Four-in-ten professional services firms missed revenue targets

A new study suggests more than 40% of professional services firms missed recent revenue targets – with many citing a lack of visibility on utilisation as a cause. And while consulting firms are AI evangelists for everyone else, they may be using it poorly for their own businesses – with a third of leaders saying they would like access to live forecasting and scenario modelling, something they are yet to unlock with AI.

A long-held belief in the professional services sector – promoted by a long list of industry research – is that the most profitable consulting businesses set and consistently exceed aggressive targets for utilisation. Leaders in utilisation are better in managing project staffing, ensuring that hours consumed align with the project plan and budget. They also have good historic data about utilisation rates needed to execute a project profitably, which leads to more accurate forecasting and pricing, and hence higher profitability down the line.

Amid a sustained slowdown in the fortunes of the UK’s consulting sector, it might be assumed that utilisation would be the first place every consulting firm would turn to maximise their results. But even in these difficult times, a new study from Dayshape polling 200 leaders across mid-to-large consultancies in the UK reveals that internal inefficiencies remain their greatest threat to growth.

The paper ‘Inside the leadership growth agenda’ shows that 44% of firms failed to hit their revenue targets last year. And while external pressures such as economic uncertainty and competition played a role, internal blind spots were just as disruptive. Inaccurate forecasting was cited by 30% of firms while 27% blamed capacity constraints. Project over-runs, or write-offs were also an issue for 14% of firms.

With the growth slipping quietly through the cracks, Dayshape also uncovered a disconnect between what leaders believe about utilisation, and what may be happening on the ground – even as many firms swiftly move to reduce their ‘unnecessarily large’ headcounts. While 86% of leaders said they thought they fully utilised their talent, one-in-three also admitted they lacked clear visibility on that front – meaning they could be overbooking some consultants while leaving others on the bench, leading to the previously mentioned capacity and over-run issues.

Matt Cockett, CEO of Dayshape, commented, “The problem isn’t a lack of opportunity, it’s a lack of alignment between people, planning and performance. When internal systems don’t talk to each other, and leaders can’t get the crucial insights they need, growth stalls – no matter how strong the market looks from the outside. Every firm has blind spots, but shining a light on them brings opportunities. The leaders who act on them will capture growth others leave behind.”

When asked how they might overcome these issues, consulting leaders said they would welcome access to ‘real-time’ insights on several fronts. A 38% chunk said capacity and availability insights would help; 37% said profitability by team or service line would also supply a better picture of organisational health; while 36% said they would like live forecasting and scenario modelling services.

According to Dayshape, all these insights could be better unlocked by implementing AI – ironically, something which the consulting industry regularly touts for its clients. However, with just 39% of large firms planning to invest in AI to help with scheduling, it seems they are reluctant to practice what they preach. This was something also slowed by integration challenges and cost concerns, cited by 31% of respondents, and poor data quality – cited by 38%. Regardless, those braving these issues may well come out ahead, according to the researchers.

Cockett concluded, “In what is an increasingly pressured and volatile market, predictability is a company’s (and its growth prospects’) greatest ally. Firms that invest in a future looking view of their resourcing and operational efficiency will not only protect revenue but build the confidence and resilience to grow, even when the market shifts.”