The reliance on professional services in SaaS and Consulting has largely become a necessity for organizations seeking to enhance their operations, install and leverage emerging technologies, as well as drive business growth and scale revenue. However, the efficacy of these services can vary significantly from one provider to another. To ensure that your organization delivers high-quality and value-added services, it's crucial to assess the maturity of your professional services organization. In this comprehensive guide, we will delve into the varied intricacies in evaluating your professional services maturity, offering insights and actionable steps to empower decision-makers in selecting the right partners.
UNDERSTANDING PROFESSIONAL SERVICES MATURITY
The maturity of Professional Services is the functional capability to hit targets. Function is a multifaceted concept, encompassing the level of sophistication, capability, and overall effectiveness that a service provider has in delivering solutions to clients. The model is a framework that can be used to assess the maturity of the function. It involves evaluating various dimensions, including organizational processes, employee skills, technology adoption, and the overall delivery of services. The goal is to gain a deeper understanding of a provider's ability to meet client needs and drive successful outcomes.
A simple way to understand PS maturity and how you can assess your own would be to imagine a map. You know your destination, but you're unsure of the route you need to take to get there. Understanding where you are on the map is the only way you can plan a route from A to B. This is the same for understanding your professional services maturity to become a more mature organization. Without assessing where you currently are, and how mature all of your current functions are, it will be much more difficult to develop actionable plans to become a more mature PSO.
Below highlights the core foundational elements of those in their early stages. Looking for more information? Take a look at our guide, Understanding Professional Services Maturity here. Often the best way to benchmark your maturity is to place it for yourself. At Precursive, we have developed our own model to help all professional services organizations to navigate the growth of their PS function. You can find that here.
KEY FOUNDATIONS OF PROFESSIONAL SERVICES MATURITY
In seeking to comprehend your professional services maturity, and how it can be used to your advantage, the most effective way of doing this is to start from the ground up; the core foundations of a professional services function; in effect what an immature organization looks like. The “pillars” of PS are explored below in relation to this lens.
Resource Management
Effective Resource Management (RM) enables professional services organizations to optimize staff deployment by providing insights into workloads, availability, skills and more. There are foundational elements of RM that appear for less mature PSOs in order to manage people and projects. For example, PSOs are beginning to forecast their workload, which is key to establishing consistent resource allocation processes.
These are still very much the basics, however, and there’s still a long way to go for companies to increase efficiency, chief of which being introducing repeatable processes of managing resources. SPI research indicates that effectiveness within resource management processes increases in direct correlation with an organization’s maturity, namely due to the improvised nature of resource deployment for those at low levels of maturity. There is a noticeable difference in the resource management process effectiveness for companies at either end of the maturity spectrum, with the most mature companies having around a 25% increase compared to less mature PSOs. The key difference between the extremes is when resource management becomes more strategic and aligned with business objectives. The transition from the ad-hoc style of resource allocation to a proactive and optimized approach contributes to increased project success rates, improved efficiency, and better utilization of available resources, often supported by automations.
Pricing
According to the SPI research, the highest-performing PS organizations win north of 80% of their bids. This suggests that they had their pricing spot on in order to win these bids. The higher performing PSOs could have the ‘right’ pricing for a few reasons. More mature organizations not only have higher quarterly bookings, but are also considerably more profitable than less mature companies. This could mean that higher performing PSOs can afford to offer more competitive prices, and with price being one of the key determinants for organizations when searching for vendors, a lower price could help win a significant number of deals. Organizations that are a few levels further down in terms of maturity, will unlikely share this luxury, and with lower profit margins, may not be able to justify lowering prices to increase sales.
