Full Sail Partners Blog | Building Business (10)

What is forecasting? Forecasting is a tool that many professional services firms use to help management make decisions based on past and current data trends. 

There are two types of forecasting we will focus on in this article: 

1. Utilization forecasting
2. Cash flow forecasting

For professional services firms, forecasting starts with the analysis of the work that is yet to be performed and equating that to overall firm revenue. The revenue then becomes the basis for the accountant to project cash flows coming in, considering average day’s receivables, to drive what cash is available versus the cash required to cover current expenses.

Without these forecasts, it makes it much more difficult for management to schedule, staff, plan or perform the work in production that is necessary without them sitting up in bed at night on a regular basis. 

So let’s break the process down into steps and then focus on the key benefits of what is forecasting. 

1. To properly track utilizations, it is important to establish two budgeted figures, target utilization and available utilization. Both should be established for every staff person and documented by employee in your system.
   Definitions:

• Target Utilization is a function of the targeted billable hours over the standard hours in the work week.
• Available Utilization is a function of all available hours minus just the benefit hours.

One engineering firm we are working with used to post the labor utilization “curves” on their message board in their lunch room and it was measured against budgeted utilization for the year as a constant.  This singular graph showed what the firm was projecting for scheduled utilization against target and available which kept staff cognizant of both the need to schedule fully.  The graph also served as a tool for staff to promote billable hours against project deadlines.

From this data, management was able to see the most important single factor for the firm, how far out they were scheduled, and if they needed to adjust staff or move project timelines to increase project throughput.  Since labor costs against labor revenue is the single most influential impact on a firm’s bottom line, forecasting in this way had this firm’s management sleeping better, while it also empowered the firm’s staff to keep an eye on utilization. 

Since this level of tracking was in place at this particular firm, it also allowed their senior financial person to produce informative forecasts of revenue, which in turn, promoted the morale of everyone in the firm. 

To note, when the firm had many proposals out with the results tracking per the graph above, and the firm had the ability to look at un-scheduled but awarded professional service hours as well, they knew when staffing could not meet the demand of the impending work and were able to stage clients expectation with delivery dates or let HR know that hiring was needed on the horizon. 

So, is your firm enabling forecasting to better win work and deploy resources? If not, after reading this blog do you recognize the importance of implementing forecasting at your firm? I would forecast that the answer is “yes”!  

Achieving consistent project profitability while maintaining strong client relationships is at the top of most firms’ goals and objectives. And, while there are certainly a number of variables that must be integrated to make this happen, asking your clients for feedback during the project plays a valuable role. I’ve identified two scenarios that are common in the A/E industry. Incorporating feedback into your project management process has been demonstrated to have a positive impact on both.

Reduce (or eliminate) Re-work

Streamlining the project delivery process is essential to creating project efficiencies that lead to increased profit on your job. But there are pitfalls to this approach unless you are getting regular project feedback from your clients. Let’s look at a scenario:

You have done projects for one of your best clients for more than 10 years. You have developed a delivery process that seems to be working for them and it eliminates the need for your team to reinvent the wheel each time. Enter the new client project manager. This individual has their own set of expectations regarding how this project will proceed. And, although you all believe you were aligned when you left the kick-off meeting, suddenly there are 10 pages of comments to your first major submittal. They don’t like the format, they feel you have left out critical information, and generally they are looking for you to fix the problem which will require some significant re-work on your team’s part.

How could project feedback have avoided this outcome? Firms that have integrated gathering feedback into their project management process understand the importance of requesting feedback after each milestone meeting or deliverable. In this scenario, a feedback request would have been sent after the initial meeting perhaps after the submission of the meeting minutes. This would give the project manager the opportunity to uncover gaps in expectations with this new project manager. Before his team began to move forward on the project, these gaps can be closed. In this scenario this would have meant deviating from the streamlined process at least a little, but that knowledge and flexibility would save many hours of re-work that kills a project budget.

