Why Do So Many PSO’s Struggle with Resource Management?

Professional services organizations (PSOs) are a vital part of the modern business environment and continue to grow in numbers and importance. According to the SPI 2022 Professional Services Maturity™ Benchmark report, 2021 saw the greatest utilization within PSOs in the last decade, topping 73% billable utilization and nearly 16% net profit.

The success of every PSO relies heavily on having the right people, doing the right work, at the right time. Yet, this can be one of the biggest challenges of professional services operations. Without proper and timely resourcing, a PSO can’t meet or exceed the expectations of its clients.

For the organizations we’ve talked to who are struggling with resource management, we frequently find outdated processes and infrastructure at the root of the issues, with identification, assignment, and scheduling of resources being handled using limiting methods, such as email and spreadsheets.

Now, more than ever, PSOs must have their resource management processes clean, streamlined, and working in lockstep with the other parts of their service organization. Today’s dynamic and frequently remote working environments complicate these processes. It’s no longer as simple as walking down the hall to a colleague’s office to hash out scheduling conflicts or utilization problems.

Pivotal to eliminating struggles with resource management is defining what success looks like so that you can apply the right metrics to surface where you’re doing well and where your processes are falling short. These actions lead to greater growth and profitability and put a more operationally mature organization within reach.

Defining What Resource Management Success Means

SPI divides PSO organizations into five different categories of maturity as part of its Services Maturity™ model. The defining characteristics of each of these levels align well with a professional service organization’s resource management maturity. The levels include and are distinguished by:

Initiated – The business has ad hoc processes

Piloted – Processes begin to become repeatable

Deployed – The business has a standard set of operating processes

Institutionalized – Metrics and controls are aligned

Optimized – The business is able to focus on continuous improvement

Regarding resource management, success for a PSO requires stable, predictable, and profitable staffing. However, roughly 90% of the organizations we talk to that are looking for help in this area lack process, or the process they do have relies on inflexible tools and infrastructure that doesn’t meet the company’s workflow with up-to-date resource allocations.

With a majority still using email and spreadsheets to manage resources, they struggle with accuracy, visibility, and scalability of their process – and are shackled to artifacts that are out of date almost as soon as they are created. Plus, these tools miss critical information like utilization, failing to uncover if resources are being over or under-utilized until after timesheets are submitted.

The difference between businesses that rate as Optimized and those that are Initiated in the areas of utilization and profitability are staggering. SPI’s research indicates that high-performing PSOs see utilization rates over 77%. In contrast, other organizations are closer to 71% – or, to put that in terms of hours, consultants at high-performance PSOs each bill roughly 200 hours more a year than other service organizations. Moreover, of the high performers surveyed for the report, annual company revenue averaged 26% higher than others.

Efficient resource management touches almost every element in a PSO, from project management to revenue. It’s nearly impossible to reach higher levels of maturity without dialing in your resource management. So, investing in a deeper understanding of your strengths and weaknesses in this area gives you a roadmap toward a more optimized operation.

Measuring Success with the Right KPIs

It isn’t easy to know where you need to make improvements if you don’t have a clear picture of where you’re at. A few Key Performance Indicators (KPIs) are universal to professional services organizations and indicate where your resource management is succeeding or falling short. The three most important KPIs to start with are:

Scheduled vs. Actual

Tracking resource scheduled time against the time they actually spent is crucial to efficiency, proper billing, and project management. For instance, scheduled vs. actual reporting will show if a team member was supposed to work 20 hours on project A but really worked 20 hours on project B.

Insight into this KPI lets you know where resources are over or under-booked and gives you the information to resolve scheduling issues more proactively.

Utilization

Regardless of operational maturity, utilization is one of the most important KPIs a PSO should track. Tracking resource utilization rates is key to a number of important business elements, including knowing who is over or under-utilized, project management, forecasting, and hiring.

Tracking and reporting on utilization through spreadsheets or looking back using timesheets won’t help correct immediate concerns and can require a great deal of manual manipulation to get the right information. When that’s the case, whatever information is uncovered is already outdated.

Project Revenue and Profitability

Revenue is, of course, another important measurement of success. You may have every billable consultant booked but not see revenue levels where you want them to be. Is that because the wrong resources are on projects? Is lack of visibility putting senior staff on tasks that could be done by less experienced (and less expensive) resources?

There are many other KPIs to measure once you get started. However, to accurately report on most other measures – and even report on these in a meaningful way – your PSO needs the right tools to support your process.

How a PSA Can Support Resource Management Success

As you can see, resource management is more than just necessary in and of itself. It’s an integral part of nearly every facet of your business. Therefore, it’s an area where you need the right tools to support your processes while being flexible and scalable as your business changes.

There are stand-alone resource management solutions available. Unfortunately, for a professional services organization, they aren’t much better than the spreadsheet-and-email method. Because resource management is intertwined with so much of your business, your best option is a tool that also supports multiple parts of your business. The resource management features within a professional services automation (PSA) solution gives the visibility, scheduling, and reporting needed to keep teams engaged and productive while offering complementary tools to manage other parts of the business as well.

When you’re looking for a PSA to level up your resource management capabilities, there are a few features to keep in mind:

1. Supports multiple elements of the business: By supporting resource management, time entry, expense management, project management, billing, time management, and even revenue recognition, a PSA provides a single source for data and workflows. This lets you do reporting and communication in a single solution, without manual data manipulation and offers single-click visibility into the performance of your PSO.
2. Good usability: Because many people in varying roles will use your PSA within your organization, it’s important that it be straightforward and easy to use. That means that the interface should be intuitive and, as we’ll see in the next point, allows you to add fields and elements appropriate for your business.
3. Configurable and flexible: No two PSOs are the same. If your PSA is one-size-fits-all, it’s really one-size-fits-none. It’s important to find a solution where you can configure not only the interface but the workflows and processes, as well. You should not need to change your processes to fit the tool – the tool should adapt to meet the processes that work for your organization.
4. Accessible: Your consultants may be accessing your PSA from a variety of places – client sites and airports to hotels or in the office. Your PSA should make it as easy as possible for them to enter time, expense, and complete other tasks by offering access and applications from multiple devices.
5. Reporting: We’ve mentioned reporting several times throughout this article. It’s crucial for a PSO at any stage of maturity to be able to see the health of resourcing, utilization, profitability, and so on. The ability to see this information in real-time lets you understand the business as it is today and is critical for proper forecasting for staffing, projects, and revenue for the future.

Conclusion

Effective resource management is a cornerstone of a healthy, productive, and profitable professional services organization. It can be challenging, especially for PSOs struggling with outdated data in spreadsheets and miscommunication through emails and messaging platforms. Monitoring the right KPIs, and leveraging a PSA tool that can be fitted to your organization’s needs, lays the foundation for continued growth and maturity.

Top Step has helped hundreds of PSOs achieve better resource management practices. Our consultants have worked in professional services themselves, and they understand the challenges a PSO faces at every level. Contact us today if you have questions about moving your PSO toward growth and a more profitable future.