PSA + PROCESS TRANSFORMATION
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1 PSA + PROCESS TRANSFORMATION Three (3) Case Studies in Breakthrough Transformation Mark E. Sloan Chief Operating Officer
2 All rights reserved. PSA + PROCESS RE-ENGINEERING Three (3) Case Studies in Breakthrough Transformation. INTRODUCTION For years, many consulting and professional services organizations have managed their businesses based on: 1) Historic resource utilization (how did we do?); and 2) Current resource utilization/staffing (what do we need to do today?) More recently, however, as we enter the second decade of the 21st century, progressive technology, consulting, and professional services organizations are adding a third component to their arsenal: forecasting (what do we need to do to be prepared for future staffing opportunities?) Yes, most organizations today do think about forecasting. But, can they plan, manage, and report on it? Professional Services Automation (PSA) tools provide a breadth and depth of functionality but technology deployment alone does not completely solve problems. Likewise, process re-engineering, without the appropriate enabling technology, only gets you so far. In this whitepaper, we will explore three different case studies that demonstrate the: 1) benefit of process re-engineering; and 2) accelerated benefits that come when process re-engineering is tightly integrated with technology deployment. We will assess the unique experiences of 3 companies that have focused, to varying degrees, on both technology deployment and process re-engineering. These case studies will demonstrate that by focusing on both simultaneously, you can achieve breakthrough transformation and that the benefits of improved operating performance significantly exceed the combined costs of technology deployment and process transformation. RESOURCE MANAGEMENT Many PSOs spend the bulk of their time on staffing, focused on what I call the -10 to +20 day window. When they look at metrics, they look at utilization. That is, they are focused on the here and now with staffing; and with yesterday in reviewing utilization. Both are obviously important. However, effective Resource Management requires focusing on a holistic viewpoint and gaining a forward looking view at how the PS organization will need to be staffed. (For the sake of demonstrating effective Resource Management techniques, this paper will use examples and concepts from Just-in-Time Resourcing (JITR) throughout.)
3 3 JITR Component Technology Implication Process Implication Skills Inventory Need to create a view as to the full skill set of each resource Staffing Leveraging the Skills Inventory technology needs to identify all the resources that could do a role Forecasting The future cannot be precisely defined but it can be modeled; technology can help you evaluate different scenarios (e.g., what do we need to staff if they entire pipeline hits? what if these 3 big opportunities hit? what if nothing new hits? ) Need to create a process for continual updating of skills so that the information stays relevant Need to create a process that effectively evaluates all capable (and available) resources for each staffing request and not over burden a select few SMEs Additionally, PS resources cannot be managed in a department like fashion where resources are bottled up they need to be treated as corporate assets that can be moved to areas of need PS leadership needs to evaluate this information in a structured manner and gain agreement with Sales, Finance, other departments on how they should proceed (e.g., hire, contract with third parties, cross-train resources)
4 4 JITR Component Technology Implication Process Implication Candidate Sourcing & Development IT / PSA Infrastructure Process Governance Integrating technology with the HR department can speed time to hire The right technology enables the process At the same time, PS orgs need to get out of the mode of defined need go hire and get into a model of continual recruiting; building a pipeline of candidates that can be tapped as work materializes (technology helps by pin-pointing and focusing on what skills to recruit) A well defined process generates ROI on technology CASE STUDIES This brings us to the central theme of this paper: changing both the way you operate today from a resource management perspective AND enabling that with the necessary technology. We will review three different examples of actual companies we interviewed, and their real-world results after tackling both technology and process changes around resource management with demonstrated success. In the: First example, we will look at a company who first deployed technology to improve resource management and later undertook process change; Second example, we will look at a company who first embarked on process change and then went about enabling that change with technology; and Third example, we will look at a company who embarked upon both simultaneously. In all the examples, you will see that it is the intersection of both technology and process change that drove considerable benefits. EXAMPLE 1: LEAD WITH TECHNOLOGY FOLLOW WITH PROCESS In this example, the client (a Fortune 500 technology company with a 2000 person global professional services organization) had implemented a PSA solution to drive better staffing decisions and ultimately to improve overall utilization. The impetus for the technology implementation was the integration of a variety of professional services departments from across the company into a single, unified professional
5 5 services organization. The client proceeded to implement the technology to give them a unified view the variety of resources spread across North America. As you can likely imagine, without the proper processes in place, the implementation of the PSA alone did not immediately solve their problem and completely enable a unified PSO. JITR Component What they did get (Technology) What they did not get (Process) Skills Inventory Staffing A onetime snap shot of the skills and proficiencies of the resources on board at the time of implementation A means of defining who was where when it was updated Forecasting They did not spend much if any time leveraging the system to enter future data Candidate Sourcing & Development Little to any integration of the system with HR systems No process for updating the information when skills were developed (or when they waned due to inactivity) and no real process discipline on adding new employees With no central Resource Management role to police the data, the quality of information in the system was dependent on the diligence of the manager of each department As a result, there was a lack of confidence in all the data in the system (though a good portion of it was actually accurate no one really knew what was accurate) Lacked information to help make hiring decisions and new resource acquisitions became rushed resulting in an over reliance on 3 rd party contractors Over reliance on 3 rd party contractors After realizing that greater efficiencies could be had, the company embarked on process re-engineering. They realized that integration of the various PS departments into a centralized PS organization did not break down the silos. As such, they implemented a centralized Resource Management Office (RMO) to oversee and monitor all staffing. This is not to say that the RMO made all the staffing decisions; rather the RMO was put in place to facilitate decisions.