Avoid Scope Creep

Scope creep is something most A/E firms understand all too well. You know what is needed to complete the project but the client is extremely cost conscious and asks you to remove several items to lower your fee. Depending upon the experience of the project manager involved, they may be able to complete the project to the client’s satisfaction. However, doing so will quite likely result in a lower profitability for your project. Let’s look at a scenario:

You have been asked to design a renovation for a commercial building for a new client. This type of work is your specialty. You know all of the elements that will be needed to meet your client’s expectations for a successful project. However, when the client asks you to remove about 5% – 10% of the scope so that your fee will fit into their budget, you agree because this is a client that you really want to work with and your staff is a little light on work at the moment as well. As the project progresses, you run into problems because of the scope you removed and the client ‘forgets’ they asked you to remove these items and asks you to do what is needed to complete the project. Rather than ask your client for an increase in fee, you just finish the project with the fee you have been given. This involves both you and your team working extra hours and your profit still takes a hit.

How could project feedback have avoided this outcome? Because this is a new client let’s assume that the opportunities to use feedback to avoid the fee reduction in the first place are limited. Requesting feedback from your client throughout the lifecycle of the project however, can play a significant role when the scope items you removed come back into play. Each time you send a feedback request to this client you are giving them the opportunity to let you know how well you efforts are matching their expectations. You are building the relationship with them that lets them know that you value your relationship with them and it is your goal to ensure the project outcome meets or exceeds their expectations. When the moment comes that the scope items you agreed to remove become essential to the project, this relationship will make the conversation to request additional fees more comfortable for both of you.

Interested in learning more about using project feedback to increase profits?
 

Budgeting and forecasting is part art, part science. For too many firms, however, it is also a frustrating process that takes a lot of effort to produce less than optimal results.

All too often, the budgeting and forecasting process breaks down because the two parties involved — the executive management team and the operations side — see the challenge from opposite ends of the same telescope. It may be a gross generalization, but from what I’ve seen, management often tends to be more aggressive and optimistic about goals and forecasts. On the other hand, the operational side sees the nuts-and-bolts challenges and logistics required to meet management’s goals, and tends to be more conservative in terms of what they think can be achieved with a given budget. 

In addition to this fundamental dynamic, another challenge related to budgeting and forecasting is that unless it’s handled well, it can lead to a lack of buy-in on the part of various parties. Even worse, it can result in a budget that ends up sitting on a shelf for the rest of the year, which is not in anyone’s best interest. 

Key strategies for success

Fortunately, there are several strategies that can help an organization improve its chances of a successful budgeting and forecasting process. 

1. Start early. Think about the budget process as one of dialogue and compromise — so allow time for both management and operations to develop their budgets and plans, and then to negotiate an acceptable compromise. If you’re aiming to complete your budget by December 31, for example, consider asking management to commit to establishing and publishing their corporate goals no later than October 31. 

2. Be transparent and clear about the process. If you let everyone know up front that the budgeting process is a dialogue and compromise, there may be more chance that all parties will embrace it and comply with expectations. 

3. Have the management team kick off the process. After all, their vision for the corporate goals and general forecasts should be what drives the organization. In general, it’s a good strategy to use previous years’ results as a baseline, incorporating any relevant data about changing market and economic conditions, new products in development, and so on. Once the management team has published its goals, the operational managers develop budgets for reaching those goals. This is not the order in which it’s always done, but in my experience, it’s a more effective approach and leads to better results. 

4. Have a meeting of the minds. Last but not least, block off some time to bring the two sides together around the budget documents and negotiate a compromise. As in any compromise, it’s critical that both sides understand that they are not going to get everything they want. But by finding an agreeable compromise, the organization can develop a budget and forecast that’s both aspirational and achievable. 

Budgeting and forecasting succeeds when it brings together two very different perspectives of the organization and finds an effective meeting point. Obviously, it needs to help the organization move forward in a strategic direction; but to become a plan that staff can buy into and implement; it also needs to be realistic and achievable. Above all, don’t forget that a realistic, well-thought-out budget is essential to the firm’s financial success. 

You might be tempted to think that the hardest part of using business performance metrics to guide your business is gathering and analyzing the metrics. 

