and operational chaos.

Developing the capabilities of leaders is cited as a major barrier to continued growth as firms increase in size beyond the capacity of their founders to personally set the organization’s vision.

“Most independent consulting firms can easily grow from 20 to 50 consultants, but after that, things get more interesting. This is when firms must move from heroic to repeatable and founders must move from doers and fire fighters who wear all the hats to leaders and visionaries. The leaders who can’t make this transition must have the courage to bring in new talent who can take the firm to the next level. As professional services organizations grow, leadership challenges intensify. SPI’s research into this topic over the past fifteen years has shown a powerful correlation between financial success and confidence in leadership. In small organizations, leadership by walking around works just fine. But as the organization grows in size, scope and complexity; geographic dispersion, communication and alignment become issues.”

The report advises organizations implement policies to ensure communication, collaboration, and alignment do not suffer with expansion. This means leveraging systems that can deliver real-time visibility and control for managers – empowering them to break down silos and discourage cliques and factionalism.

Crunching the numbers on finance

Financial performance encompasses every metric for revenue, billable time tracking, and KPIs like days sales outstanding, revenue leakage, and percent annual revenue target reached.

There is a striking difference between the highest performing firms and the rest against all KPIs when it comes to Finance and Operations performance.

SPI blog table 1

Of particular note is the Annual revenue per billable consultant metric – the single strongest indicator for profitability – which is 32% higher among the highest performing firms.

On top of these strong financial indicators, the research also shows that organizations who achieved their revenue targets had lower attrition rates, reflecting financial stability and an ability to both reward good performances and reinvest in their business.

Days sales outstanding (DSO), another of the most important financial KPIs in the sector, is nearly 20% lower in the highest performing companies. This acts as a powerful indicator of operating controls, but also client satisfaction (as indicated by their willingness to pay invoices) and client creditworthiness.

What are the best doing that makes them so much better?

More successful firms behave in a variety of ways that set them apart from the pack – and one surprising vector is their adoption of business application use and integration:

SPI blog table 2

 

In all dominant business application categories, top performers invest more, and do a better job of integrating their investments.

This has a remarkable effect on not just their application effectiveness, but also employee satisfaction with their working experience. Higher performers also generally have much better information visibility than others, enabling better decisions to be made at the company and individual project level to drive performance.

High performing firms use five core information solutions to improve their performance:

▲Corporate Financial Management (CFM) or ERP: The fundamental solution required to accurately collect and report financial transactions.

▲ Client Relationship Management (CRM): The automation of client relationship processes to improve sales and marketing efficiency and effectiveness.

▲ Professional Services Automation (PSA) : The initiation, planning, execution, close and control of projects and services through the management and scheduling of resources that include people (both internal and partners), materials and equipment.

▲ Human Capital Management (HCM)): Talent management solutions for recruiting, hiring, compensation, goal setting and career and performance management which rely on integration with and extracts from the employee database.

▲ Business Intelligence (BI): The assembly and use of information to improve decision-making.

To discover more about how your firm measures up against the best in its field – and learn how leveraging modern operational technologies like cloud ERP and PSA solutions can help your firm compete with them on an equal footing – check out SPI’s full Professional Services Maturity Benchmark Report here.

For more information on leadership and financial operations in this year’s report, check out our interactive eBook which summarizes the report’s most important findings and provides you with actionable first steps for boosting your performance here.

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