Traditionally, professional services teams are measured on 3 main KPI’s: Billable Utilization, Revenue, and Gross Margin.
There are more nuanced variations, and some other KPI’s that are also often considered, but are along the same lines. Examples of those may be revenue per consultant, productive utilization (for customer work that’s not billable in the interest of higher customer satisfaction), professional services pipeline and bookings, NPS for PS, and Time to Value.
All of these KPI’s are valid to assess the state of the professional services business at your company but does it 1. Help with planning, and 2. Help with achieving better outcomes?
I would argue that the answer to both those questions is a resounding “NO”. While it may be used to predict some trends, those KPI’s have little predictive value because they are by their very nature trailing KPI’s. In addition, it may tell us something about the state of our own business, but does it really provide any insight into what outcomes will be achieved for our customers?
For example, we may run a perfect project, with high utilization, positive margins, and delivering on time, within the specifications of the product. But we may still have a highly unhappy customer with a likelihood of our product ending up as shelfware, and part of the 70% statistic of failed projects (per KPMG).
How do we get more predictive then? I would suggest that we need to establish and measure leading KPI’s in addition to the more established industry standards. My experience has taught me that the quality of outcomes dramatically improves if we do a few things up front, before the project starts. Those actions typically include gaining a great understanding of the expectations and how those align with our promise we made, the quality and depth of the contractual agreement, how much knowledge of both the domain and our product our customer has before we start, the quality of how the outcomes are captured as functional and technical requirements, and how we translate that into a plan that can be crisply executed.
I’m sure there are more, but those have served the teams I’ve led and worked with well over the years. So, the million-dollar question then is how to turn those into KPI’s? These are more difficult, as predictive measures typically are. (If I knew how to do this for the stock market I’d be sipping drinks on a beach somewhere). And do these predictive KPI’s focus on the right areas, of which surely the most important is the ability of our customer to extract the full value of what was envisioned with their investment?
While reserving the right to further develop and add to these, my proposal is that we add the following predictive KPI’s. As with the trailing indicators, these apply equally well for both individual engagements, and at the larger organizational level:
- Expectations to Product Match % – this describes how the out-of-the-box functionality aligns with the operational capability for the customer’s business to function better, and much work we (both us and our customers) really have to do to ensure a successful outcome. This may give some early insights into how much development work is needed, for example. The % range here, from experience, needs to be at least 7-% OOB matching for SaaS offerings. 30% or below has a good chance of ending up as a negative statistic.
- % of customer project stakeholders trained and certified – somewhat self-explanatory, but failing to measure and improve this as early as possible has downstream implications for both requirements and testing. The goal here is 100%, with 80% as a barely acceptable level. 50% or below virtually guarantees frustration, delays or worse.
- Planning completeness % – this relates to both the technical delivery process and resource planning. While no plans survive collisions with reality, the starting point needs to be detailed and widely communicated. Using a standard plan, all planning areas need to be addressed for task, time and resource across the combined vendor, customer, and advisory teams, as applicable. The benchmark is 90%, while 70% or less leads to confusion, delays and even cancellations.
I would hasten to add that the actions that are needed to improve these KPI’s have a profound impact on the successful outcome of engagements, and on the overall health of the professional services business. Abd we can hardly wait until we’ve raised invoices or approved timecards before we take corrective action or pat each other on the back. Getting buy-in from our customers and our own cross-functional teams around these KPI’s and striving to continuously raise the benchmarks will ensure that the trailing KPI’s also improve.
Happy to hear additional thoughts as we strive to improve customer outcomes and roll out KPIs that help us make continuous improvement decisions.