But equally important — maybe even more so — is selecting the right metrics to begin with. Of course, there are some people who observe that there are no “bad metrics.” The argument goes that a metric itself is neither good nor bad; it could be just as likely that your data is wrong, or possibly that the metric is simply not a good fit for your needs or your organization. 

But even though the metric itself is neither good nor bad, there are other ways that business performance metrics can be failing you. Let me describe three of the most common problems. 

1. Inconsistency. One of the most common ways a metric can go south is inconsistency. Granted, some people think consistency is overrated: the philosopher Ralph Waldo Emerson once railed in his classic essay, Self-Reliance, that “A foolish consistency is the hobgoblin of little minds.” (It’s good stuff — look it up!)

2. Unintended consequences. Another problem is if your metrics are somehow incentivizing your employees to do the wrong thing. For example, imagine your firm has put a recent focus on customer service. Unfortunately, last year you notified all employees that their pay raises will be based on employee utilization rates. The longer your employees spend keeping your clients happy (non-billable work), the lower their utilization rate. You are telling your employees one thing, but your actions are saying the complete opposite.

Although it should go without saying, it’s absolutely critical to make sure that the math and logic that feed into your business performance metrics remain consistent, regardless of the timeframe or operating unit being analyzed. 

So in this example, a better metric would be to incentivize your employees on a combination of utilization rate and customer satisfaction — more complicated to gather, but ultimately closer to what you want to reward and encourage. What’s more, a great reason to plan your metrics with care! 

3. Understanding Lagging vs. Leading Indicators. To be most effective, you need business performance metrics in as close to real-time as possible. Understanding the difference between lagging vs leading indicators can often be the defining factor for setting your firm on the correct course. Lagging indicators help your firm indentify historical trend information, while leading indicators provide predictive information that can allow you to make data-driven decisions to change future outcomes.

QuickBooks, Excel and other office applications can help in collecting and analyzing data, but lacks the sophistication to provide real-time insight. A purpose built ERP, like Deltek Vision, provides front and back office functions insight into historical and predictive information. Whatever tools you use to gather your metrics, be sure to automate the process as much as possible to provide your team with the ability to make the best data-driven decisions.

Start measuring!

So how does one avoid the pitfalls of metric management? A great starting point is to understand your business and what your version of success looks like. For example, is it total revenue, net profits, other measures, or a weighted combination? 

At Full Sail Partners, we work with a large number of professional services firms — especially those that are project-based. As a result, we have a lot of insight and experience into the metrics that are most telling for them. To learn more, keep exploring our blogs, or contact us.

Each of your clients, like you, are individuals that have a unique definition for what a positive client service experience means to them. We can no longer treat everyone the same way – it just doesn’t work!  Sending client surveys gives your firm the opportunity to ask clients what that terrific experience looks like to them – each of them. It also gives you the chance to show that your firm is serious about their satisfaction and to build stronger relationships. As a result of the thousands of survey results and comments we’ve seen, we wanted to share with you the top 3 reasons clients want you to send them a client survey.

1. Ease or Dis-ease: Your clients want to be at ease in their relationship with you. They hired your firm in the first place because they believed you could provide them with something they needed. So what happens when something is not exactly right? We all know that tension we feel when some relationship we have is not flowing smoothly. Your clients feel the same way. When you send them a client survey and give them the chance to let you know that something could be a little better, it creates a greater sense of ease for them because you gave them a voice. 

2. Build Trust: Trust is a funny thing, it takes time to build and usually involves both positive (and negative) interactions. We all want to be seen as ‘an expert’ for our clients and sometimes may think this means that there are never any miss-steps or misunderstandings. Clients understand that nobody is perfect – what they are looking for is corrective action when something has not gone as expected. The interactions you have with your clients often have consequences you may not even be aware of – how they look to their team, their boss, maybe their clients. When you send a client survey and follow up in a timely manner, your clients grow in their trust that you will handle situations in a positive, professional manner. 

3. Creates Affirmation: Everybody wants to be appreciated and acknowledged. In fact it is such a basic human need, that we hear and read about client appreciation and satisfaction in a great many marketing materials. The reality is however, that more times than not, these are empty words and there are no actions behind the words.  When you send a client survey and follow up, your actions, not just your words, tell your client that you value them, their input, and their satisfaction. That is a very powerful message.

