Retaining and Optimizing a High-Performing Services Workforce
This is a guest post from John Ragsdale, distinguished researcher and vice president of technology ecosystems for Technology & Services Industry Association (TSIA).
Professional services is a people-intensive business. Through recent years of rapid growth, tech companies have struggled to retain consultants. Hiring has also been a challenge, which has impacted project delivery and created backlogs for firms. With the state of the economy uncertain, tech companies may need to focus more on retaining and optimizing existing talent.
This blog will explore approaches that professional service executives need to prioritize to boost retention, optimize employee contributions, and improve output by forecasting resource demand, a topic that will also be explored in depth in the upcoming “Staying Ahead of the Changing Dynamics of the Modern Services Workforce” webinar.
According to the TSIA Professional Services (PS) Benchmark Survey, PS voluntary attrition rates are averaging 8.5%, which is higher than the 7.8% industry average for customer success managers. TSIA member companies report averaging 10-12% voluntary attrition in some sectors. Experienced consultants continue to be in great demand, forcing companies to re-evaluate how they can improve the employee experience and minimize the possibility that their talent will leave for a competitor.
When we surveyed our PS members about their Employee Engagement program, respondents showed that 75% of companies provide career pathing for consultants, and 68% offer a formal mentoring or coaching program. Younger employees are less likely to stay with organizations long term, so career pathing and mentoring is critical to help them understand how they can progress within your organization.
Figure 1: Length of Tenure Varies by Generation
While 70% of Baby Boomers say they plan to stay at their current company indefinitely, 27% of Gen Z workers claim they only plan to stay one to two years, and 46% of Gen Z workers claim they plan to remain three to five years (Figure 1).
Workers of different age groups also have different priorities for an ideal work environment. For example, 82% of Gen Z respondents claim receiving feedback and recognition is critical, whereas only 46% of Baby Boomers saw feedback and recognition as essential to their environment. Additionally, 73% of Gen Z respondents assert that having opportunities to learn and grow is important, compared to only 27% of Baby Boomers.
If your employee engagement or talent management program has not been overhauled in recent years, it is worth revisiting. Not only do younger workers have different priorities, but many engagement programs were designed pre-COVID, and legacy structures of mentoring and skills assessments may no longer be adequate.
With a potential recession looming and many companies instituting hiring freezes, protecting your existing talent, in whom you have invested a great deal of time and resources, is critical.
Hit The Ground Running: Boosting Employee Time to Competency
It takes an average of 48 business days for a newly hired delivery consultant to become billable—that is nearly 10 weeks. New employees hired to fill spots vacated due to unexpected voluntary attrition are not able to be scheduled for some time, which impacts scheduled projects and contributes to customer backlog. Additionally, new employees feel frustrated because they want to add value to projects immediately instead of being sidelined in training for weeks before doing any revenue-generating work.
One approach to shortcutting time to competency is moving away from custom projects. We are currently seeing a shift toward offering more fixed price, repeatable projects, which now represent 55% of all PS projects. Pre-defined, fixed price projects lend themselves to subscription sales since they are more easily represented in service catalogs and included in configure price quote (CPQ) tools to include in product bundles.
These repeatable projects can reduce consultant training time by allowing for staged training, providing new hires with minimal training, and assigning them to a particular kind of project that is well defined and less complex. As their skills grow and additional training is provided, you can expand their reach to additional project types. Also, it is important to remember to balance the expertise levels of each project team, leveraging skill levels to pair less experienced consultants with seasoned team members when conducting resource management in a solution designed for professional services, such as Professional Services Automation (PSA).
Optimizing Consultant Time and Impact
Fear of economic downturn is leading some companies to decelerate, or even freeze, hiring, so maximizing the talent you have is becoming critical. For PS, this means increasing consultant productivity and boosting utilization rates. The average industry billable utilization rate is 58%, with pacesetters averaging 72%. However, organizations can boost utilization through various key strategies:
- Increase Visibility: Many companies have not expanded their use of PSA beyond revenue forecasting and resource management, which means less visibility into actual time spent on projects and other consultant activities. The more information organizations can capture about how consultants are spending their time, especially time spent on untracked billable work, the more they can optimize their workforce and collect more accurate utilization data.
- Streamline Time Tracking: Auto logging activities, such as placing client email conversations into projects, will capture a lot of time and effort spent on projects that companies may not be tracking today. Also, it is important that companies provide easy and intuitive mobile tools for consultants to log activities at any time from any location.
