For seven years, we at SPI Research have been benchmarking various levels of operational control and process maturity to determine the characteristics and appropriate behaviors for professional services organizations based on their organizational lifecycle stage.
What is the optimum level of maturity or control at each phase of an organization’s lifecycle?
Is it possible to build diagnostic tools for assessing and determining the health of key business processes?
Are there key business characteristics and behaviors that spell the difference between success and failure?
The original concept behind our PS Maturity Model was to investigate whether increasing levels of standardization in operating processes and management controls improves financial performance.
In fact, we found that high levels of performance have more to do with leadership focus, organizational alignment, effective business processes and disciplined execution than “time in grade.” Relatively young and fast-growing organizations can and do demonstrate surprisingly high levels of maturity and performance excellence if their charters are clear. The PS Maturity Model describes maturity guidelines and key performance measurements at each performance level.
The formula for improving professional services business performance has a lot in common with health improvement plans, weight loss plans and alcohol recovery programs — they all rely on an accurate diagnosis of the underlying issues that led to the problem in the first place. Obviously businesses have more important things to do than wander aimlessly to prove they’re going somewhere. You can create an improvement plan after you’ve first assessed the root causes of the problem.
Organizations are best served by seeking expert advice to develop valuable new growth opportunities before competition or lack of alignment has cornered the firm into a death spiral. As with all programs that require change, participants often don’t allocate the time, money or attention to fully develop and fund improvement priorities. Developing a lasting, sustainable growth strategy is hard especially when it involves change and building new management disciplines.
Over the past seven years, more than 10,000 PSOs have used the concepts and KPIs from SPI’s PS Maturity Model to pinpoint their organizations’ current maturity and develop improvement plans to advance in lagging areas.
SPI Research works with PS firms to create a maturity scorecard to compare to the benchmark maturity definitions.
For decades, information technology providers have touted the benefits of how their solutions improve real-time visibility. In the latest benchmark, 238 professional services executives shared the level of information visibility they had across their organization. The data shows that organizations with high levels of visibility grew and expanded their client base much faster. When an organization grows and expands the client base faster, it also improves in other aspects. The table also shows professional services organizations (PSOs) with high levels of visibility wasted less money on overhead because they stayed aligned and focused.
Likewise, those responsible for delivering services use professional services automation (PSA) solutions in order to better manage resources and service delivery.
The problem is that PSOs only operate at maximum efficiency and effectiveness if the information available to one department — such as sales, marketing or services delivery — is also available to others.
No doubt, the department responsible for services delivery and human resources would prefer to see what deals are in the pipeline and what their potential bid price is. Likewise, the sales organization must have visibility into the resources available so it can focus sales efforts on selling projects that best match resource capabilities. Having real-time information helps PSOs react faster and make the necessary changes to succeed. Many organizations, however, struggle to look at the prior quarters because the information may not be available for several months.
We believe that using an integrated information infrastructure improves organizational visibility across the entire PSO. No longer do employees have to make multiple phone calls to multiple people to get the message out.
Notice that PSOs without a CRM solution have a deal pipeline of approximately 161 percent of the current quarter forecast. This analysis applies to PSA solutions in terms of how having integrated solutions further improves the benefits as opposed to having a non-integrated solution. Few people doubt the importance of real-time visibility, but they want to see theory backed up by fact before pursuing it. PS executives who want to expand the organization rapidly and operate at high levels of both project margin and organizational profitability will want to do everything within their power and budget to provide the needed visibility to collaborate effectively. To accomplish this feat, PSOs must use their information infrastructure to their fullest advantage. Based on completed Professional Services Maturity benchmark surveys to date, we at SPI Research expect 2014 to be a strong year for professional services growth. But we wouldn’t say everything is rosy in professional services, as PS executives continue to convey their difficulty in finding, hiring and retaining highly qualified professional services employees. We expected this to be an issue for the next five to 10 years, and nothing has changed in last year’s assessment. Before digging into the latest findings, let’s review the key functional areas that we call pillars.
Leadership. This pillar represents the unique view of the future and the role the service organization will play in shaping it.
Client relationships. This pillar includes sales, marketing and partner relationships and effectiveness. Human capital alignment. This pillar focuses on recruiting, hiring, retaining and motivating a high-quality consulting staff.