You may find it helpful to know that there is no ”right” way to go about evaluating your business growth plan (or knowing that might actually make you even more anxious!). There are however, several reliable tips for getting the most out of the effort. 

Tip # 1. Choose the right metrics

Using metrics to evaluate your business growth plan is a powerful strategy that can bring you greater focus. The key is knowing which key performance indicators (KPIs) to measure — and to do so, you need to really understand your business and what your version of success looks like. Start by considering such basic questions as:

• What are the three or four market forces or trends that will have the largest impact on your organization in over the coming year?
• What are your specific revenue objectives for the year, and for each quarter?
• What are the “soft” (that is, non-financial) criteria for success over the coming year?

Your answers to such questions will provide insights into what matters the most to your business. They’re also a springboard for choosing the metrics that will be most effective at measuring success. 

Small wonder that the use of metrics differs from firm to firm. For example, Full Sail Partners recently conducted a survey of client organizations and asked about which specific metrics they considered to be reliable growth indicators. Almost 9 in 10 (88%) identified revenue, while slightly less (70%) identified profit margin; a much smaller portion pointed to headcount or retention as indicators of growth. 

Tip # 2. Establish yearly and quarterly goals, and measure accordingly.

Create a business growth plan with goals not only for the company, but for each department as well. Ideally, you should measure every component of your business in terms of its performance against goals — your marketing staff, your project managers and teams, support and operations, sales, finance, and so on. 

Tip # 3. Keep your data fresh and reliable.

To be most effective, you need data in as close to real-time as possible. QuickBooks, Excel and other office applications can help in collecting and analyzing current data. Even more effective is a purpose built ERP, like Deltek Vision, that allows front and back office functions to share and collaborate on relevant data. Whatever tools you use to gather your metrics, be sure to automate the process as much as possible — that way, you and your people won’t spend all your time on number-gathering. 

Tip # 4. Get people involved and interested.

In our survey, we also asked firms which functional areas within their organizations took part in the development of KPIs to measure. More than half (58%) said that their finance and operations functions contributed to the establishment of KPIs, while another 17% said that HR also played a role. Don't forget to include marketing so they have visibility on how they can impact KPIs. It’s also a good policy to share metrics and results as you receive them — not only with management, but with all employees. Doing so helps to maintain transparency and leads to a culture where everyone is on the same page and motivated toward unified goals. 

Tip # 5. Keep tweaking.

For best results, you should plan on reevaluating and adjusting your metrics as your business priorities change. Every month, quarter, and fiscal year offers a new chance to refine your metrics and your business growth plan in order to drive growth. 

The power of metrics is within your reach!

When you invest time and thought into establishing, measuring, sharing, and refining your metrics, incredible things can happen. You’ll be pleased at how much more in sync you are with the state of your business, and how much more confident you’ll feel in making the critical decisions that can help you take your business to the next level.

For firms in the project-driven Professional Services industry, managing a defined set of tactical project management metrics is key to meeting strategic objectives.

Although it might seem efficient to have a single indicator of project success that measures the firm’s profit growth — for example, project profitability — there are pitfalls with such an approach. A better solution is to measure across a finite and efficient set of indicators that together track whether the firm is meeting its objectives, whether the specific goal relates to market penetration, service offering penetration or key account growth.

Project Management Metrics — collectively known as the Project Management KPI — fall into six major categories. One way to remember these categories is to use the acronym TRACQS. 

Is your project on TRACQS?

Time - How is the project tracking against schedule plans?

Keeping projects on schedule increases profit growth by lowering overhead and increasing labor margins. For example, when a project is off schedule and staff is reallocated it increases overhead to readjust the schedule may reduce realized utilization.

Metric calculation: Schedule Performance Index (SPI) = Earned Value of the work performed ÷ Planned Value of the work performed (to date).

Resources – Are we within anticipated limits of staff-hours spent?

