How Talent Optimization + Customer Satisfaction = Revenue + Profit

Posted by Deltek on June 18, 2019

How Talent Optimization and Customer Satisfaction leads to profits for Consulting Firms

The 2019 Service Performance Insight (SPI) Benchmark Study* confirms that revenue and profit are still the gold standards of performance for most IT and management consultancies. It also reveals that revenue and profit are chiefly driven by two other KPIs: talent optimization and customer satisfaction. Let’s take a closer look at how talent optimization and customer satisfaction equate to healthier revenue and profit.

 

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Optimize Talent, Optimize All KPIs

Since people are a consultancy’s biggest asset, it stands to reason that an optimized workforce positively impacts all KPIs.

According to the study, at the top 20% of consultancies, 81.7% of employees are billable, as opposed to 73.3% at the other 80%. As SPI Managing Director Dave Hofferberth says, “An interesting correlation we found is that if you have the wrong mix of talent (say, too many non-billable employees), your billable utilization goes down, which ultimately reduces profitability.” His statement is borne out by the fact that companies with optimized talent, where 81.7% are billable, saw 20.3% profit growth, as opposed to 14% for all other companies in the study. They also saw annual revenue per billable consultant of $242K compared to $196K, a 24% difference.

Customer Sat Satisfies Multiple KPIs

Of course, firms don’t stay on a growth trajectory for very long without high customer satisfaction. And one very effective way to a customer’s heart is through on-time delivery with minimal overrun. (Hofferberth suggests that on-time delivery is even more important to customers than project cost, and it’s the main reason consultancies are not re-hired.) According to the study, the top 20% of consultancies deliver 87.2% of projects on time, versus 77.8% for all other companies. And they do it with an average project overrun of 6% as opposed to 8.3%, a 27% difference.

On-time delivery with minimal overrun yields customer satisfaction as manifested in referenceable clients. The top 20% of consultancies can rely on 85.8% of their clients for references, where the rest can rely on only 70.8%.

Follow the Leaders

How can the 80% become the 20%? As Hofferberth says, “Aligning talent optimization, client satisfaction, revenue and profitability goes a long way to success.” And that’s a challenge, because the teams responsible for these areas need to work together, not in silos. That’s why visibility into all four areas is so important—the whole company has to contribute to the effort and have visibility into how the company is performing in those areas.

Once you have the requisite visibility, reviewing KPIs on a weekly basis is important. Doing it less often risks missing trends that can be corrected if caught early on, but are difficult to correct when they’ve been going on for quite a while.

As Hofferberth suggests, using a standard delivery methodology helps, as does clarity in proposals and contracts, so that customers know precisely what they will receive for their investment. It’s also essential to manage customer expectations when scope creep occurs, so mapping out new deliverables and delivery dates and getting client sign-off are essential.

Just Do the Math

A solution like Vantagepoint helps consulting firms make every aspect of projects more visible, optimize talent and increase on-time delivery and customer satisfaction. What does all that add up to? A boost in revenue and profitability. In other words, Vantagepoint can help transform your firm from the 80% to the 20%.

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*Service Performance Insight (SPI) is widely regarded as the leading analyst group covering the PS market. SPI’s PS Maturity Model is the industry-leading performance improvement tool used by over 25,000 service- and project-oriented organizations to chart their course to service excellence by assessing, prioritizing and implementing service performance improvement.

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