6 6 By implementing the RMO, there was one person who wakes up everyday thinking about the proper Resource Management processes and how to enable those processes. In order for an RMO to be effective they needed: 1) A more robust and up to date Skills Inventory; The PSA technology that was already in place easily enabled this, and gave the RMO information on a variety of resources that could satisfy a particular need (and get away from staffing (or over-staffing) the same SMEs on the same roles) 2) A Staffing process that looked at all available and capable resources across the organization (i.e., breaking down the departmental silos of that s my person, you can t have them because I may need them later); the head of the PS organization could readily be made aware of issues and quickly resolve staffing disputes that prevented the flow of resources 3) A Candidate Sourcing & Development process that had all New Hire and Contractor requests funnel through the RMO so that a centralized body was reviewing Do we really need to add another person (i.e., more costs) to the business? This did not eliminate the need to add new people, but it forced PS managers to really think through Do I need OR want this? Ultimately resulting in the use of on-board resources and absorption of those costs into paid engagements. The Results The process re-engineering work began in late 2Q 2008 when the forecast actually looked good. By the time the process re-engineering work was wrapping up in late 2008, the economy had changed considerably. Leveraging the information from the PSA as well as the revised processes, this company was able to re-assign capable employees to positions that were being fulfilled by contractors thus decreasing their overall staff while avoiding massive layoffs. They had the information to quickly assess skills, availability and development needs. Despite the tough economy in 2009, this PS organization delivered more gross profit to than it had in EXAMPLE 2: START WITH PROCESS FOLLOW WITH TECHNOLOGY In this example, the client (a private equity held software company with over 400 professional services personnel) had decided their staffing processes were not working as well as they needed them to. The professional services organization (PSO) had come together through a series of acquisitions (with similar silo problems as mentioned in example 1) and was experiencing significant growth in the marketplace. They simply could not keep up with all the demand and there was concern about possible lost revenue. Working with the client, we diagnosed some critical (yet common) areas for improvement: 1) Over-reliance on a set of SMEs 1 and under-utilization on a broad-set of resources a. ~10% of their resources were averaging >100% billable utilization 1 Subject Matter Experts
7 7 b. ~15% of their resources were averaging <15% billable utilization 2) Staffing resources to projects was consuming 70-80% of a Practice Lead s time 3) Little to no resource forecasting had led to ~25% of the staff coming from 3 rd party contractors (on average, at higher cost rates than an employee s loaded cost) To get a handle on this situation, the client realized they needed dramatic action. They embarked on both process and technology change the technology timeline was longer, however, due to procurement review of alternatives, integration of the PSA with a variety of existing systems, and other initiatives in IT that consumed bandwidth. The implementation of process began to address their challenges but it was further enabled when the PSA solution came on line with full functionality. JITR Component Skills Inventory Staffing Forecasting What they did get (Initially with Process) A onetime snap shot of the skills and proficiencies of the resources on board at the time of implementation stored in an MS Access database This provided an immediate stopgap solution and provided better information to reduce over reliance on SMEs and contractors A centralized process by which resources were requested; initially enabled by a combination of MS Excel and other legacy IT applications A centralized Resource Manager could better triage resource requests and reduce the amount of time Practice Leads had to spend Without an automated system, it is difficult of forecast on a regular basis The processes were put in place to What they did get (Eventually with Process and PSA) A formal process for updating the information when skills were developed (or when they waned due to inactivity) and for when new employees came on board A searchable, on-line tool that both Resource Management and Practice Leads could use for staffing, training, and hiring purposes A semi-automated process that identifies available and capable (i.e., skills inventory) resources for positions being filled by Resource Management The application better enabled the process and took more of the guess-work out of identifying who could fulfill various roles A push of the button for reporting based on the data that is in the PSA tool Resource Management and PS