Using staff and labor multipliers as budgeted is essential to maintaining project margins. When evaluating which resources to use, it is sometimes argued to use a more skilled person that will use fewer hours than a less experienced person. The thought is the margin will ended up the same. However, when this decision is made business development and client relations to do the production work can result in the firm’s backlog and pipeline suffering.

Metric calculation: Total Hours variance for budget vs. spent AND Labor Multiplier
Budgeted versus Labor Multiplier Attained.

Actions – Do we have action items outstanding or past due?

It may seem obvious, but without a metric tracking action items (completed, missed, and planned), project performance cannot be corrected. Maintaining visibility and monitoring deliverables can increase client satisfaction and reduce inefficient cycles of “catching the project up”.

Metric calculation: Number of project collaboration tasks that are past due.

Cost – How are we doing against the budget?

Monitoring this project performance metric provides direct insight into a firm’s profit growth.

Metric calculation: Cost Performance Index (CPI) = Budgeted Cost of the work performed ÷ Actual Cost of the work performed.  

Quality – Does client feedback indicate project success, or the need for correction?

On a regular basis, survey clients about results and milestones, based on meeting the client’s expectations to the deliverables.  There is little to no change that can affect the project, if you wait until the end of the project to conduct a survey, there is little to no change that can affect the project. A satisfied client results in more work (client retention), reference-ability (more clients) which are essential to firm growth.  

Metric calculation: A rating greater than X means quality, and anything less requires attention.

Scope – Is the scope staying within budget? If not, do we have authorization for variances
of planned from baseline?

Clearly define an agreed upon scope, the client’s role or responsibilities, and qualifying what constitutes a change in scope is an essential first step. When the scope has changed, documenting “why” will allow for margins to remain intact for
client requested change orders and allow management to take corrective action when the scope creep is due to the firm’s lack of performance to the initial scope.

Metric calculation: Comparing where planned exceeds baseline, and ensuring that original scope plus authorizations equal or exceed the estimate at completion.

Clearly, a firm needs to have mechanisms in place to measure these project management metrics. Almost as important, however, is finding a way to indicate variance from expected (budgeted) results in an easy-to-reference graphical format — e.g., blue for good, red for bad. Doing so will ensure that staff, project managers, and executives are all on the same page for tracking firm growth and responding to any obstacles or problems that may appear.

In the movie Casablanca, Humphrey Bogart’s character tells his café’s piano player, Sam, that a competing bar has offered to pay him double what Rick is paying him. Sam says he’s not interested, explaining, “I ain’t got time to spend the money I make here.” 

When professional services firms are swamped with work, they can be a bit like Sam the piano player. You might say, "I have too much on my plate, I don't have time to track the results." If you aren't tracking your performance then how do you know it's paying off? To make the most effective decisions, financial and otherwise, it's important to allow time to step back to see the bigger picture. Tracking your firm's performance results provides a number of bottom-line benefits to the firm. Here are our top five: 

1. See around corners.. First and most importantly, it allows you to spot emerging issues before they become major problems. For example, if you’re tracking employee utilization and the numbers start heading south, management can take steps to diagnose and fix the underlying problem, such as setting more realistic targets. Depending on the metric that is underperforming, your management can take other steps to nip problems in the bud.
2. Know who to hire, and when. A related benefit to measuring growth is that it can be crucial to effective resource planning. You can track the status of projects and determine whether you have sufficient staff on board to get the work done, and if not, how many and what type of new employees you need to hire in order to keep the work flowing and deadlines being met. A featured firm, SAGE Engineering, is an example of how this exact topic helped their firm grow.
3. Get more context. Monitoring relevant Key Performance Indicators (KPIs) can also provide you with useful data in benchmarking your firm, giving you a context against which to compare your own firm’s performance. Where is your firm in comparison to other firms in your industry allows you to understand what metrics growing firms are doing. Set your sights high! If you want to compete, do you really want to compare yourself to the 'average'?  See what high performing firms are accomplishing and understand what is impacting that growth.
4. Motivate! Don’t forget about the impact of metrics on employee motivation. Many of the top performing firms not only track a specialized set of KPIs, but also make them constantly available to employees. For firms that tie employee bonuses to certain KPIs, this can be a powerful motivator. In addition, the same tools and processes used to measure growth can be used to answer other questions that can affect employee motivation, such as: Are we remaining competitive?; Are we engaging our people?; Do we have loyal clients?; and others.
5. Build your value story. Last but hardly least, measuring growth can be highly beneficial to project based firms that are considering or may be the targets of a merger or acquisition. Deltek Vision provides an excellent solution to this need, by creating comprehensive, auditable paper trails that help a potential buyer or partner see exactly what the financial state of the organization is. 