- Better Tracking of Non-Revenue Activities: Non-billable project activities, such as working with development, and non-project activities, such as sales and marketing support, are often not well tracked. Understanding the demands on consultants outside of recorded project activities is important to identify frequent demands or activities that could be streamlined, eliminated, or charged back. The average percentage of total time PS delivery staff spend on pre-sales and sales support activities is 3.8%, but likely the percentage is higher due to inaccurate tracking.
- Expanding Use of Utilization and Project Allocation Tracking: Allocation, assigning the best available resources to tasks and projects, means you are ensuring the success of projects, but it also has an impact on employee health and well-being. Companies should be certain consultants are not stagnating with repetitive tasks or underutilizing their unique skills. Alternately, it is important to be cognizant of burnout. Recognizing talent that is overburdened and repetitively assigned certain tasks when other resources are available to help is critical. Not only does this improve employee retention, but it should also even out utilization rates across all available consultants.
Figure 2: How Consultants Spend Their Time
Resource Forecasting: Strategic Planning
Companies targeting revenue growth are expanding into new geographies, new industries, and identifying new use cases within their existing customer base for cross-enterprise growth. Each of these initiatives may require consultants with various experience, languages, certification, or skills. Additionally, introducing new product capabilities, such as enhanced AI (Artificial Intelligence) modules, may push you to bring in different technical skills than you recruited for in the past.
It currently takes an average of 18.1 business days—nearly 4 weeks—to staff a PS project. Despite investments made in technology to automate resource management and scheduling over the last few years, this statistic is getting worse. The average in 2020 was 15.3 days, indicating an increase of almost two business days in two years.
To improve staff planning for future projects, companies should consider resource forecasting. While most companies using PSA are forecasting revenue, few are also forecasting resources. Resource forecasting requires companies to review deals in the pipeline and project win rates to gain a better understanding of what resources may be required three, six, or 12 months down the road. By forecasting, PS executives can identify when deals that will necessitate hiring consultants with specific skill sets will be complete. Alternately, resource forecasting allows executives to gain lead time to cross-train existing employees, so they are ready to execute when deals are closed.
As with revenue forecasting, resource forecasting requires a tight integration between PSA and customer relationship management (CRM) or Salesforce automation (SFA). It also requires data accuracy for pipeline deals and win rates. If no one outside of sales has ever relied on sales pipeline data, it is not unusual to discover that opportunities in SFA may better represent the quotas of sales account managers than reality. Some additional forecasting hygiene may be required before basing hiring strategies on the information.
Armed with accurate pipeline data, PS hiring managers can better collaborate with HR in identifying what skills to emphasize or de-emphasize as industry forces and pending deals evolve.
On average, 25% of revenue from B2B tech companies comes from services. The largest percentage of that revenue, 58%, comes from professional services. Faced with an uncertain economy, companies tend to focus on two things: growing revenue and improving margins. If you are looking for opportunities to accomplish both goals using your existing workforce, consider these concluding recommendations.
- Create New Offers: On average, 26% of PS revenue comes from business consulting, value realization projects, or adoption services. Not only can new offers in this area contribute to additional revenue, but these services positively impact annual recurring revenue (ARR) and boost adoption and time-to-value for customers. One revenue trend to be aware of is monetizing customer success. Currently, 42% of companies with a customer success practice are monetizing offers, and many of these offers are delivered by professional services.
- Boost Productivity with Automation: Few companies are leveraging all the capabilities of their PSA platform, which can automate activities across revenue forecasting, resource management, project management, and project accounting. Expanding use of your existing platform will help streamline and automate a wide array of activities. Also, introducing more mobile capabilities for consultants to reduce the effort in logging project updates and expenses will help streamline and more accurately capture data.
- Leverage Dashboards and Alerts to be Laser-Focused on Margin: Using more capabilities within your PSA platform will not only help automate and optimize activities, but it will also bring additional visibility into the business by eliminating spreadsheets. Creating alerts for project dashboards can proactively notify a manager when a project may be close to missing target margins, deadlines, or key milestones, which may incur penalties, impact customer satisfaction, and/or impact resource availability for other projects.
Find Success in the Changing Professional Services World
Want to hear more? John Ragsdale and Kantata Brand Evangelist Charles Gustine will be presenting “Staying Ahead of the Changing Dynamics of the Modern Services Workforce” on August 23rd. Sign up below.