Implementing a PSA Solution
In professional services, PSA is the core solution to maximize operational efficiency. Of the high-performing PSOs featured in the SPI benchmark, 82% of these utilized a PSA solution. A powerful PSA tool like Precursive can improve and automate a wide range of PS activities from selling through project delivery and accounting including resourcing, time tracking and billing. SPI research also shows that companies with a PSA solution generate 36% more PS revenue, so for less mature companies, there’s no time like the present to make a business case for automation and implement PSA. Less mature businesses should look towards integrating a PSA solution when they are starting to see some benefits from automating certain repeatable tasks and processes. That way the company has already begun to see the positive effects of software tools. Using a fully fledged PSA tool too early may not help achieve the desired effects, as some members of the team may still be skeptical of adopting software where manual efforts have been previously relied on. Adopting a culture that welcomes a PSA solution first is ideal as it means everyone can learn how to utilize it to their advantage from when a tool is eventually utilized.
If you're looking for a powerful PSA solution to kickstart your maturity journey, look no further than Precursive. Our PSA software uses the Salesforce reporting engine to forecast and track revenue and margin, allowing you to have greater control when it comes to delivery in order to boost profitability. Take a look below at how Precursive helps with your professional services delivery:
Project Management: Improve your services delivery to improve margins and improve the client experience you provide
Resource Planning: Mobilize people with the right skills and eliminate capacity crunches to improve time-to-value
Revenue Management: Simplify tracking time and optimize billable utilization for accurate billing to your customers
Hiring Talent
If you’re a PS leader and you decide to commit to efforts that progress your function’s maturity, it’s an ethos that should be adopted throughout the business, from top to bottom. Improving talent is an optimal way to improve overall results. SPI research highlights the clear growth in billable hours for those PSOs that have set out to improve organizational maturity. Productive hours increase while non-productive administrative hours drop drastically, leaving more time for personal time-off and education. An increase in billable hours means increased revenue, and can improve profitability, especially when the cost of delivering services remains relatively consistent. Conversely, companies in the early stages of maturity will be competing with organizations further along in their maturity journey for the top talent, as well as to retain their own talent. What’s key here is that every new hire understands the vision of the company, namely its desire to scale effectiveness through sustainable operating practices. This stems from mature leadership, and it will be key if you want to hire staff that fit the level of maturity you want to achieve rather than the stage at which you’re currently residing.
Vision
A company’s vision shapes its future as it determines all targets and activities going forward, as well as the desired ethos for the whole team. A poorly-executed vision spells disaster for any PSO looking to become more mature. Naturally, a company’s vision will be set by its leaders, so good leadership goes hand-in-hand with an effective vision. Less mature companies will not have a clear vision, and there will be a limited understanding on how services activities will likely impact stakeholder outcomes. SPI research examined this effect of leadership on company performance; companies with a lower leadership maturity score saw lower employee billable utilization, lower annual revenue and project margin, compared to PSOs with a conversely higher maturity score. This highlights the fact that effective leadership has a significant impact on all aspects of PS performance.
Leadership skills and competencies need to mature in line with the organization. The best PS leaders will possess a unique view of the future as well as knowing the role in which professional services can play in shaping it. Such core leadership processes include the defining and setting of strategies, business planning and goal setting. A services vision is a key that can ultimately make or break a PSO depending on its clarity and foursight.
Commercial
The commercial side of a professional services organization primarily looks at ways to maximize revenue generation, and acquiring clients and building these relationships. There needs to be synergy between the sales and services teams, and generating leads, managing sales pipelines, and closing deals are all top priority. The cornerstone of building client relationships is to master the ability to communicate effectively with employees, partners and customers to win more business deals. To employ an effective commercial strategy, companies will need to develop a clear and compelling go-to-market strategy, clearly defining target customers, their requirements, and how the PSO’s solution can solve challenges they are facing. Effective client relationships equals greater growth because a PSO’s deal pipeline will increase, allowing them to win more bids and build a backlog.
