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ServiceLine White Papers |
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Services Maturity Evolution
Managing a consulting service business is easy, right? … Just hire the right people and ensure that their billable utilization is at an acceptable level. In truth, managing a consulting services organization can be very complex. How a services organization is managed is very important. There are three standard management models:
- Transactional: The essential element of a transactional business approach is simply processing transactions: collecting time and expense, approving the right time and expenses, and billing customers.
- Operational: The "middle of the road" approach: streamline and measure the cycle time of scheduling resources, collecting time and expense, and billing customers.
- Systematic: The systematic business method features a more holistic, disciplined approach: planning the business based on current metrics and adapting the plans as necessary, based on a clear understanding of the causes of change. The ultimate goal of the systematic method becomes creating a nimble organization that builds a proactive and profitable consulting business.
The business approach that a firm chooses to enact depends on maturity levels and the desired business results that the services organization wishes to achieve.
Transactional Approach. The current economy has led many businesses to get back to the basics. For the services organization, "basics" could be defined as focusing on necessary transactions. The most basic of transactions that needs to be processed in any billable service organization is the collection, approval, and billing of time and expense. If a business can do these mechanics well, then client money will flow in. Of course, this is a very simplistic view of the business.
The transactions are an essential element, but they do not provide any insight into the machinery that truly powers a business. Key questions go unanswered without the right information. For example:
- Are the right resources being assigned to the projects being sold?
- Are the right billable rates being scheduled to the project to maximize revenue?
- What projects are being forecasted and what types of skills will be required?
- What is the status of the project?
- What are the deliverables?
- What is the profitability of the projects being completed?
- What are the current and forecasted utilization rates?
Some transactional-oriented businesses may try to fill the gaps with Excel spreadsheets. These businesses believe that if time and expense can be processed efficiently, the rest can be managed with a good spreadsheet. However, by the time the spreadsheets are created, it may be too late. The opportunity to make the right business decisions may be lost.
The transactional approach leaves many gaps in a firm's view of its own processes. Operationally, there is little insight into what is working and what is not. Strategically, there is no insight into whether the right people are being hired at the right time and deployed on projects at the right rates. There is no insight into if projects are being delivered predictably and profitably. Simply stated, the transactional approach provides a very simplistic view of a services business.
Operational Approach.The operational approach takes the consulting services organization to the next level of management. Transaction processes feed into an operational flow that begins to take other management considerations into account. At the operational level, data flow becomes very important for the next step in the process, as well as for reporting purposes.
Beginning with the first step in the process, data is entered and, in each subsequent step in the process, additional data is entered. One of the important elements in the operational approach is that the data entered in one step is carried forward to the next. In other words, the data builds upon itself. Why is this important?
Data flow is important because the compilation of data becomes real-time information that will drive decisions at each step in the workflow. If there is a good reporting mechanism, the information becomes very meaningful to the decision-makers in the workflow.
As an example, let's take a look at staffing people to projects. First, the transactional focus:
Without a good operational approach to the business, available people will be found and staffed to a project as they are sold. The search begins: telephone calls are made and emails are sent in the frantic search to find out who will be available when. It is a "first available" approach. Furthermore, hiring decisions for additional talent will be based on what has been sold (i.e., past information).
Compare this to a more operationally focused firm:
A firm utilizing the operational approach would have the tools to focus on the process. The sold project information (type of projects and skills required) flows forward and enables the firm to successfully meet client requirements. Based on current information, there would be clear process steps to locate the person that matched the specific requirements and then schedule them on the sold project.
The difference: In the transactional approach, decisions are based on immediate, yet limited information. In the operational approach, information flows forward and decisions are made on the compounding information.
The operational approach gives consulting services organizations the ability to operate more efficiently and productively. Daily decisions are informed decisions based on data that is pulled from a workflow.
This is a good, solid approach to managing your business. However, what role does the overall strategic plan play? Are the right things being worked on, given where the company wants or needs to go? Is current and forecasted information being fed into a business planning process?
Systematic Approach. The systematic approach takes the transactional and operational approach and adds a critical element – business plans. Essentially, the systematic approach incorporates the other two approaches and encircles it with a strategic planning process that evolves based on information and reports gathered from the transactions and the operational flow. This approach establishes a clear connection between the operational and strategic processes, while key, real-time metrics pull it together.
Without the transactions and a powerful workflow, the information becomes less reliable and less meaningful. Information is only as good as what is captured and then carried forward. Once the current information is there, managers need to do something with it. They need to ask key questions:
- What are our most profitable types of projects?
- What types of projects are our clients demanding?
- Who are our most profitable clients?
- Which are our most profitable business units, project managers, and resources?
- What is the current and forecasted utilization?
- What are the current and forecasted skills required?
- Where should you focus the direction of your business to maximize profits?
- How does this information impact the business plans?
- Do the business plans need to be adjusted? If so, how?
The gleaned information converts the "what" questions to "how" questions. The systematic approach ensures that questions are answered with solid information and provides insight into how to deal with pertinent information.
Let's look at the resource scheduling example used in the previous section. Below is how it would work in the systematic model:
Information about the projects and skills being forecasted and sold is being used to make staffing decisions for the present and future. Hiring decisions are based upon the forecasted type of projects and skills as well as the forecasted billing rates of the projects in the sales pipeline. Additionally, historical utilization percentages for individuals and departments are used to balance the forecasted information. There is a balance between doing – operational – and planning, with information flowing real-time into both efforts.
The systematic model is balancing the future and the past so that decisions are based on a broader base of information. There is a good blend of human and system interaction to make business decisions soundly, quickly, and more accurately. The systems will provide the tools for the operational and the information flow; people will use the information to plan appropriately. This combination establishes a foundation for a predictable and nimble business.
Predictability comes from the operational workflow and the defined metrics to improve the process and the results. Nimbleness comes from the metric and information interchange between the operational and strategic processes – steering the business successfully through a changing, demanding marketplace.
Where Are You Today?
Where would you classify your services organization today, given the maturity model?
Usually, the maturity of the services organization is an evolution – starting with the transactional model, moving to the operational model, and then to the systematic model as the organization grows. However, some service organizations have realized that the systematic approach is the best one to undertake, no matter what the size.
Summary. Each service maturity model has certain benefits, given the business goals of the organization. There are three choices:
- A transaction-oriented business that is more concerned with internal processing of basic elements.
- An operationally-oriented business that is more focused on the overall workflow of the organization and using information gathered to improve the workflow.
- A systematic-oriented business concerned with ensuring balanced, accurate, and timely information is being translated into solid business strategies and plans. Further, the business plans are supported by a strong, disciplined workflow.
The choice boils down to the results that the services business needs to achieve and the maturity of its business model. Regardless, moving to the systematic approach will allow your consulting services organization to build a sustainable, nimble business that adds value to your customers, employees, shareholders, and the overall marketplace.
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