A Balanced Scorecard for Running a Professional Services Organization

By Team Kantata

A professional services organization is a complex business, requiring careful management of different motivations and demands across a wide spectrum of contributors: consultants, project managers, contractors, salespeople, customers, suppliers and partners. In maintaining an optimal balance of these different groups, the elements below should be considered.

Balanced Scorecard: Elements Overview

Business StrategyAn overall long-term view of what the business is aiming to achieve
PropositionsThe products, services and annuity services that the business delivers; the value they provide; and their competitive advantage
Sales Execution StrategyHow sales opportunities are identified and sold
Business Operating ModelDoes the platform guarantee uptime? Will data continue to be available at a required level of performance in situations ranging from normal through to “disastrous.”
Finance and OperationsCan users access data in near real-time? How much time does it take for your data to become available after your request or event? Typically, data latency is measured in seconds or milliseconds.

What is a Balanced Scorecard & Why is it Important?

Traditional management reports consist only of historical financial information; for small businesses, this is often enough. At this smaller scale, the management team understands the business well and the directors can hold a full picture of the business in their heads. However, as a business grows, it gets more complicated: there are more people involved and responsibilities must be delegated or growth will be constrained by a lack of management bandwidth. Common objectives are required that are communicated throughout the business and everyone needs to know how they are contributing to success. Looking at indicators of future performance becomes more important than simply analyzing historical numbers and tracking business performance against strategic goals becomes a key part of day to day operations.

A balanced scorecard is a strategic planning and management tool that is used to align business activities to the vision of the organization, monitor performance against strategic goals and communicate performance both internally and with external stakeholders. This technique emerged so that businesses had clear visibility to their strategic plan while keeping track of normal day to day operations.

The balanced scorecard approach considered here, therefore, includes both operational and strategic measures for a professional services business. It combines an overview of current business health together with indicators regarding strategic direction and it provides early identification of issues and opportunities so that timely, pre-emptive action can be taken.

Four Essential Elements of a Balanced Scorecard

1. Operational and strategic goals:

Operational goals would include traditional monthly and quarterly revenue and margin targets. A strategic financial measure might be revenue for a particular service line the business wants to grow, or a customer acquisition target for a newly established geography.

2. Leading and lagging indicators:

A lagging indicator might be revenue, profit, or utilization for the previous month. A leading indicator might be the sales pipeline, attrition, or, of course, revenue and demand forecasts. It is important to look at leading indicators so that timely action can be taken. For example, if supply (available resources) is forecast to be insufficient to deliver the work that has already been sold, the business needs sufficient time to take corrective action and recruit the necessary additional resources required.

3. Variances and trends:

Trends and variances are important because they look at performance against target or at how performance varies over time. Variances may be against budget or forecast, against last month, or last year. Trends often provide more valuable insights: It may be more important to notice that this month is 10% below last month’s performance and the trend is downwards rather than that it’s still 5% above budget.

4. Financial and non-financial measures:

A non-financial operational measure might be utilization. In fact, for a business doing work on a time and materials basis, utilization has to be one of the fundamental KPIs. Financial measures should provide insight into which parts of the business are performing better and those where attention is needed. This might be across different business units, service lines, sales channels, etc. It is important that managers throughout the organization are aware of their own performance and how it compares and contributes to the business as a whole.

Using Executive Dashboards to Monitor KPIs

To see a balanced scorecard in action, we’ll now look at how the Kantata Industry Cloud for Professional ServicesTM incorporates KPIs into a holistic set of scorecards for services organization executives. Kantata provides a suite of interactive dashboards that deliver true insight into the historical and likely future performance of the business, providing a real-time view of your services organization. These dashboards combine the essential elements of a balanced scorecard that enable executives, senior management and line managers to:

1. Better understand performance across key areas of the business

2. Identify areas of potential improvement

3. Easily measure performance against agreed targets

4. Provide stakeholders with underlying trends and predictions to help assess value

Kantata’s Executive Dashboard Suite consists of the following five dashboards, which we will go into in more detail in the following sections:

  • Company Summary Dashboard
  • Customer Health Dashboard
  • Company Wealth Dashboard
  • People Dashboard
  • Growth & Value Dashboard

Company Summary Dashboard

The Company Summary Dashboard surfaces a set of headline measures that represent the overall position of the business. These show the historical and projected performance of the business and indicate areas — such as revenue performance against plan, levels of work at risk (ie., undertaken without PO cover), or margin contribution by business unit — that require more detailed investigation.

Key measures of Customer Health:

1. Forecast Revenue versus Target:

A breakdown of actual and forecast revenues assists in strategic decisions on where to focus for future business growth.

2. Sold versus Delivered Margins by Account:

An analysis of how projects performed against the original plan identifies situations where a sold project cannot be delivered as promised and acts as an early indicator for potential customer satisfaction issues and areas where there is a disconnect between the sales and delivery functions.

3. Working at Risk:

Revenue that has been booked or forecast against projects where delivery has already started even though contract terms have not been finalized. This analysis can provide early visibility to projects that may lead to revenue write-offs.

