Capacity & Resource Planning:
- Unlike industries such as engineering, EPC, manufacturing, and pharma, the growth and profitability of the professional services industry is very closely linked to one critical asset – its people resources. Irrespective of the nature of your business, cost of people resources forms a significant portion of the overall cost across all projects and programs undertaken.
- The sustained profitability of professional services organizations depends on robust resource planning as well as meticulous resource capacity management.
- The value of a top-class PSA software is priceless.
Let us delve deeper.
The nature of the professional services industry is such that it relies on its people resources to deliver value to customers – day after day. It is the people resources that offer ‘knowledge’ or ‘intellectual’ services to clients. While the opportunity to charge ‘premium’ price exists, not all professional services companies are able to sustain their growth and profitability. Borrowing from a McKinsey study, we could categorize professional services organizations based on their growth and profitability profiles.
There are two clear dimensions of professional services industry (and applicable to other businesses too).
- Growth – gaining more customers and market share; this is not completely controllable by companies.
- Costs – completely internal to the organization, and hence controllable
- Profitability – driven by the delta between costs and revenue, and hence partially controllable.
How do ‘Supergrowers’ sustain high rates of compounded growth?
The second part of the answer lies in their ability to rein in costs – in the case of professional services, it happens to be their ‘resource cost.’
What is it that ‘Supergrowers’ do to manage costs?
Business demand and resource capacity planning
The foundation for professional services growth and profitability starts with visibility into –
- Potential customer demand along with a range of probabilities.
- Resources needed to meet the expected customer demand.
The above comparison offers insights into –
- Likely shortfall of resources, or
- Excess availability of resources
Top professional services organizations go deeper to breakdown business demand and resource capacity by customer domain, resource competencies & skills, and resource experience.
Imagine a professional services company with about five hundred to five-thousand professionals with a spectrum of experience and expertise. Would this analysis be nerve-wracking? A top-class PSA software makes this job effortless! A resource planning tool offers proactive alerts to hire resources and notifies managers when resources become available.
Efficient resource allocation process
Successful professional services companies ensures that the process of resource request, resource approval, and resource allocation is as smooth and efficient as possible. Many ‘strugglers’ manage resource allocation via emails and in the process create confusion and conflicts – impacting the goal of growth and profitability! A powerful resource planning tool should enable configurable processes and approval workflows from resource request to resource approval. Alerts ensure that escalations, if required, are automated – thereby speeding up the process of resource allocation.
Effective resource management
Resource allocation is just the beginning of resource management. The real test has just started. Once resources are allocated to different projects, programs, or tasks, great professional services organizations zoom in to figure out the next level of insights –
- Resource utilization
- Resource productivity
- Resource timesheets
Consistently successful professional services companies closely review the extent of resources that are utilized on project management, programs, and tasks – a higher percentage indicates better opportunities to improve revenue and profits and vice-versa with lower percentages. Poorly run professional services organizations struggle to cross 60-70% resource utilization – as they rely on spreadsheets and emails for the purpose. Well-run professional services hit 80-90% resource utilization with ease. Investing in a well-designed PSA software with resource planning tools incorporated empowers this process in just a few clicks. Pre-configured alerts help managers with timely notifications whenever the utilization rates fall below a specific threshold.
Top professional services companies take resource management a notch above when they track the planned effort vis-à-vis actual effort at the task level. With such granular analysis, it is no wonder that the elite professional services enterprises can analyze the cause of negative variances, bring in course corrections, and finally profitability on track. A top-tier resource planning tool allows managers to define the levels at which effort tracking is needed.
Elite professional services organizations do not relax yet. They ensure that their team members report their time/effort diligently – made possible by automated processes that push notifications to users about reporting their effort with escalations designed within. Top professional services organizations ensure that their work is converted to ‘recognized revenue’ and ‘invoices’ generated. Again, a best-in-class PSA software with inbuilt resource management, revenue recognition, and billing comes to their rescue – driven by pre-configured rules of revenue recognition and invoice generation.
Ordinary professional services companies approach the above dimensions in an archaic manner which is antithesis to efficiency. It should be no surprise that they fall behind even when it comes to receiving their well-earned revenue – blame it on the lack of a foresight to invest in an excellent PSA software with resource planning tool embedded.
- Well-run professional services firms run on the foundation of a top-class PSA software with clear focus on resource management.
- A top-class resource planning tool removes the redundancies of resource management cycle and allows managers to focus on value delivery through better resource optimization and revenue recognition.
- Profits and growth are not automatic for professional services – you need a clear vision of resource management.