Keeping professional services firms happy and healthy in hard times
Professional services firms often encounter a spike in demand, ahead of an economic downturn – but firms currently experiencing a boom need to be aware that a bust often follows swiftly. Unit4 industry expert Mark Gibbison explains how leaders can help their professional services firms survive and thrive in difficult times.
In the 2022 Professional Services Maturity Benchmark by Service Performance Insight, one statement stood out clearly: “Over the past 15 years SPI has witnessed ‘boom’ and ‘bust’ cycles across the professional services industry.”
The report goes on to say that 2021 was a better year for the industry worldwide compared to 2020, but if we look ahead to the storm clouds predicted for 2023, it would be natural to assume that professional services firms might experience more “bust” than “boom” in the next couple of years.
Overall, the picture for the professional services sector in the last 15 years is positive. According to SPI’s study, between 2007 and 2022 the IT services market alone has grown from $297 billion to $1.3 trillion. Yet there is a distinction between the high performers and those who are not achieving positive financial results.
I often talk about the importance of leadership and talent to achieve success within professional services companies, but the third foundational pillar must be strong client relationships. In the 2022 SPI Benchmark, high performing firms had happier clients who were more referenceable, resulting in a 7% better net promoter score.
Why is this important? In the same report, aside from the number of active clients, referenceability was cited as the largest differentiator in key performance indicators and states that “Repeat business and referrals are the primary source of new business.”
As we look ahead to what could be tough market conditions next year, building lasting relationships with existing customers will have a significant impact on driving new revenue. For consultancies, avoiding the boom-and-bust cycle will come down to having a laser focus on client churn by developing strategies to exceed their expectations.
But how do you get all your employees on board with this?
Focus on people
The biggest challenge in ensuring your client relationships remain strong is your people. Interestingly, the independent high-performance firms expect their practice leaders “to be consultants first” and be able “to truly add value to client relationships.”
So, there needs to be an emphasis on consultants being practitioners and subject matter experts, not just business managers. Pre-pandemic, consultants would have honed their expertise and skills onsite at a client’s location. Now how we work is changing dramatically, so firms cannot simply expect their teams to return to this old model.
The pandemic has shown expert advice can be delivered remotely, as the SPI Benchmark indicates consultants were only 33.9% billable onsite last year, compared to 40.2% in 2020. There is no reason to expect this to change as the report also estimates that 75% of employees may never return to working fulltime in a client’s premises.
This means professional services firms must adapt their HR policies to show far greater flexibility. Indeed, there is a warning in the data that voluntary attrition increased in 2021 to nearly 10% compared to 6.9% the previous year, so employers need to engage their teams properly to avoid falling foul of the Great Resignation – especially as the report estimates it takes 124.1 workdays to find, hire and onboard a new consultant and costs more than $150,000.
What professional services organisations must also remember from the pandemic is that it has enabled more flexibility in terms of balancing work and personal commitments. Firms should be encouraging employees to make time for themselves, whether that is family responsibilities, general R&R or professional development and continuous learning. Creating a culture that encourages this balance will result in a more rewarding work environment, which has a positive knock-on effect for clients.
Simply adopting a flexible working policy is not enough. You also have to empower your employees to do their jobs more effectively and this can be done by optimising their day-to-day experience. The right technology tools are key to empowering your teams. They can give more care and attention to clients if they are not bogged down by mundane tasks that can instead be automated. More user-friendly working experiences will also reduce stress and monotony to make for happier, more engaged employees who are less likely to leave.
For example, there is nothing worse than having to manually input weekly timesheets, so why not use an intuitive digital assistant to auto-fill timesheets, so that each consultant only has to review and approve the information? The right tools will also allow consultants to identify real-time insights and be far more responsive if applications are mobile-enabled so that consultants have freedom to access information wherever they are located.
Properly integrate tools
Integration is critical. Highly successful professional services firms integrate core enterprise resource planning (ERP) functions with talent management, procurement, business intelligence and customer relationship management (CRM) systems. Only with a streamlined holistic picture can the organisation make effective decisions about recruitment, utilisation and planning and forecasting.
Integration also offers greater flexibility in areas such as workforce strategies, which is crucial in the project-based world of consultancy. The SPI Benchmark referenced research by Gartner that suggested a growing trend of firms bringing in external resources.
According to Gartner, through 2025, “organisations will increase their reliance on external consultants, as the greater urgency and accelerated pace of change widen the gap between organisations’ digital business ambitions and their internal resources and capabilities”.
By getting the integration right, professional services firms can take a more flexible approach to who and how they hire, enabling them to meet a broader range of client expectations. It will give them greater confidence not just in how they recruit and manage employees, but how they cost, contract and staff projects, which is equally important for building client confidence that projects are being well run.
It is a complex task to get right, as it requires a veritable soup of acronyms to work together including Professional Services Automation (PSA), Human Capital Management (HCM), CRM and ERP. However, the benefits in terms of happy clients are massive as properly integrated applications mean you are making decisions based on accurate information, critical for an effective client relationship.
Happy clients, healthy business
Why does the combination of your people, your tools and how they all work together matter so much to delivering the best service to your clients? It may sound like a facile statement, but competition is only going to increase in the next year if the economy tightens as suggested by some commentators. This will make price a dangerous point of differentiation, as it cuts into your precious margin.
If you build a reputation for unparalleled client relationships, completing projects efficiently and on-time you are far more likely to have satisfied clients who are willing to continue spending money with you. If you also use innovative tools to be more flexible and responsive to clients, offering different ways of working and measuring performance, you can be more agile in how you manage change if the economy slows. Bottom-line, happy employees will make for happy clients, which makes for healthy business in 2023.
Saying you care about your clients should never be a throw away remark, but now more than ever there should be absolutely no complacency around your approach to client relationships, because you can guarantee that astute competitors will muscle in if there is any opportunity to outshine you.