When things are busy, it may be tempting to keep your head down and pound away at the keyboard (whether at a piano or a computer), with the hope that the financial picture will work itself out. However, you should be measuring growth continually, tracking your performance against your own past history, as well as against relevant competitors and other firms, and using the insights to inform your management decisions. 

Be sure to check out how SAGE Engineers, Inc. (SAGE) used a purpose-built ERP to bring rapid improvements to an organization and track their firm metrics against industry standards:

The business benchmarking process can be a powerful tool to help any organization make better decisions, run a tighter operation, and better position itself in the marketplace. For the best effect, it pays to use an approach that boils down to four key steps. 

1. Learn from others. If you’re new to benchmarking, it may be helpful to explore how other organizations do benchmarking, and see how your organization compares. Fortunately, there are many industry experts and organizations that share information about their benchmarking process. Some of our favorites are:

• Deltek
• Forrester
• Gartner
• Hinge Marketing
• IDC
• Society for Marketing Professional Services
• Vision Edge Marketing

Of course, there are enormous numbers of additional companies and organizations that benchmark as well, so you may want to explore further. 

2. Decide what’s important for you. The first step is to choose meaningful measurements to use as your standards or benchmarks. Key performance indicators (KPIs) in the form of financial and project-related statistics can provide meaningful insights into company performance, beginning with how your own company has performed over time. For most professional services firms, there are a variety of KPIs that can be helpful in giving an accurate reading on the organization’s financial and operational health. Some of the most widely used are:

• Accounts Receivable
• Average Collection Period 
• Chargeable Ratio
• Chargeable Ratio times Net Multiplier
• Current Ratio
• Debt to Equity Ratio
• Employee Realization
• Employee Utilization
• Estimate at Completion (EAC)
• Estimated to Complete (ETC)
• Net Multiplier
• Net Revenue per Technical Staff
• Net Revenue per Total Staff
• Overhead before Discretionary Distributions
• Profit on Net Revenues before Taxes and Distributions
• Return on Owners’ Equity

Consider which of these metrics truly measure success for your organization, and establish corresponding benchmarks. These can be based on your firm’s historical performance, industry surveys, standards specifically designed for the type of work, your firm’s general philosophy, or a combination of factors. When choosing which organizations against which to benchmark your organization, consider such factors as industry, geography, and size; the more similar they are to you, the more relevant and valid their metrics will be. 

3. Track the data. Once you’ve established which metrics to track, and corresponding benchmarks against which to gauge your firm’s performance, the next step is to start tracking. There are a variety of approaches for doing so, from one-off spreadsheets and workarounds (not recommended) to software packages, including accounting solutions that specifically track financial statistics and project management products that specialize in tracking data on individual projects.

A better alternative, however, is a purpose-built ERP such as Deltek Vision, which connects and organizes data from both the front office (i.e., project) function as well as the back office (accounting). This solution can provide a firm with up-to-the minute, comprehensive visibility into all the metrics listed above. Just as importantly, it serves to optimize oversight of the firm’s projects and staff, and automates a wide variety of essentially manual processes — including Customer Relationship Management (CRM), business development and more. 

Whether you use a combination of software programs or a comprehensive solution like Deltek Vision, the key is to collect metrics on an ongoing basis. 

4. Make data-driven decisions. The last part of the business benchmarking process basically closes the loop. It involves making sure the right data is getting to the people who need to see it in a timely fashion, and that there is a management commitment to using data to make decisions. 

