Resource Management 2.0 The Next Chapter of Just-in-Time Resourcing

Transcription

1 Resource Management 2.0 The Next Chapter of Just-in-Time Resourcing Randy Mysliviec President and CEO Jenna Schofield Senior Consultant

2 , Inc. All rights reserved. Just-in-Time Resourcing is a registered trademark of, Inc. RESOURCE MANAGEMENT 2.0 THE NEXT CHAPTER OF JUST-IN-TIME-RESOURCING This white paper provides an actionable guide to better understand drivers of RM performance, barriers to RM success, and how to overcome barriers to get the most out of your billable resources. Introduction Recent research makes it clear that while the professional and consulting services industry has invested in process improvements to enhance project performance, quality and cost of delivery, the industry is actually getting worse at resource management! Given that labor expense is the single biggest cost element for professional services organizations (PSOs), these trends must be reversed for any services organization to be successful. In this whitepaper, we will discuss five key industry barriers to success and how to overcome them to achieve true Just-in-Time Resourcing - enabling your team to predictably get the right person in the right place at the right time. With industry trends showing that services are a growing part of the revenue stream of most product companies, the ability to achieve efficient use of PS human capital is mission critical. The chart below shows recent data from an analysis of 50 of the largest hardware and software firms and the growing importance of services. Source: TSIA 1 Service 50 Quarterly Tracker 1 Technology Services Industry Association

3 3 It is widely accepted that human capital (people) are the most important asset in a services organization - in which the core offering is the commercialization of employee s skills and expertise, and the consultant represents the brand and reputation of the organization. Given that billable consultants now represent around 80% of the typical service organization s cost base, it is clear that the organization must prioritize efficient management of these resources, getting the right person in the right place at the right time to maximize resource utilization and successful project delivery. Evolution of Resource Management A look back to another analogous industry transformation provides some helpful insights for PSOs struggling with effective resource management (RM). Roughly thirty years ago the manufacturing industry looked to more efficient ways of creating products using modern technology, to perform the same work at lower costs, with higher and more predictable quality, to eliminate costs due to idle inventory, and lower lost opportunity costs due to short supply of parts during demand peaks. This was the beginning of just-in-time manufacturing predictably supplying parts at precisely the time needed, and timed to evolving demand forecasts, to efficiently bring products to market. Over the past decade, the services industry has found itself in a similar state. Simply said, processes, methods and tools have failed to keep pace with the large disruptions in traditional labor sourcing and management methods. Too many companies have responded with stop gap and tactical measures, in many cases compounding the problem or delaying the inevitable need for real process change. Reasons (excuses) for low or inconsistent billable utilization are often accepted as normal practice, to explain away anything less than consistent full utilization of billable resources. Similar to how manufacturers learned through advanced inventory planning techniques to have the right parts available at the right time, PSOs are now challenged to provide the right resources at the right place at the right time. To address the need for sustainable business transformation, many PSOs have responded to this call to innovation by implementing RM functions, or have adopted new or improved existing RM processes. Many have gone as far as realigning their organizations and attempting to centralize their RM function. Despite their efforts, surprising industry trends show that services organizations are actually getting worse at RM! In a recent study conducted by the Technology Services Industry Association, utilization has decreased by 4 points over a 5 year period for PSOs surveyed. In an organization with 250 consultants, that translates to roughly a $4M decrease in revenue not a small impact!

4 4 The same study showed that PSOs were expecting additional revenue from billable utilization than was actually achieved. So, not only are PSOs losing revenue as a result of decreased utilization of their resources, they are leaving additional money on the table due to being unable to realize revenue from the demand that was planned during the time period. In our experience working with many PSOs who have implemented RM functions, we have found piecemeal solutions, rather than sustainable transformation leading to predictable results. The typical RM execution scenario we often encounter is as follows:

