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Supply vs. demand: Striking the right balance in professional services with capacity management

Having the right people, in the right place, at the right time. This is the challenge faced by all professional services organizations (PSO).

Insights provided by a forecasted pipeline against staff bandwidth are vital to driving revenue growth. Even so, capacity management is more than a quantity of hours or days sold versus availability of personnel. There are multiple factors that impact the true capacity of a business and it is imperative the supply and demand balance is correct.

Large demand vs. low supply
Having a large pipeline and low availability of time looks good. It shows your sales team is landing deals and the delivery team is nearly maxed. At a glance, revenue appears to be strong and so does the company’s financial position.

Scratch the surface a little and maybe all is not as good as it seems. A large pipeline and low availability can cause resourcing delays, resulting in negative customer perception and the potential for lost deals. Furthermore, this scenario can negatively impact employee motivation by pushing them too much and leaving no time for personal growth.

What at first looked promising can actually be a pitfall.

It’s better to have growth and earnings that are sustained. The simple solution is to hire more people to increase availability and deliver all the work in the pipeline. Still, there are factors to consider when taking this approach:

  • Culture Fit: Hiring candidates that don’t fit your team culture just to fulfil demand can frustrate proven employees, slow down work, set back morale and increase overhead.
  • Timing: Be aware of your recruitment lead times. Can you hire the right people in time to meet customer timelines? You don’t want to over-promise.
  • Readiness: What is your ramp up time with new staff? You may have found the right people onboard, but how long will it be until they are operationally ready to deliver billable work to the standards your company and customer expects?

Hiring the right people is only part of the answer. You need to make sure they’ll be able to perform and meet customer’s deadlines.

Low demand vs high supply
Having a small pipeline and high availability of personnel is never a good situation. Low utilization and highly skilled employees sitting on the shelf usually means costs are high and revenues are low.

You may be confident deals will materialize – that this is only a momentary lull that actually provides personal development time for your employees. You might want to think twice.

An under-utilized employee can quickly turn into an unhappy one. If they are bored and not being challenged, they may seek greener pastures offering more excitement. Then again, they could misinterpret the downtime as their not being as valuable as they thought. This could prompt them to feel insecure in their position and look elsewhere.

The wrong blend
If your company offers a portfolio of products and services, selling a blend that doesn’t match employees skill sets can be disruptive to your business. You’ll have a large pipeline and high availability, which shouldn’t be. The wrong blend masks the operational capabilities of your company and the potential revenue that can be generated.

The downsides of the wrong blend are both sets of issues listed for the high and low scenarios. Unhappy customers, unhappy employees, high utilization for some delivery teams and low utilization for others. You may seem to be doing well financially, you could be doing better and this lack of capacity understanding will eventually cause a crash.

Striking the right balance
A solid pipeline of work and a team of amazing, productive people is “the sweet spot.” Everyone feels valued and they see the value of what they’re doing.

However, even under the best circumstances, there are other considerations to always keep in mind when looking at capacity management:

  • Modern culture: Your talent strategy should include offering a healthy work/life balance. Are your employees’ personal growth and development married with your company’s growth and internal performance metrics (utilisation and billibility rates)?
  • Work fit: When considering work, be sure it’s a fit your company’s strategy and objectives. Profitability is important but so is employee buy-in. Ask yourself is the project exciting? Interesting? Cool? Could it develop further marketable skills or lead to inroads in other segments?
  • Engagement: Always monitor to make sure you have the correct blend of skills and personalities on your team. Also, be sure the customer and your organization are going to be happy working together.

Finally, making the right decisions requires the right insight. Professional services automation (PSA) offers visibility of your capacity in a single source, with real-time data that will improve your overall operations and business planning.

When it comes to capacity management, features can keep you on top of personnel utilization and service status. Heat maps offer at-a-glance availability, there’s role and skill matching capabilities – even automated suggestions. You can also analyze the past and anticipate the future to more accurately forecast the pipeline and scope of work.

It’s all part of striking the right balance, and once you do, you’ll be able to deliver strategies, execute and achieve your desired business outcomes.

If you’d like to learn more about using a PSA platform for capacity management, talk to us!

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