Finance and operations. The financial backbone of a services firm that addresses planning, revenue, margin, billing, collections and IT infrastructure. Each Service Performance Pillar has guidelines and key performance measurements that correspond to levels of maturity, which provide a roadmap to service performance excellence. As expected, the latest scores reveal employees feel more confident about leadership and the PSO’s future. On the flip side, the talent cliff has yielded two challenges: 1) increasing sales and marketing and 2) meeting financial objectives. One change that’s evolving is the movement toward fixed fee engagements as opposed to the more traditional time and materials engagements.
Because of the talent cliff, we anticipate PSOs to look at their own employee base, investing in the needed skills for the organization to grow and prosper.
Since talent management will be the most important issue for the next decade, we asked questions related to the age and gender of the professional services workforce, as Table 1 shows. First, most might think of someone in professional services as a grey-haired business guru, but the fact is the majority of the workforce is made up of young, energetic professionals, just a few years removed from college. On-time project completion may be a potential problem, as it went from nearly 79 percent down to this year’s 75 percent. We’ve been monitoring two other critical key performance indicators: 1) annual revenue per billable consultant that looks at the efficiency and effectiveness of the consultants delivering services and 2) annual revenue per employee, which highlights the effectiveness of managing the workforce. To date, revenue per billable consultant sits at $190,000, down from $206,000 in 2012, a notable decrease that needs close monitoring. We are preparing to begin our seventh annual Professional Services Maturity Benchmark survey.
While the professional services market has grown more than 10 percent annually for the past two years, many professional services organizations still experience lackluster results. Although a long time coming, the North American market is finally stabilizing and recovering while the Europe, Middle East and Africa regions continue to traverse its sovereign debt crisis and China’s turbulent growth slows. With immigration being a sensitive topic for politicians and business leaders alike, many PSOs are going offshore to less developed regions to find personnel with adequate skills. The combination of a talent shortage and return to double-digit revenue growth have driven both billable utilization and the percentage of employees who are billable to higher levels than the past six years have seen. Another perennial area of concern and attention are all of the activities associated with the marketing, packaging and selling of services. While the ability to find and retain qualified consultants is still of primary concern, all PS executives must constantly keep their eye on sales. The Professional Services Maturity Model is specifically targeted toward billable PSOs that either exclusively sell and execute professional services or complement the sale of products with services. Organizations that operate at levels one and two average approximately 6.7 percent net profit, whereas those operating at levels four and five average almost 30 percent.
Six years of results and insights gained have confirmed the original hypothesis that services organizations must develop a balanced and holistic approach to improving all aspects of their business as they mature. More than 1,500 firms have participated in the PS Maturity Model Benchmark since its first year. Many of the firms, especially in the consulting sector, are heavily focused on growth and organizational profitability. In February, we introduced our sixth annual Professional Services Maturity benchmark with cumulative results from 1,059 PS organizations. Accustomed to high levels of growth, the professional services market saw annual revenue growth rates of 15 to 20 percent in the early 2000s. The 2012 survey showed an average growth rate that was almost 20 percent lower than 2011 growth, as shown in Figure 1.
Staff augmentation, at the bottom end of the market, is experiencing contraction and significant rate pressure. It’s no surprise that the greatest reported challenge for PS organizations is talent management, as skilled talent shortages have forced firms to revitalize college recruiting and invest significantly in employee development. One key performance indicator that has improved every year is the percentage of employees who are billable as compared to non-billable management, sales and administrative personnel.
Increased reliance on powerful integrated accounting, sales and professional services automation solutions has resulted in significant productivity improvements and fewer administrative roles. The average organizational profitability in this year’s survey is impressive, as it nearly tripled that of just two years ago.

Although client delight is always the number one PS priority, high profitability provides an excellent indicator of firm health. Sound management practices favoring long-term growth investments over short-term tactics will yield sustainable profits. Every year, we recognize the top 5 percent of benchmark participants with the annual “Best of the Best” award based on superlative overall maturity scores.
The leaders of the best-of-the-best firms have real-time visibility into and control over all aspects of the business. The most mature organizations are more likely to have implemented integrated accounting, CRM and PSA backbones to give them the real-time visibility they need to catch problems and spot negative trends before they spiral out of control. A focus on greater efficiency and productivity were major reasons for growth and success in 2012. The growth and success of the professional services marketplace comes from the organizations offering innovative services to help clients manage change and improve performance. The benchmark demonstrates that increasing levels of business process maturity do result in significant performance improvements as shown in Table 1. Further improvements accrue when an organization’s goals and measurements align with its mission, and investments are made in talent and systems to provide visibility and appropriate levels of business control. These guidelines illustrate examples of business process maturity while providing directional advice to move to the next level.
