In our most recent Ebook, The Five Most Critical Project Metrics, we dig into the most important success measurements for project managers at services organizations. This blog is an introduction to the three most prominent challenges that services face and how metrics and BI can play a major role in success.
The phenomenon of chasing growth at the expense of profit margin can happen in any business, but this is nowhere more true than in a professional or creatives services business. In helping hundreds of companies become higher performers, we’ve seen this particular struggle over and over again. And it is unnecessary. So, why does it happen?
The Innate Challenges of Services
Creative and professional services, or organizations that deliver fee-based work to clients, are incredibly complex to manage, especially through growth. There are many dynamics to these businesses that change daily. Exacerbating the challenge is that most are operating from a host of disparate systems, so key data points about their people, projects, and financial performance live in silos, and must be brought together at some frequency to gain insight into the levers and measures that impact the business.
Challenge #1: Difficulty forecasting revenue.
In the past, clients would sign contracts for long-term, assured engagements, sometimes lasting years, making revenue forecasts somewhat easy. Today, projects are much shorter term, and rapid. Clients evaluate budgets and project success metrics much more frequently, creating more uncertainty for providers. These realities have made it much more difficult for services providers to accurately forecast future revenue.
Challenge #2: Uncertainty in resource planning against demand.
Services businesses need to be extremely agile in allocating the right resources in the right places to maximize profitability. Too many people on the bench can drive down profit margins, and having too few people available limits what can be taken on. And, keeping track of the utilization of dozens, hundreds, and sometimes thousands of resources, in realtime, is daunting.
Challenge #3: Lack of real-time visibility into project profitability.
There is very little room for error when making decisions in realtime during the project lifecycle. Miscommunication and scope creep can reduce your profit margins before you realize what even happened. Waiting a month for a profitability report from your finance team can be devastating to your margins. This lack of real-time visibility could be enhanced with the proper success metrics.
Metrics and Business Intelligence (BI) in Services
Services firms have a profound need for business intelligence (BI) to make sense of vast information in order to make profitable decisions. Without this clarity, success is just an illusion. Yes, you’ve been busy. Yes, you’ve served clients. But you could be less busy and serve more clients — and be more profitable.
So how do you move from busy to breakthrough?
In our most recent ebook we discuss the five most critical metrics that every services business needs to have readily available, and how to calculate them, so you can turn your data into decisions. The five most critical metrics can be understood as: Project Margin, Planned and Actual Utilization Rates, Billable Performance to Target, Total Availability by Month, and finally, Supply vs. Demand.