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PAC on professional services: operational performance

from  July 18, 2022 | 4 min read

The professional services industries are emerging from a period of massive disruption, and we’re keen to help you understand how your market is faring – and what the future might hold.

A recent PAC Research study – based on the views of leaders at 250 firms – sheds some light on both recent performance, and priorities for the futures of Europe’s 2 million service-based businesses. This survey checks the pulse of organizations as they rebuild their strategies for the post-pandemic world. Including short-term expectations for revenue and profit development, and what they anticipate to be their main growth engines in the future.

In this blog, we’ll be looking at the report’s findings in the areas of operational performance: what firms are prioritizing now, what will become important in the future, and what actions you can take to stay ahead of the curve.

Key takeaways for operational performance:

  1. Talent recruitment and management are now a critical success factor for Europe’s professional service firms, with almost a third looking to expand headcount by more than 10%.
  2. Effective resource management is being obstructed by legacy systems – leading to challenges in utilization, project delivery, and profitability.
  3. Operational efficiency can enable firms to do much more with their existing teams without having to add new talent to the ranks.
  4. Firms are relying more and more on NPS as a measure of operational success – and there’s room for improvement on some key aspects of day-to-day ops.

After a period of retrenchment, Europe’s service firms are back in recruitment mode

Slightly more than a quarter of firms (29%) plan to expand their headcount over 10% over the course of the current year. France, the UK, and the Nordics are the most aggressive in this regard. The one outlier is the financial services sector, where 21% expect to reduce headcount this year.

This can be explained in terms of sector maturity – financial services is a very mature sector with entrenched legacy business models, propositions, and skillsets. As firms look to pivot to address new challenges, it’s understandable there’ll be a period of downsizing and rightsizing. Particularly as organizations look to cut costs and digitize operations.

But such ambitious recruiting goals won’t necessarily be easy to meet as many sectors are facing a mounting talent shortage. For instance, Germany is reported to have a shortage of 340,000 experts in engineering and technology – and the gap is only likely to get worse.

But even as they look for new talent, firms are struggling to leverage what they currently have

Utilization rates fell dramatically in the early phases of the pandemic, and many firms still haven’t fully recovered. Almost a fifth of firms have been unable to reach levels of 70% or higher – and in some cases, a significant number are failing to hit even 50% - including 22% of the financial services sector.

The cause of these challenges is quite simple - operational complexity is becoming a huge issue for professional services firms – and resource management foremost amongst them. Organizations increasingly leverage a more diverse blend of resources, including subcontractors, freelancers, and partner ecosystems. All in an environment where remote and hybrid working are increasingly the norm.

What’s more, many firms are still trying to manage this increasing operational burden on ageing technology platforms that are no longer fit for purpose. This inability to manage the permutations of matching resources to projects and ensuring good standards of delivery jeopardizes project success and profitability, and results in badly utilized and increasingly disengaged staff.

The solution? A strategic approach to project management and a renewed focus on customer satisfaction

To combat these trends, firms will have to become much more sophisticated in their use of technology in project management. Ensuring not just that deadlines are met, but that resources are effectively matched to projects in a way that fully leverages your entire team’s skills, ensures materials are used effectively and efficiently, and improves bottom line performance.

Armed with an integrated resource management system, project managers can easily identify and source appropriate resources, track changing requirements, and take a holistic review to the financial health and success factors governing every piece of work. Without such a system, project managers will be relegated to managing based on gut instinct and historical data. And every aspect of project delivery will become much more error prone with fraught processes.

Beyond this, inefficient project management that is dependent on outdated legacy systems can have a profound effect on customer satisfaction. To help understand how operational efficiency supports customer sentiment, many European firms (95%) are leaning heavily on the marketing standard – Net Promoter Score (NPS).

Although only 1% of firms admit to having a negative score, and 69% say their NPS exceeds 50 (the benchmark for “excellent” according to the system’s developer Bain), there’s still considerable room for improvement in some sectors.

In particular, financial services and “other” firms have a lot of ground to make up – with 34% and 29% of firms reporting scores below 50.

The report makes it clear that not only is operational efficiency a key element of bottom-line performance in service-based businesses, it’s a critical factor for success across multiple domains. Good operational performance both supports talent acquisition and management and reduces the need for ambitious recruitment drives – but it’s also vital in both managing projects successfully and keeping clients happy – which in turn can be make or break for continuing business with existing clients, and new logo customer acquisition from recommendations.

Ready to learn more?

To read the full report and understand the complete picture of the professional services sector as we move into 2022, check out the PAC Research Study, Professional Services in Europe: A Benchmark for 2022.

To learn more about how Unit4’s products can transform your operations and help you to capitalize on the promise in 2022 and beyond, check out our dedicated professional services industry page or click here to book a demo of our products.

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