Customer Health Dashboard

The Customer Health Dashboard presents a series of charts that represent the current status of customer projects. This is a point-in-time view and represents the current position, rather than a trend. These charts are used to identify projects which are not running to plan, where executive oversight and review are required, or where a process to remedy should be instigated.

Key measures in the Company Summary include:

1. Project Variance against Budget:

Regularly reviewing the projected margin variance allows executives to see projects where there could be a risk to customer satisfaction, due to increased timescales and cost, as well as identifying projects that could impact the overall company margins.

2. Non-Billable Time and Revenue Write-Offs:

Free-of-charge work is an indicator of poor project health. This may be because of a commercial or delivery risk, or omissions in the original planning and shows that customer satisfaction could be at risk. Regular executive reviews of non-billable time provide an early warning of project issues affecting delivery and satisfaction.

3. RAG Summary Status:

Red Amber Green (RAG) status summaries provide visibility to the engagement manager’s assessment of delivery confidence and highlight projects considered at risk together with associated narrative. Regular executive review of this information provides early visibility to issues affecting delivery and customer satisfaction.

Company Wealth Dashboard

The Company Wealth Dashboard displays a set of financial charts that demonstrate past and potential future revenues, alongside the cash generation position for the company. The information presented is used to review progress against the current plan and the likely outcome for the quarter or year against planned targets as well as the financial stability of the company.

Measures of financial health include:

1. Revenue Trend by Business Unit:

Seeing the future demand and likely revenues and margins across business units will assist in strategic decisions of where to focus investment in go-to-market strategies and hiring. For example, if the demand is growing in one area and declining in another, should effort be spent on re-training or hiring into the areas of highest demand?

2. Bookings Pipeline versus Target:

The total possible booking value gives an indicator of the effectiveness of the sales engine and the likely coverage versus target. Ideally, the possible amount is greater than or equal to the target, for the near term months and is likely to drop below for the months further out.

3. Projected Incoming Cash:

Forecast invoice amounts, combined with typical payment terms, provide an accurate forecast for expected incoming cash. Seeing the likely cash inflows and resulting cashflow projections, will allow solid decisions on investments to be made.

People Dashboard

The People Dashboard includes measures to demonstrate the historical and projected performance of billable resources, including open un-resourced demand.

Key indicators for People-related measures include:

1. Resource Utilization:

The historical and forecast utilization as a percentage of available time for resources. Utilization is an essential indicator of the health of a services business. Getting a balance between efficiency and resources running “too hot” is critical. The higher the utilization percentage, the higher the likely net margins will be. But, if it is too high, then employee dissatisfaction and burn-out could cause attrition problems.

2. Average Resource Rates:

The average daily or hourly rates show the revenue-generating potential of your resource pool. Understanding which business units and roles are commanding higher rates allows you to better understand market demand and make strategic decisions on recruitment and retraining while providing the insight needed for reviewing standard price list rates.

3. Headcount Fluctuation:

Headcount drives revenue and costs, so headcount trends should track in line with revenue forecasts and any variance will indicate whether there needs to be a focus on recruitment or sales. If growth is not in line with the budgeted headcount, the recruitment function should be reviewed for effectiveness, assuming that the demand is also in line with budget.

4. Joiners and Leavers:

The number of resources who joined the business each month shows whether the recruitment process is keeping up with forecast demand. While the overall headcount figure can mask attrition issues, leaver information can identify specific areas of attrition and prompt a review to understand underlying causes.

Growth & Value Dashboard

The Growth & Value Dashboard presents measures that demonstrate historical sales and delivery execution and future growth potential of the business along with the quality of revenues. These figures can be used to show the trajectory and potential of the business.

Key measures of growth include:

1. Gross Margin Quality:

The trends of historical and forecast gross margin contribution for each service line. Understanding the relative contributions of business units and service lines allows you to better understand the external demand and profitability of the underlying elements of the business.

2. Engagement Backlog by Month:

A breakdown of the amount of contracted work where revenue has yet to be earned. Backlog should be regularly reviewed to ensure a healthy buffer exists to smooth lumpy sales timings.

3. Book to Bill Ratio:

The ratio between the amount of new business sold versus the revenue earned in the calendar year. This ratio indicates whether the business is growing or shrinking and is used to maintain an appropriate investment balance between securing new business and ensuring the correct level of delivery capacity.


Kantata’s Executive Dashboard Suite provides a complete, balanced view that service business leaders can rely on to guide their decision making for both efficient operational performance and the long-term achievement of strategic goals, including the key indicators of both future and historical performance.

The Kantata Industry Cloud for Professional Services is the first purpose-built software tool created specifically for the next generation professional services organization. Kantata takes professional services automation to a new level, giving people-powered businesses the clarity, control and confidence they need to optimize resource planning and elevate operational performance.

By leveraging the Kantata Industry Cloud for Professional Services, services leaders gain access to the information and tools they need to win more business, ensure the right people are always available at the right time and delight clients with project delivery and outcomes. Visit www.Kantata.com to learn more.

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