For example, schedule-based metrics can help management determine not only if a project is currently on budget, but if it will finish within the overall budget as well. If the EAC is greater than the overall budget, management may choose to either reduce future expenditures or accept that the project will be over budget, and determine where the slippage occurred (such as failure to send out additional services contracts). Of course, this is just one example; management will have a variety of options and decisions to make, based on the specific metric that is underperforming, and how wide the deviation is from the desired benchmark. 

One of the keys to success in this part of the benchmarking process is ensuring that management has access to all the metrics they need at any given time. There are manual ways to gather and present this information to management, but automated KPI dashboards, one of the customizable features in Deltek Vision, are a much more efficient way to do so. 

The time to start is now

Whatever road you take to identifying and tracking your firm’s benchmarking information, the process will pay dividends as your firm gains a more relevant and up-to-date picture of its performance. Just as significantly, it allows the firm to be proactive rather than reactive in addressing underlying issues before they turn into major problems — thus increasing the probability of project and financial success.  

There are shelves and shelves full of books — actually, entire libraries — that offer insights into business process management. There is a simple reason for this: it’s one of the most fundamental and effective ways to improve firm growth. 

So what areas are involved in a business process evaluation? At a very high level, it’s about answering the big questions needed to effectively guide your firm, such as: 

• Are business objectives appropriate?
• Are key policies and plans effective?
• Do results validate business strategy?

At a more granular level, this type of inquiry involves examining existing business processes to find pain points, bottlenecks and inefficiencies that could be improved. In this regard, it’s a process that every business can benefit from — but especially firms that are project-based, such as professional services firms. For these types of companies, the exercise can point to solutions for: 

• Streamlining business processes, minimizing redundancy and saving money
• Gaining insight into operational metrics you can’t currently see — such as work backlog, etc.
• Making better decisions on uses of internal resources, based on up-to-the-minute data

Choices in Approach

How you conduct this type of self-examination depends on your goals, resources and desired return on expense/effort. For example, it could be highly focused, with internal staff looking at one particular process in one section of your organization. Or it could involve examining complex processes spanning several separate parts of the organization, which might require using an external consultant. 

When Full Sail Partners begins any new engagement with a client, we typically start with a business process evaluation. Generally this involves understanding our client’s various front and back office processes — potentially, all processes along the project lifecycle, including: 

• Business development tracking
• Estimating and business capture
• Project management and project profitability
• Employee utilization and realization
• Billing, A/R and firm financial reporting
• TQM

To appreciate the impact of a business process evaluation, consider the case of one of our clients, Wiss, Janney, Elstner Associates (WJE), a 500-person firm based in Northbrook, Illinois. Along with the client’s initial concerns, our evaluation identified an inefficient paper-based process for initiating new projects that required anywhere from several hours to several days per project. Following our business process evaluation and implementation of a paperless process, (among other improvements), the client was able to reduce the required time to a few minutes per project. That efficiency gain, multiplied by the approximately 7,000 projects that WJE handles each year, resulted in $1.8 million annual savings, according to WJE’s Controller. 

There are other potential gains of a business process evaluation that are not directly tied to process efficiencies. For example, it can provide visibility to timely and accurate data that helps leadership make better business decisions. This was an additional gain from the project at WJE; principals were able to see clearly the potential conflicts of servicing a new client, allowing them to forego business development expenses and effort on a client that could not be serviced. 

Another example is gaining visibility into an organization’s work backlog — knowing exactly how much work is in the pipeline, and even more importantly, whether one has the staff on hand to do the work (and if not, specifically what type of staff are needed to fill the gaps). As a result, a firm can make better decisions about whom to hire (and when), and which projects to pursue. 

Evaluating ways to improve efficiency and effectiveness is an essential part of guiding an enterprise. Whether it’s performed internally in a very focused way, on a broader level by an external firm, or somewhere in between, it has the potential of allowing you to reexamine and reengineer your standard operating procedures and in turn, drive greater efficiency and visibility. Both capabilities are critical to consistently delivering value to your clients — and increasing profitability and firm growth.

Interested in a business process evaluation? Contact us to begin the process.