The funny thing is that they all start with you realizing you have a problem, and you’re sincerely interested in doing something to fix it. Lasting recovery depends on taking measurable steps toward an improvement goal, typically with the help of an expert coach.
Here again, having an empirical benchmark standard provides a fact-based reality check and objective yardstick of the value of improvement. It’s hard to change old habits, so the temptation to resume business-as-usual behaviors is strong.
The maturity model is not static as it reflects the dynamic and ever-changing PS industry and emerging best practices. The figure shows that approximately 10 percent said they had complete information visibility for making decisions in real time. Employees want to work for fast-growing organizations because they feel secure in their jobs, and they should be able to take on more responsibility, learn more and get paid more as they move up within a growing organization.
Most departments have their own solutions which offer real-time visibility for particular tasks. This helps departments work together to make sure the entire organization realizes more success.
This information helps ensure they have trained resources available at the right cost to deliver the services. It also allows them to more accurately plan long-term initiatives based on the latest information. Thus, the lack of real-time information hampers the ability to accurately spot marketplace trends that might impact service strategy. It becomes more relevant in light of all the new technologies, such as smart phones and tablets, which provide information access from almost anywhere and at any time.
This means they have slightly more than 60 percent more work proposed than is expected to be completed in the quarter. But if an organization integrates CRM with a core financial management solution such as enterprise resource planning (ERP), this jumps to 230 percent. It’s a powerful tool that lets them adapt to current conditions as quickly as possible to reach and exceed their organizations’ goals. Last year, we identified a talent cliff as a result of the market losing baby boomers and the struggle to replace them with a supply of qualified individuals with the appropriate science, technology, engineering and math (STEM) skills. This figure is significantly higher than in the last three years, when organizations averaged approximately 220 employees. Our hypothesis is that professional services organizations consist of five pillars that drive organizational performance.
Leaders develop a clear and compelling strategy, providing a focus for the organization to spur action. It starts with Level 1, where processes are immature and employee roles are broad, and progresses up to Level 5 where the organization, methodologies, tools and governance are synchronized and structured. For the past three years, PSOs have shown solid growth, thus increasing confidence and optimism. PSOs are struggling with finding qualified employees, which could slow growth rates and profits. Although we see their sales pipelines increasing to one of the highest levels ever, we also see that it takes almost 10 percent longer — about 105 days — to close deals compared to last year. Although specialization remains important, PSOs must have more agility and versatility in order to maintain high levels of billable utilization and keep employees motivated.
Currently, the average employee is 38 years old, and two-thirds of the employees are men, presenting several interesting trends.
With the average age in professional services approaching 40, it signifies an older employee base than our initial expectations. If someone said 90 percent of the workforce was comprised of men, most people would have believed it.
So far, the predictions remain accurate, as attrition lingers around 9 percent, when it was only 7.2 percent last year. Considering most of the other services execution metrics have improved, this key performance indicator most likely correlates with the talent cliff.
The good news is that the revenue per employee has risen from $168,000 in 2012 to $178,000 this year, an indicator that PS executives are moving to get their houses in order. Yes, in spite of the talent cliff negatively impacting the future growth for many PSOs and increasing attrition. Much has changed in seven years, as the economy went from boom times to bust almost overnight.
Professional services growth tends to be a leading indicator of the health of the overall economy because PS experts help organizations navigate change and growth while improving efficiency. Uneven market expansion combined with increased pricing and regulatory pressures have upped the ante regarding PSO efficiency and effectiveness. Regardless, for the professional services market to grow, it will need to incorporate a more active role in the development and retention of its talent. While these results show PS executives are more focused on eliminating overhead and non-billable staff time, there is a point at which voluntary employee attrition due to burnout and demand for higher compensation and benefits will begin to hurt these organizations.
Independent and embedded PSOs constantly look for rainmakers who combine industry and domain knowledge with the ability to grow business relationships and a book of business. Their focus is to create services that clearly demonstrate value to their clients, and to do it repeatedly.
Typically, at this time of year, PS executives begin their focus on next year’s goal setting. Based on vision, strategy and culture, this looks at how executives create a vision and supporting strategy and lead the organization to achieve. This area is based on how the organization markets and sells services while focused on growth and client retention.
This area looks at how the organization hires, develops, manages and retains its workforce. This area considers how the organization delivers services efficiency and quality at the forefront. This area is based on how the firm manages itself from a financial perspective, as well as on its reliance on information technology to support all operations. These guidelines cut across the five service dimensions, or pillars, to illustrate the benefits of business process maturity.
