The global professional services market is expected to reach $7.1 trillion in 2025 at a CAGR of 7%. ~ Global Newswire
This stat emphasizes that professional services businesses will continue to thrive in the coming years. One of the primary reasons for their growing prominence is the human resources in a PSO. They form the most valuable assets for service-based businesses as they have the knowledge base, intellect, and skills that help generate revenue and deliver value to clients.
Therefore, ensuring that the consultant pool is well-equipped with in-demand and evolving skills is imperative for PS firms to maintain a competitive edge. Efficient capacity planning can help organizations achieve the same. It enables firms to assess current and future requirements, analyze the demand vs. capacity gaps, and bridge them proactively to future-proof the workforce.
This article highlights how efficient capacity planning benefits a professional services company. It also explains how SAVIOM’s resource management software can help enhance it.
But first, let’s consider how ineffective planning can hamper a professional services firm.
How is Poor Capacity Planning Detrimental to a Professional Services Firm?
Due to inefficient capacity planning, professional service firms fail to identify and build a competent workforce for future projects. This makes it challenging to initiate appropriate resourcing measures to fulfill demands and bridge capacity gaps proactively. Thus, it can lead to last-minute firefighting for consultants and wrongful or expensive hiring, affecting the bottom line.
In addition, poor capacity planning can cause the improper allocation of under/over-skilled resources to projects. Consequently, this can negatively impact service quality, cause schedule/budget overruns, and poor customer retention.
Moreover, the lack of proper capacity planning results in unnecessary hiring/firing cycles. Managers who fail to foresee future skill requirements resort to last-minute hiring activities. Moreover, with no visibility into workforce schedules in real-time, managers fail to anticipate the resources scheduled for release from various projects, leading to an increase in bench size. When they cannot find suitable work for these benched people, it leads to disengagement, low productivity, and unplanned attrition.
Given the repercussions of poor planning, the following section explains how a firm can stay ahead of the curve by making it effective.
How Does Effective Capacity Planning Benefit a Professional Service Company?
A well-defined capacity planning framework is essential to a service-based business in several ways.
Here are a few prominent benefits.
2.1 Maximizes billable utilization of every consultant
Firms often fail to achieve optimal utilization rates for all professionals, directly affecting overall billability. When consultants are underutilized, it lowers their morale and engagement, affecting productivity. On the contrary, overutilization can cause burnout, hampering the quality of services and resulting in budget/schedule overruns.
Effective capacity planning helps managers foresee the utilization levels of consultants across the organization. This helps to implement measures like resource leveling and smoothing to prevent over utilization. In addition, they can also mobilize professionals from non-billable work to billable or critical tasks. This helps prevent the under/over-utilization of consultants and enhance the overall billable utilization.
2.2 Helps forward-plan pipeline consultancy projects
When managers cannot assess skill demands in advance, they resort to last-minute resourcing measures causing either a shortfall or an excess of consultants. A robust capacity planning framework enables professional services firms to get foresight into pipeline project demands, determine skill gaps, and bridge them ahead of time.
To avoid resource shortage, they can leverage skilled benched professionals, implement out rotation and backfill strategy, or hire and create the right mix of permanent/contingent workforce. To prevent consultant excess, they can bring forward project timelines, redistribute the excess capacity among other projects, or sell it at discounted charge-out rates.
2.3 Minimizes turnaround time for services
Firms often book consultants on multiple projects to maximize billability and increase revenue. However, sometimes they assign an under-skilled employee to a critical job, compromising service quality. At other times, they assign overqualified consultants to low-priority work, leading to disengagement. In cases where critically skilled consultants are constantly overbooked, burnout lowers their productivity and leads to unplanned attrition.
Capacity planning entails foreseeing consultants’ availability in advance and allocating them to projects as per their skills. It, thus, ensures competent allocation across all the projects and helps optimize their utilization. Moreover, when every consultant gets work matching their skills and availability, it increases productivity, thereby reducing turnaround times.
2.4 Facilitates diversification of services/operations
As professional services organizations rely on the workforce’s knowledge for sustenance and growth, maintaining an efficient and skilled consultant pool is pivotal in today’s hyper-competitive business landscape. Further, building new skills is paramount if a firm decides to venture into a new vertical for revenue growth.
An effective capacity planning strategy helps get foresight into the skills required for new services. Based on that analysis, the management can identify existing skill gaps and implement appropriate upskilling/training programs to equip the workforce with requisite skills. If required, firms can also initiate external hiring of competent consultants to fulfill the demands. This way, they can build a competent talent pool to take on new initiatives and contribute to the diversification of services.
2.5 Enables project delivery within time and budget
Without proper capacity planning, the delivery team would find it challenging to have the right-skilled personnel, which may trigger last-minute hiring. As a result, it can either cause wrongful hiring causing skill mismatch, or onboarding expensive consultants, resulting in budget overruns. It, in turn, can hamper deliverable quality, leading to client dissatisfaction.
Capacity planning helps delivery professionals foresee and assess the skill requirements of the deliverables. Accordingly, it can initiate hiring, upskilling/training, out rotation-backfill, etc., to create the right-skilled project team. This helps the firm deliver the project meeting the quality standards within the stipulated time and budget.
How Can Resource Management Software Help?
Saviom’s futuristic resource management software helps create a robust capacity planning framework for professional services organizations.
This tool provides capacity-vs-demand reports to help managers foresee pipeline project demands as they reach a certain probability of closure. A firm can also leverage the capacity-vs-demand report to understand the skills it may require for a new service vertical and take measures to equip the workforce with them.
It also provides project vacancy reports to facilitate a detailed analysis of skill requirements and determine if they are one-time or recurring. Accordingly, managers can initiate measures like hiring a permanent/contingent workforce or implementing upskilling/training programs.
The enterprise-wide visibility helps view resources’ attributes along with their current and future project or non-project bookings. It helps managers assign all the consultants to vacancies matching their skills and available capacity, thereby avoiding incompetent allocation and under/over utilization.
Capacity planning is an indispensable component of workforce management for a professional services firm. It helps identify and bridge the supply-demand gaps proactively and ensures on-time deliveries within budget.
Professional services can leverage a futuristic resource management solution to build a future-ready workforce and secure businesses against market volatility, economic uncertainties, and fast-evolving trends,
Interesting Related Article: “A Guide to Capacity Planning for Project Management“