How can professional services streamline planning and budgeting
5 min read
28 June 2018
What do you do when the outcome matters more than method? Centage Corporation's Ed Gromann explains how professional services can streamline workforce planning and budgeting.
Professional services organisations (PSO) are in the midst of planning their budgets for next year right now, and for firms that rely on outcome-based engagement, accurately predicting workforce needs is critical.
I’ve heard from a few CFOs that this model, in which their clients pay based on the outcome and not the work and effort needed to achieve it, allows their firms to drive profitability. But they also warn of a real risk: if the customer’s deliverable is late or is inadequate, the firm stands to lose big.
As a PSO, your asset is people, which means your workforce can be one of the biggest risks to your client engagement. If the resources a project needs aren’t available, scheduling (and profitability) are jeopardized. No firm can afford to allow this to happen.
How can you prevent this risk? Planning and budgeting for a PSO workforce obviously requires you to make assumptions about headcount and tie them to business goals and client engagements. It’s challenging enough to do this on a project level due to continuous flux; but doing it for the next 12 months across all projects is even more difficult.
My best advice to CFOs is to move away from Excel spreadsheets. I know they’re familiar (and there’s a lot to be said for familiarity). But PSOs tend to have multiple rates for engagements and often for different customers. And the resources assigned to each project also have multiple skill sets, all of which must be billed differently.
Even if you manage to reflect all of your client and skill set rates in your spreadsheet, you still need to roll up and consolidate a lot of revenue assumptions to a corporate level. And in an outcome-based scenario, you’ll need to account for and track key milestones, as well as percentages of completion.
With Excel, you simply can’t accurately predict what your business is going to look like at the time you negotiate a fee for a project with a client. Unless you know exactly who is working on what and when, you’ll need to “assume” that the right resources will be available.
And there’s a risk: your workforce plan will contain an abundance of confidential information, including social security numbers and salary information, and you need to ensure that your spreadsheets can’t be accessed by people who are not authorized to see those numbers. Even password protection does not provide the level of security many organizations require. To have that sensitive data completely secure, you need to be able to control who sees what.
Finally, you need to account for multiple what-if scenarios in your planning. What will you do if the engagement is behind schedule, or critical resources aren’t available? What happens if you staff up a specific skill set but the projects don’t come through? These are the things you need to think about now, as you are planning your workforce budget.
So what’s the answer? There are a number of SaaS-based tools that allow you to build a workforce plan using a wide array of datasets. Once you enter or import salary data for each skill set (by region, client or project, as needed) you can dynamically calculate all salary and salary-related expenses, including overtime and shift-differentials. You can also generate detailed headcount reports based on any combination of user-defined criteria. In short, you can see, in real time, what your workforce looks like at any given point.
Outcome-based engagements are appealing to clients, because they know exactly what they’re signing up for, as well as firms, who stand to drive profitability. But making them work requires building an accurate workforce plan so you can predict what your outcomes will be.
Ed Gromann serves as CPO for Centage Corporation.