For example, although financial measurements are of primary importance, they are equally weighted and correlated with leadership and sales and quality measurements to ensure organizations improve across all dimensions, not just in terms of financial performance.
But many of the embedded services organizations, such as those responsible for implementing hardware and software sold by the parent company, are more focused on areas such as sales, client retention and expansion.
The results show the professional service market is experiencing high levels of growth across most market segments, including IT consulting, management consulting and managed services. As the global economy dipped into an extended recession, the PS market retrenched but not to the point of flat or negative growth. 2009 had the lowest point of year-over-year revenue growth, while 2007 was the most recent high point. This decline from 2011 could be a reaction to the European sovereign debt crisis and worry over the implementation of increased U.S. As for the upper end of the market, the demand for unique and specialized expertise is growing along with higher bill rates.
With economic improvement, we have seen a steady increase in attrition, bringing it on par with pre-recession levels as the war for skilled talent intensifies.
While this might not sound significant, it bodes well for profitability because there are now three billable consultants to every non-billable employee. However, as the percentage of senior management personnel continues to decline, it could cause operational and sales concerns for PS organizations.
Reductions in other supporting organizations such as human resources, finance, accounting, and service quality or engineering may compromise recruiting, employee development, financial management and quality.
For instance, quarterly non-billable expense went from $1,600 per employee to less than $1,300. Many profitability levers, such as cutting administrative, facility and discretionary travel expenses, are sound business practices for the long-term. For example, providing employee incentives helps drive performance improvements, revenue growth and profitability. Perennial winners share many common characteristics, with the main ones being constant management operational vigilance and respect for metrics.

They understand the impact of key metrics such as attrition, project overruns and excess overhead on bottom-line profitability. Their key focus and investment are in finding, hiring and retaining top-quality staff, yet they’re frugal in other areas such as expensive facilities and perks that don’t affect client and employee satisfaction.
2013 will require greater creativity as increased burdens such as health care costs and taxes could limit profitability and inhibit growth as PS organizations’ clients face similar challenges. As market dynamics change, leading PS organizations have adapted to take advantage of new technologies to create innovative solutions to help their clients. But the headwinds will be slightly stronger, and the need for repeatable service offers and organizational efficiency and effectiveness is critical if professional organizations want to remain competitive and profitable. But, as the entire market tumbled in the fourth quarter, technology service organizations were not immune to the ravages of the economic downturn. This study measures the correlation between process maturity, key performance measurements and service performance excellence. A good benchmark provides an apples-to-apples comparison to other professional services organizations in the same business. Diagnostic tools like the PS Maturity Scorecard help firms understand where they are now and what it will take to move up to the next level of maturity as shown in Figure 1.
Having an impartial yet knowledgeable business adviser can help reduce the emotional stress of change. This is a crucial stage for long-term, sustainable business enhancement because it defines the future path, whether change is possible and if the executive team is willing to see it through.
Progressing through maturity levels depends on adopting repeatable and sustainable methods, tools and measurement systems. At the end of the project, leaders not only understand the maturity model, but also have the tools to identify, frame and prioritize strategic improvement priorities required to accelerate performance. Still, what does this do to improve the bottom line in professional services?  We decided to consider only those 10 percent of the organizations (about 30 firms) who said they had complete information visibility and compare them to the rest. This means that for every 10 bids they submitted, they won about one more bid because of a more efficient and effective bidding process. For instance, sales and marketing personnel use client relationship management (CRM) solutions to manage the pipeline and better understand the services being sold and the price. If this information isn’t available at a detailed level, the organization can’t efficiently build its bench in order to start work on time.
For example, executives typically look back a quarter or two to determine where they have or haven’t been successful and where they should invest.
Now, executives, project managers and employees who deliver services have immediate access to any project-related data or changes in priority.
Unfortunately, most of the work in the pipeline won’t be won or will have a start date much later than the current quarter. It gives the organization a greater confidence margin, which allows the team to craft better proposals. The outcome is that this increase in broad, real-time visibility across the PSO helps everyone work with the same information and, therefore, align resources to achieve optimal results. If this rate holds, it will be the third consecutive year of annual growth in excess of 10 percent, showing the professional services market has fully recovered from the recession and is in the midst of a big growth surge!
It’s clear from the higher growth rates that employees feel positive about the direction the leadership has taken to get there. We expect resource management to play a larger role in 2014, as PS leaders must maximize their resources. Because PS executives demand more and receive greater control over their services spend, we expect fixed fee to be the dominant type soon.