Improving the commercial maturity within a PSO often necessitates defined handoffs to promote partnership between teams. This, along with repeatable sales processes builds a solid structure and encourages collaboration not only with internal teams, but also with clients. Improving client maturity brings significant advantages when it comes to market expansion and the size of the sales pipeline. Less mature organizations will see poorer client “referenceability” and net promoter scores. Improving this is key as it will lead to more referrals, more customers and larger projects. SPI research shows that although the percentage of current clients using existing services is the same for less mature and more mature PSO’s alike, the percentage of referenceable clients, the percentage of bids won, and the deal pipeline are all significantly higher for mature PSOs than their less mature counterparts.
Services Execution
Services execution surrounds the quality, efficiency and repeatability of service delivery, and how it can be measured. It focuses on a company’s core activities for planning, scheduling and delivering service engagements. This is one of the most important PS functions because regardless of the maturity of every other PS function, none will succeed unless a company can successfully and profitably deliver services, while prioritizing quality and timelines.
Among some key performance measurements by maturity, data indicated that for early-stage PSOs, the percentage of projects delivered on-time was 70%, compared to 83% for more mature companies. With this figure rising as companies become more mature, there could be multiple elements at play here. For example, companies that achieve more maturity will inevitably invest in a powerful PSA solution. This can eliminate tedious, repetitive tasks from the to-do list which can free up teams to focus on the bigger, more important tasks.
Finance & Operations
The finance & operations function of a PSO has a focus on revenue, margin and cost, and the financial and contractual operating processes that are required to run a profitable business with predictive revenue. Companies in the early stages of their maturity journey will likely have an ad-hoc approach when it comes to financial strategy, making it difficult for them to track performance accurately. These companies will be lacking a structured financial management process, which will significantly reduce their ability to consistently track and analyze KPIs and financial metrics. This lack of visibility hampers the organization's ability to make informed strategic decisions based on reliable data. SPI’s data indicates that profitability for mature companies is over three-times higher than companies at the lower end of maturity. Profitability however is driven by many areas, not just one, so PS leaders must examine the whole organization and its functions to begin improvement.
HOW TO ASSESS PROFESSIONAL SERVICES MATURITY
Now that we have a better understanding of the parts that make up professional services maturity, what’s next is to think about the actions you can do to get a further grip on the concept. Assessment of professional services maturity is crucial for every business, as it will be a unique set of challenges and tackling it head on is the best way to make it work for you.
Assessing your own professional services maturity is a crucial step toward enhancing the effectiveness and quality of the services you provide. This self-assessment involves evaluating various aspects of your organizational processes, employee capabilities, technological infrastructure, client relationships, and commitment to continuous improvement. Check out our table below that shows how you can assess your own maturity when it comes to the functions we’ve outlined above.
FOUNDATION | DESCRIPTION | HOW TO ASSESS |
Resource Management | Resource management in the early stages is very reactive. This can lead to a lack of consistency and may result in resources being placed on the wrong task or project. Resources can be allocated without rhyme or reason, and can be overextended across various tasks without a clear understanding of the requirements. | Evaluate the organization's capacity planning processes. Assess whether there is a systematic approach to balancing workloads, identifying bottlenecks, and optimizing resource allocation. It is also crucial to Identify and categorize the key resources your organization manages, including human resources, financial resources, equipment, and technology. |
Pricing | Pricing is a very complex issue, in which the more profitable companies and ones with more revenue can afford to take more risks. Less mature companies will earn more revenue, so to remain competitive can often oppose being more profitable. | Look at your percentage of deals won. This will give you an indicator of whether people are reacting well to your pricing structure. There may of course be other factors at play, but it would be a good basis from which to work. Creating a survey to send out to both current customers, as well as prospective and churned ones could help get you some answers regarding your pricing. |