8 8 JITR Component Candidate Sourcing & Development What they did get (Initially with Process) support forecasting and analyses were run on a periodic (but not necessarily consistent) basis Though a manual process, there was much more confidence in the information that was passed to HR What they did get (Eventually with Process and PSA) Leadership were enabled to continually evaluate where they are in terms of supply vs. demand A semi-automated process that can inform HR about pending / possible recruiting needs and better ensure alignment of candidates coming in for interviews In this example, the client did know they would embark on both process and IT transformation. The timing simply varied based on various constraints. In this case, the client understood it needed to change its processes and since that might take a few iterations, they led with process change first so that when the technology was implemented it was enabling the desired target state helping to deliver the overall benefits. The Results The client has publicly acknowledged that this transformation returned a 7.5x ROI on its investment (in the first year) in process transformation through improved billable utilization. This more than covers the costs of both the process transformation and PSA implementation. The improvements in utilization continue year over year so the benefits continue to be earned. Additionally, through their focus on Process Governance, the client continues to drive additional improvements in utilization. Through better Forecasting and Process Governance, they have seen when, where, and how to decrease their number of contractors during slow periods; and in periods of growth they have seen when, where, and how to add new headcount be that employee (sustained growth) or contractor (peak load need) additions. EXAMPLE 3: INTEGRATED TECHNOLOGY & PROCESS TRANSFORMATION In this example, the client (a consulting and systems integration subsidiary of a global provider of network and IT solutions) embarked on a technology deployment that was tightly coupled with process transformation. Prior to embarking on this transformation, the organization was using a variety of home grown tools (e.g., spreadsheets, legacy accounting tools) to track time, assignments, and even vacation. Before describing the transformation, this quote sums up the result quite well, Our consultants have been vocal regarding the improvements they have seen They have greater visibility within the system and can self service their information needs.
9 9 As mentioned, the transformation was enabled by technology but included process re-engineering to achieve the benefit: JITR Component Staffing Forecasting Candidate Sourcing & Development What they did A centralized resource management process by which resources were requested, assigned / allocated The technology enabled a singular view of the entire population both on and off shore Established weekly review meetings to review Supply (How we are staffed to deliver) vs. Demand (What we need to prepare to deliver) Integration of the PSA to their SFA/CRM enables clear and consistent visibility at all stages of the sales cycle with clear process definitions of when resources are soft vs. hard booked to assignments Improved forecasting of available time, vacation time, and future needs enables the appropriate resource acquisition strategy and tactics The Results The before and after on the transformation could not be more stark. This client has documented that through improved tracking of employee leave accruals (e.g., vacation, sick time) that they have reduced leakages equal to 1% of their annual revenue. In addition to the financial benefits, employee satisfaction has increased dramatically. CLOSING This paper has identified how improvements to Resource Management both technical and process oriented can have positive impacts on the bottom line. We have seen at many companies that by creating better visibility to the resource management information, you can improve: billable utilization, on-time delivery, and employee satisfaction and retention. This is achieved by defining a target state resource management process that to your unique business needs and enabling those processes with the requisite PSA technology. PS organizations benefit from improved predictability. Employees (and
10 10 clients) appreciate predictability and insight and are willing to stick with those PS organizations that can deliver both. As Professional Services practitioners, we espouse the benefit of technology implementation coupled with process transformation to our clients. As managers of our own businesses, we must heed our own advice. And given the significant benefits associated with even small improvements in utilization derived from the transformation, can you afford not to take action? MARGINAL REVENUE IMPROVEMENT Increase in Utilization by (pts): # of Consultants $208,000 $1,040,000 $2,080,000 $3,120, $416,000 $2,080,000 $4,160,000 $6,240, $832,000 $4,160,000 $8,320,000 $12,480, $1,040,000 $5,200,000 $10,400,000 $15,600, $1,248,000 $6,240,000 $12,480,000 $18,720, $1,664,000 $8,320,000 $16,640,000 $24,960,000 Assumptions Billable Hourly Rate $200 ABOUT RTM CONSULTING AND THE AUTHOR Cincinnati-based RTM Consulting provides strategic and operational advice to assist technology companies with increasing revenues and margins by leveraging professional and consulting services more effectively. Specializing in Resource Management and Professional Services Business Optimization, RTM Consulting helps IT hardware, software and pure consulting businesses achieve the benefits associated with successful professional and consulting services portfolios. With its unique Just-in-Time Resourcing solution and Business Acceleration Services, RTM Consulting 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. Mark E. Sloan is the COO of RTM Consulting. Mark is an industry pioneer with respect to defining and deploying Global Resource Management processes for Consulting and Professional Service Operators. Mark is a frequent speaker at industry events and has served as an Advisory Board Member for the Technology Professional Services Association (TPSA). Prior to his current role as COO and Senior Founding Partner of RTM Consulting, Mark held a number of executive consulting and entrepreneurial roles with Accenture and Convergys All rights reserved.
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