Data says this market has changed, and the emergence of women in the consulting ranks has opened up greater opportunities and viewpoints. We’ve seen this rise in the past five years and expect to see the trend continue as the economy improves. While 75 percent or higher would be better, the past two years have shown the strongest average utilization in the benchmark’s seven years. The market cannot afford for on-time completion to go down for it will ultimately reduce growth rates, profitability and client satisfaction. Count on seeing changes in the next year with the need for mergers and acquisitions to grow firms. In the past two years, we have seen the professional services market regain momentum to traditional 10 percent-plus annual growth.
Research shows that professional services organizations are finding it increasingly difficult to find, hire and retain highly qualified staff with the skills necessary to succeed in a demanding market. In the upcoming survey, we will closely explore this topic, as it can affect the future of the overall economy. This evolution has given rise to the demand for packaged services, which our research began to discuss a few years ago. While the organizational charter might not change from year to year, each year brings new challenges and opportunities in the professional services industry.
And it goes up to level five, where the organization operates in a structured and repeatable mode of continuous improvement, eliminating much of the uncertainty and waste that negatively impacts other firms.
Higher levels of profitability naturally allow the firm to hire and retain the highest-quality employees, command the highest billable rates, and have money left to invest in growth, which in professional services is critically important to long-term survival. However, if the organization is profit-motivated, as most are, increasing maturity levels do show up in significant bottom-line profit. Excellence in only one particular service performance pillar does not create overall organizational success. However, the consistency that exists among all of them is their focus on delivering project-based services, and generally all are for-profit or part of a profit-driven product organization. Growth rates over 10 percent generally lead to hiring, while growth below that can be managed through efficiency gains, increased utilization and use of third-party contractors. This ratio reduces the pressure for excessive billable utilization because the chargeable workforce has to carry fewer non-billable staff. Monitoring this key performance indicator will help PS executives ensure that short-term profitability improvements don’t inhibit long-term growth and quality. Considering the 2011 benchmark showed average profit at 13.5 percent, this year’s survey shows the market is growing and profits are there for the taking. Annual non-billable administrative time per employee declined from 232 to 150 hours, giving each employee more than two weeks of additional time.
However, other profit levers such as staff, salary, bonus and training cuts may improve short-term profitability yet damage morale and growth over the long-term.
Employee, quality and infrastructure investments will lead to greater financial performance over the long haul. Each firm’s improvement path will be unique, but visualizing the road peers have taken and the timeframes and investments they have made helps chart an improvement roadmap.
Cement and reinforce improvement plans with quarterly check-ins and annual check-ups with the help of a coach and roadmap.
While few would argue with this construct, the question is, “How much more efficiency does real-time visibility provide?” We’ve explored this question for the past seven years in our annual Professional Services Maturity™ Benchmark. The net effect is a much more efficient organization, resulting in fewer cost overruns and 3 to 5 percent more in net earnings.
Executives can compare information taken from this week, last week and several prior weeks to precisely determine where to focus future efforts. They can immediately shift their focus to the most critical issues facing the organization. This evolution will force PSOs to concentrate on better service delivery and scoping projects properly.
We doubt the ratio will be 50-50 in the next few years, but it could get there over the next decade as more opportunities evolve for women. While on the surface this growth gives many PS executives optimism about the economy’s future, it comes with a few caveats.
Drive and innate business acumen must be cultivated over years, if not decades, to produce consulting leaders who can effectively develop new business. Clients combine our annual benchmark with their own assessments of strengths, weaknesses and opportunities. Rather, it’s the appropriate balance and alignment within and across performance pillars that ultimately leads to sustainable success.
Please take the time to download a copy of the benchmark survey so you can better understand the value this research could bring your organization.
Regardless, double-digit growth rates signify the strength of the global professional services market, making it a dependable source of revenue and profit, particularly in technology and management consulting services.
Unfortunately, PS organizations squandered most of this improvement on non-billable project hours, which went up from 196 to 225 hours.
Processes like the the PS Maturity Scorecard program help organizations avoid unnecessary potholes while focusing on the highest impact strategies. Maturity advancement requires continuous effort to take advantage of changing market dynamics.
The net result is the creation of a strategic and tactical plan for growth and improvement.
Or the heart of performance issues may be due to dysfunctional executive relationships and lack of alignment.
Preventing business setbacks requires maintaining healthy business measurements and controls. No one wants to work for an organization that faces financial challenges or loses market share.

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