5 5 Resource management is treated as a tactical activity focused narrowly on staffing and data management, rather than a holistic strategy including forecasting, sourcing and talent development As a result, while overall billable targets are often met, it occurs because: o Utilization is boosted by the hard work of a dedicated few resources (vs. a balanced use of available resources) o A large number of resources therefore go underutilized o And yet skills shortages (the right mix of skills for projects) continue! Typical results look something like: o 15-20% of the resource population is achieving 80%+ utilization o 5-15% of the resource population is averaging less than 45-55% utilization o While utilization of so many resources is low, there is a high percentage of contractors in use A review of common staffing processes provides some insight into why these situations occur: Tactical (vs. strategic) planning orientation of both Practice Leads and Account Management (-10 to +20 day syndrome), often focused on crisis management Significant reliance on a handful of experts at the expense of getting more leverage out of the full PS team Lack of clear visibility to the skills of the underutilized (i.e., they are not all poor performers) and a path to prepare and deploy them Lack of centralized process and governance for staffing resource needs and forecasting future needs, and/or lack of empowerment of resource managers to execute processes Five Barriers to Success And Overcoming Them As we discussed in the previous section, a majority of companies are underutilizing the resources they have already paid for and leaving money on the table due to missed opportunities. What is going wrong? What are the mistakes companies are making when it comes to implementing effective resource management strategies? There are 5 common barriers to effective Resource Management: 1. Organizations operating in silos. RM is often conducted by people managers or practice leads, and is done within the practice for the practice, or within the region/geo for the region/geo. This often masks bad (resource management) behaviors, and prevents resources from being utilized across practices to alleviate shortages or fill schedule gaps. 2. Lack of strong RM process discipline. Effective RM processes and policies ensure that all parties have information they need to have so that they can quickly take appropriate action. Without them, differing expectations on the part of RM, Delivery, Sales and

6 6 consultants can quickly escalate into resource crisis or conflict situations and project delivery challenges. 3. Limited forecasting for delivery capacity needs. Delivery organizations may have insight to revenue forecasts from Sales, but often have no indication of how this translates to hours and skills requirements for resource planning, or have no visibility to changes in resource plans over the progress of the deal. This makes it very challenging for RM and Delivery to make strategic staffing decisions and prepare resources for upcoming work. 4. Insufficient technology enablement. Often, RM is supported by technology that is not meant for resource planning, or is not optimized to support existing processes resulting in delays and efforts to circumvent RM process, and undermining the credibility of RM. 5. Current culture not focused on billable utilization. RM implementation must include a culture shift to prioritize billable utilization reflective of its overall importance to good financial and project performance. Without managing the change, empowering each party to do their jobs differently, and enforcing compliance, old habits will continue to live on. We have identified the following strategies for successfully overcoming these barriers: 1. Break down the silos by centralizing enterprise resource planning: Perhaps the biggest shift for most companies in establishing effective RM is adopting the simple paradigm that all resources are the asset of the company, not any particular department, region, or geo. This begins by aligning RM as a neutral support function, allowing it to operate without fear of repercussion for planning decisions or temptation to play favorites. This function we named the Resource Management Office (RMO). Additionally, by setting up RM to transcend organizational boundaries, it allows for resource managers to be effective at championing changing priorities and recognizing and offering candidates across departments visibility is critical to speed time to staffing and results. Resource managers should be a key partner in resource planning activities and must be properly aligned and publicly supported to make and enforce key resourcing decisions. Indeed, industry research indicates that when RM is centralized, billable utilization increases and time to staff decreases.

7 7 Centralizing RM does not remove the people manager from the process of staffing. It changes their role, delegating many of the heavy lifting aspects of staffing to the RMO, and leaving the all-important people management function with an individual s immediate manager. Important to also note is the interaction between the role of the people manager and the staffing function. People managers will still be called upon to provide guidance and insight on skills, career goals, preferences, etc. as needed for staffing. A neutral staffing function allows for a balance in considering the holistic needs of the organization, as well as the needs of the individual. 2. Adopt strong process discipline for RM JITR provides a proven solution: As we discussed, your labor force represents the largest part of your services costs as such, your strongest process discipline should be in RM. PM and quality processes are important, but if you cannot get the right person in the right place at the right time, you will never achieve the results you want for project performance. To get the right person on the job, it is imperative that Sales and Delivery adhere to key processes around forecasting, schedule management and staffing. Resource managers can only make decisions and recommendations as good as the data they are using after all, if you don t know who is available, you can t consider them for project roles. Likewise, processes and policies should be established for dealing with common situations, such as unexpected extensions (e.g., does the resource stay on the current project, or move to the one that has been planned next?), and there should be an escalation point to quickly resolve conflicts. These policies should be supported by leadership, in order to empower the RMO to do their job efficiently. This keeps everyone on the same page as to what they can expect, allows for quicker resolution of issues, and allows expectations to be managed between all parties and the customer. The aforementioned are just a few examples of process needs. Implementing a holistic solution such as JITR for RM is imperative.

