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For Professional Services: 2014 Will Focus on Talent Management

Published By David Hofferberth
For Professional Services: 2014 Will Focus on Talent Management

A Special Sneak Peak of SPI Research’s 2014 Professional Services Maturity Benchmark™ Reveals Looming Resource Issues

Get ready for 2014. SPI Research is nearing completion of surveying for the 2014 Professional Services Maturity™ Benchmark, and the results thus far are impressive! With more than 100 professional services firms participating so far, organizational performance seems to be at its highest level of output, success, and revenues in the seven years of the survey. As a result, the outlook for 2014 appears to be great for growth.

Scheduled to publish in February and sponsored by Planview, the benchmark report and its findings shine a light on problem facing professional servicesorganizations (PSO). Many in the industry call it a “Talent Cliff.” What is the talent cliff? The research shows PSOs will find it increasingly more difficult to find, hire, and retain top talent. This environment is different from any ever seen in the industry. Professional services employees (baby boomers) are starting to retire at a faster pace than in the past decade, couple that with a tighter labor market for entering professionals with degrees in science, technology, engineering, and mathematics (STEM); we believe the war for talent will become one of, if not the highest, priority of PSOs over the next five years.

The Data Is Startling

Our barometer for talent and resourcing concerns has a number of characteristics that have allowed us to make this prediction:

  • It now takes longer to hire, train, and make employees billable. To couple with this added cost, we are seeing that professional services attrition is beginning to rise, and we expect it to reach nearly 20% in the next five years, meaning PS executives will face an increased challenge of talent management.
  • Operationally in this year’s survey, professional services organizations have a management to employee ratio of 1:11 (11 billable employees per manager). Normally, SPI Research finds this ratio to be approximately 1:9, meaning now professional services managers manage over 20% more people on average. As one might expect, this situation could create issues associated with service delivery and quality, ultimately resulting in lower growth rates.
  • We have also found average billable utilization for independent professional services providers (management and IT consultancies, research firms, accountancies, advertisers, etc.) to be more than 75%, meaning consultants are billing over 1,500 hours annually. This percentage is the highest SPI Research has ever seen in our seven years of surveying.

One Recommendation for “Tackling the Talent Cliff”

PS executives must focus on how to better manage their resources to ensure they are both productive and profitable, while limiting turnover. This situation might be the biggest challenge facing PS executives over the next decade. Hence the reason we recently wrote the new white paper: Three Recommendations for Tackling the Talent Cliff.

One of the recommendations is for PS executives to optimize their resource management strategy — not only recruiting, hiring, and training the best people, but to make sure that once they are aboard, they are ready to work on projects and programs that achieve both financial goals for the PSO, as well as individual goals for the worker. We’ve seen employee morale suffer when workers don’t have enough work to do or when they have too much work to do. Balance is always the key in maintaining an engaged workforce.

In addition, in the white paper (download your copy here), I establish that effective resource management helps drive organizational performance to higher levels. For example, SPI Research asked more than 100 PS executives about how effective their resource management processes were. Those that said, “Effective,” demonstrated superior results compared to those who did not.

Effective Resource Management Helps Drive Organizational Performance to Higher Levels
Key Performance Indicator (KPI)Effective Resource ManagementNot Effective
Percentage of PS revenue delivered by 3rd-parties8.8%16.2%46%
Average project staffing time (days)8.7%11.3%23%
Projects delivered on-time82.7%77.4%7%
Average project overrun10.4%12.9%19%
A standardized delivery methodology is used73.2%53.5%37%
Billable utilization73.3%71.3%3%
Project margin36.2%32.7%11%

Clearly resource management not only helps PSOs better understand the types of skills required to complete current and future work, but also helps them in the process of service delivery. Very few projects ever go according to plan — due to changing client demands, unforeseen events, or other bottlenecks — that prohibits the work to be done as originally planned. With effective resource management PS leaders have the ability to increase or decrease specific skills to meet target costs and timelines. With effective resource management they can also better understand the impact on changes to one project might have on many others.

To learn more download Three Recommendations for Tackling the Talent Cliff by SPI Research.

How is your organization preparing for the talent cliff? What tools or techniques are your using the manage resources in your professional services organization? Share by leaving a comment below.

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Written by David Hofferberth

R. David Hofferberth, P.E., Founder and Managing Director at Service Performance Insight (SPI), has championed solutions for the professional services sector for over a decade. In addition to providing guidance for hundreds of Independent Software Vendor (ISVs) clients over the years, our ongoing work with business and technology media enables our clients to remain informed and in front of the buying public. Hofferberth regularly consults with Professional Services Organizations and financial institutions. Service Performance Insight (SPI) is a global research, consulting and training organization dedicated to helping professional service organizations (PSOs) make quantum improvements in productivity and profit.