Is Your Professional Services Firm Running Best Practice Processes?
The other day I had a meeting with a manager of a large Professional Services firm who had recently reviewed and corrected their internal administrative processes. Our discussion centered on whether they were now running best practice processes and keeping pace with the industry’s high performers, as this had been a subject of an internal discussion and they had little idea what the benchmark standard is for ‘best practice’ within the Professional Services (PS) industry. This is common quandary being voiced by many of the firms I speak to day to day.
So, what should the manager do to get an answer? Is there a definitive standard they should be aiming to achieve across their internal processes? Before I address this I will first discuss the nature of processes within a PS firm. First and foremost, most ambitious services firms are interested in processes where an optimisation would have a direct impact on margin and/or an impact on their customer satisfaction.
The 'Human Factor' in Professional Services Firms
In my experience, no one single sequence of steps can define a best practice process across the board in all PS firms or in any PS sub-industry. Rather, in a services firm a process is defined by: the people making the process, management’s intentions and guiding strategies, and the software and technology at hand. But even if these factors are optimal, then there is an additional factor that is much more significant in a PS firm compared to a manufacturing firm; and that is the ‘The Human factor’. Human intervention and evaluation has so much more impact on processes in a PS firm then in any other industry.
Given the human factor in processes, how should you go about analysing and describing best practice processes? In manufacturing companies they talk about such things as the “Order to Cash” process. You also have such a process in a PS firm, but the term describes a process that, in a PS firm, is too high level to undertake any true analysis. The sequence of internal actions from when you receive a job order from a client to undertake a project to when you actually start the project could be days, weeks if not months, and there might also be periods during the project duration where there is a fully legitimate break due to your client’s other commitments or resource restrictions. Thus, to build a robust set of metrics that are truly measurable and meaningful we have to look at more granular processes such as time registration to invoice, or budget creation to revenue progress evaluation in fixed priced jobs.
Thereafter a number of objective measure points, which take the human factor out of the equation, have to be established. The measure points below are objective and not dependent on the number of steps in the process:
- The time it takes from when a transaction is captured to the destination of the transaction
- Average salary cost for each touch on a transaction in the process
- Average handling time for each touch on a transaction in the process
- Number of errors leading to a back-run in the process
How do you know whether your Professional Services firm is running best practice?
I would argue that if you are in the top 20% percentile for each granular process on the above four measures then you are running best practice. The issue you face however is that because very few PS firms are currently tracking or benchmarking such internal processes, there is limited ability within the industry to compare your core granular process measures today and identify your percentile position.
But, keep yourself posted here as in future blogs I will discuss which granular processes are most relevant to measure – given the focus on profit margin – and secondly how you can actually benchmark yourself against the best in class in the industry. I will also discuss why optimising your processes is not just an introvert exercise - you will at the same time improve your client satisfaction.
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