Capacity. Utilization. Staffing. Workload. For those running professional services firms, these words probably make you want to pull your hair out. Why? Because they represent the holy grail for driving EBITDA margin, yet they are seemingly impossible to get right.
Walt Shill used to run Accenture’s North America business. According to Walt, it was a well-known joke at Accenture that “we were perfectly staffed for about three minutes a year.” This is a challenge across professional services, where sales cycles are longer and less predictable than other industries, and where your main input of expert labor hours are harder to scale up and down quickly. The line between being overstaffed (and losing money) and understaffed (and eroding quality of delivery) is often paper thin. At small firms, the timing of landing just one or two contracts might make the difference between a great year and closing your doors. At large firms, having an overflowing bench that is eroding margins will make for unhappy shareholders, while having zero bench and an inability to take on key projects will drive potential clients to competitors.
So, what do we do? Well, we don’t just throw up our hands. This is the world we’ve chosen to live in, so there must be a way to, at minimum, extend our effectiveness beyond just three minutes. While there are many levers we could look to (training time, flexible workforce, technology-driven efficiencies), what we will focus on today is pipeline visibility. The more clarity we have about incoming (and outgoing) work, the more certain we can be about the resources needed to deliver that work. This requires setting the right expectations with the sales team around how they’re creating opportunities and driving them forward, creating a structure that drives consistency across the organization, and maintaining accountability over time so teams understand that their actions are driving staffing decisions that impact the bottom line.
Expectations
When those responsible for growth in an organization have clear expectations around the sales processes they should be following, you stand a much better chance of seeing positive results. A few examples of this come in the form of data entry about incoming opportunities and pricing of projects.
When it comes to sales, every organization has its sandbaggers and its excessive optimists—and both create challenges. If the optimists consistently cause you to overstaff in preparation for projects that don’t come in, the sandbaggers consistently drop the new work announcements out of nowhere that the team isn’t staffed up for. The important caveat to this sandbagger action is that they knew this work was likely to come in and just didn’t share enough information in advance (often in an effort to avoid ‘jinxing’ it or avoid having to walk it back if they’re not 100% sure). Get your team to update their opportunities as if their bonus were based on the accuracy of what is going to happen, not the dollars they bring in, and see what the result is. You could even consider a portion of the bonus truly being on accuracy, given the bottom-line impacts of a predictable pipeline.
Another important expectation to make clear is pricing. If someone is submitting a proposal that would call for staffing of 10 new people on a project and would require hiring, the pricing needs to build in margin that allows for that. While this may seem obvious, we’ve seen it happen all too often that salespeople get excited about adding high-dollar contracts to grow top-line revenue while not taking into consideration that what they sold will actually erode the firm’s margin. A clear process and expectation around pricing structure is needed to avoid this.
Structure and CRM
Another key challenge we see teams run into is having their various sellers use the firm’s Customer Relationship Management (CRM) tool differently. This often comes in two main forms: using CRM differently for new logo work vs. for existing client work and various sellers using the sales process stages differently.
Not surprisingly, opportunities with new logos are often more up-to-date in the CRM than opportunities at existing accounts. If account leads are doing their job right, they’re constantly unearthing new opportunities at their accounts. Chatting with your client about ideas for how else you may help often doesn’t feel like “sales,” and can therefore go unreported as a new opportunity in the CRM.
“Yeah, we could absolutely expand the scope of this project next quarter to help with an additional implementation…”
“Yes, I’m happy to meet with your counterpart in the West Region to talk about how we could replicate our work with them later this year…”
The focus is often on client satisfaction rather than CRM updates, but if these opportunities don’t get added to the pipeline, it’s not a true reflection of the upcoming work, and the operations team has no visibility into the staffing that will be needed to support new projects or scope expansion.
Next, if you truly want to use your pipeline to predict staffing/hiring needs (and we all do!), teams must use the sales process stages consistently. A stage 1 opportunity for Tom can’t be the same as a stage 3 opportunity for Morgan. This lines up with aforementioned challenge around “sandbaggers” and “excessive optimists” but also requires the sales operations leadership to be very clear about what each stage means and to have auditing processes and trigger points to ensure accuracy. Do you require a proposal with clear pricing to move to stage 1? Does pricing need additional approval? At what stage do you begin to assign potential staffing to projects? Do we make the client (or prospect) aware of this to drive mutually escalating commitments? How does each stage factor into our budget and planning for hiring? Sellers also need to be good at moving opportunities back a stage when they get new information. With the long sales cycles we see in expert services, it may not be uncommon in your business to talk to a prospect for 1-2 years before a deal closes. That deal may progress smoothly, or it may seem on the brink of closing before moving back to stage 1 due to unexpected budget or leadership changes. Make sure the full team is clear on all these questions so that they have the resources they need to close sales while also understanding how their inputs are impacting the rest of the business.
Accountability
Accountability is your friend. If we want to be able to rely on a more accurate pipeline, we need to be able to trust the data in our CRM—and not just at one moment in time—but all the time. This means setting the expectations and creating the structures outlined above, and then holding people accountable to operating within those. Meet regularly and have people share their status report—in front of their peers. Are all their opportunities in the CRM? Are they in the right stages? Are they priced appropriately to support the staffing they need? Do they have clear plans for the next steps and what is needed to progress to the next stage—and importantly, the likely timing—to inform forecasted staffing needs? Holding these regular meetings will expose the sandbaggers and the excessive optimists; while part of these tendencies are just personality and won’t change, structure and accountability can help drive toward more of an equilibrium around predictability that is needed to enable effective staffing. Reminding sellers on a regular basis of the role they play—increasing or eroding the company’s margins based on their pipeline accuracy—can keep them accountable to driving better outcomes.
Whether you’re a 5-person consulting shop or a 500,000+ person global services firm, there’s no way to completely eliminate this challenge. Scaling expertise is hard; that’s why it is—and needs to be—a high margin business. But we’re an industry of problem solvers, and we can keep getting a little better at this each day. With the help of increasingly transformative CRM and account planning tools, we should have higher expectations around pipeline visibility and be better at forecasting our project needs—and we should be clear with our sales teams about those heightened expectations.