8 8 Just-in-Time Resourcing (JITR) provides a holistic solution to enabling a disciplined, process-oriented approach to efficiently managing human capital. 3. Stronger Process and Data Integration with Sales to Improve Forecasting Capabilities: Sales, Delivery and RM must be functionally aligned in order to stay in sync on both expectations for managing upcoming demand and supply, as well as on policies that will support the execution of this process. Delivery and RM must be able to see what is coming in order to make the best staffing decisions, and to make plans to mitigate upcoming resource gaps and surpluses, such as using opportunities to develop resource skills. A typical planning horizon would be 4-6 months at a minimum. When Delivery and RM have a good sense of the upcoming demand and staffing plans, they can provide better information to Sales on when and what types of resources might be able to deliver services enabling Sales to sell projects with the confidence that they can be delivered and manage expectations with their customers all through the sales process. Best practice is to use an integrated CRM and Professional Services Automation (PSA) solution as the system of record to drive accurate forecasting and reporting and efficiently manage the opportunity as it becomes a live project. 4. Upgrade Your Technology Infrastructure Supporting the RM Function: It is critical that RM is enabled by a technology infrastructure that is designed to meet RM business requirements, manage data critical to making resource planning decisions and support efficient RM operation. Most organizations have projects and schedules too complex for spreadsheets and would benefit from a PSA tool. However, it is important to avoid simply buying a PSA solution you want to select a tool that really meets your needs. There is nothing

9 9 that undermines the credibility of RM more than inaccurate data, or moving to more inefficient processes with numerous steps, that are driven by inappropriate tools rather than the business need. Start by defining your target RM processes that meet the needs of the business, and then use those requirements to select a tool that most closely meets your needs. Keep in mind, as with any system, a PSA solution is not a magic bullet that will solve every operational problem. Even the best solution will still need to be supported by strong processes to ensure timely and accurate management of data and reporting. Because process and technology are so intertwined, implement them together and with the emerging standard for resource management solutions in the industry JITR you will be well on your way. 5. Overcome Cultural Barriers to Adoption: Taking steps to manage process and technology change, and ensure participants are willing and able to adhere to RM processes and policies, is viewed as critical to compliance and in turn, success. Anticipate needs and objections, and build a change management plan to address them. Support the education of participants on process and technology to ensure they are enabled and empowered to complete transformational needs, and measure ongoing compliance to process requirements. Build bridges with Sales to improve resource forecasting. Get senior management to visibly support, not only the change management and implementation plan, but also enforce compliance and support centralized management of resources and the day-to-day operational decisions of the resource manager. This ensures RM is seen as a credible authority on resource planning and guidelines. The Bottom Line The benefits of formal, centralized, process driven resource management are undeniable. Increased utilization, improved project performance and profitability, and customer and employee satisfaction are just a few of the benefits effective RM brings to the table. The bottom line better RM practices will make your PSO more profitable.

10 10 ABOUT RTM CONSULTING AND THE AUTHORS Cincinnati-based provides strategic and operational advice to assist technology companies with increasing revenues and margins by leveraging services more effectively. Specializing in Resource Management and Services Business Optimization, helps teams responsible for professional, consulting and support services achieve the benefits associated with successful services portfolios. With its unique Just-in-Time Resourcing solution and Business Acceleration Services, helps large, medium and small firms move beyond theory to practical application of industry best practices and achievement of exceptional results in the shortest possible period of time. Randy Mysliviec leads, providing high impact advisory services for technology companies service businesses. Acknowledged by industry sources as an expert in Global Resource Management (GRM) and author of the Just-in-Time Resourcing brand of solutions, Randy advises multi-national companies with the complex challenge of operating services teams serving the global market. He is a founding member of the Technology Professional Services Association (TPSA now TSIA - the Technology Services Industry Association) and served as a member of the TPSA Advisory Board. Randy is also a contributing author for PSVillage. Jenna Schofield is a Lead Consultant within the Resource Management practice, providing high impact advisory services for consulting and professional services businesses. Jenna is an expert in Global Resource Management (GRM) and Professional Services operations, and has delivered on the Just-in-Time Resourcing brand of solutions for complex multi-national companies. Jenna is a certified Professional in Human Resources (PHR) , Inc. All rights reserved. Just-in-Time Resourcing is a registered trademark of, Inc.