Implementing a PSA System | A good PSA solution can help to alleviate the pressure of a lot of items in this table. Automating tasks frees up valuable time, can reduce errors, and helps to create standardized processes that are strictly followed from the ground up. This means fewer ad hoc operational processes and reactive decision-making is significantly reduced. | Book a demo with a PSA provider. They will guide you through the power of the tool, as well as explaining how it can be used to specifically help your business. Every PSO has unique requirements and you can learn how the different functions of a PSA tool can help you achieve organizational excellence. |
Hiring Talent | In order for a PSO to jump to the next stage of maturity, this ethos and all accompanying strategies have to not only be understood, but encouraged by every member of the team. Hiring any new talent to achieve this goal means they are walking into an environment where maturity is prioritized from day one. | If your billable utilization is lower than you’d like, then you should make it a priority to find the cause, whether that is poor processes causing snags, or workers themselves not working at full capacity. Perhaps workers’ skills are not being properly utilized, causing employees to be misallocated, or maybe it’s time to bring in the talent which better reflects the level of maturity you want to achieve. |
Vision | A successful PSO leads from the front, and will want to set a clear vision that is both ambitious and achievable. A lower leadership maturity score sees lower KPIs across the board. This highlights the significance of effective leadership and how it can both positively and negatively influence organizational success in almost every key PS function. | SPI Research has developed a Leadership index that focuses on the most important aspects of leadership to measure its impact. This takes into account several KPIs such as effective communication, aligned goals, and well understood vision to assess whether a company’s leadership is leading to success or further challenges. Once you know this score for your own organization this can help to determine a different strategy to utilize the skills of the PS leader. Ultimately your leadership maturity needs to reflect where you want to be rather than where you are currently. |
Commercial | One of the key factors in a PSO’s commercial success is improving client relationships. Cultivating positive client relationships is the key to building your sales pipeline and reducing churn. Not only will it build existing relationships, but client referenceability will lead to more referrals and thus more customers. Efficient communication must be demonstrated internally as well, and transparency between sales and services teams is vital to ensure deals get over the line. | There are a number of success-led PS metrics that help to ascertain a client’s happiness with your service. For example, the implementation net promoter score (NPS) is a way of measuring customer sentiment at different points of a services engagement, and gives you an idea of their likelihood to recommend your services. Another one is the CSAT score which is used to quantify how satisfied your customers are with your services delivery. |
Services Execution | Ensuring projects are delivered on-time is vital for customer satisfaction and long-term customer relationships. The percentage of projects or services successfully delivered on time is a key indicator of the level of your professional services maturity. | Calculate the percentage of projects or jobs that are delivered on time. Based solely on the research provided by SPI, your figure could indicate how mature your delivery function is by comparing your percentage to the average for PSOs at differing stages of maturity. Focus on getting your figure similar to those of more mature organizations. |
Finance & Operations | A company’s finance and operations function is the key to running a profitable business. This is only possible through a sound financial strategy that allows easy tracking of performance and financial metrics. Without this visibility, it is unlikely that a PSO will run financially sustainable operations. | With many ad-hoc strategies in place for companies at the lower end of the maturity spectrum, it is important to assess all current financial strategies to see if any could become repeatable. A repeatable process not only helps to reduce errors, but for financial operations it can provide a basis going forward of more accurate data which can be used to forecast and encourage more proactive long-term planning. |
WHAT NEXT?
To truly understand an idea, there are two things you must have, knowledge of the basics at least, and actionable steps to deepen your unique relationship with the concept. With this in mind, professional services maturity is a complex topic, but you should now have a better understanding of its building blocks and what you can do to make it count for your organization.
Understanding your own professional services maturity provides insight into your capabilities for each part of your business, which can help facilitate targeted improvements and enhanced efficiency in service delivery. This self-awareness fosters a proactive approach to continuous improvement, allowing organizations to align their services with industry best practices and meet client expectations.
Looking for more? Take a look at our webinar, 'The Anatomy of World Class Services in 2024' that took place last month. Check out the topics that we covered below:
Improving alignment with Sales with well designed Services offerings
Intelligent organization design and the must-have roles in Professional Services
Lessons learned in scaling PS Revenue from $30M - $150M
