One of the most critical determinants of success in professional services is the ability to “leverage” your highest valued resources. For professional services/consulting firms, that means you can get more out of your best people, which translates into more revenue and accelerated growth. What I find most intriguing is the large number of professional services organizations that don’t understand leverage or try to achieve it in a manner that is detrimental to their success. The ability to achieve a highly leveraged model is fundamental to growth and profitability in professional services.
How do Successful Firms achieve Leverage?
The difference between the firms that truly understand what leverage is all about and those who struggle with the concept is astronomical. Accenture has been developing and refining their highly leveraged model for 40 years. The number of firms who try to copy Accenture’s success, but refuse to acknowledge some of the fundamental reasons for that success surprises me. Accenture not only has an organization that gets the most mileage (and revenue) out of its stars, they also develop people more quickly and disseminate knowledge more rapidly than most of their competitors. They do a better job of learning from their successes and their failures. Accenture achieves leverage through its methodologies, its extensive training system, and its culture to mentor and share knowledge readily. On the other hand, PricewaterhouseCoopers (PWC) for many years achieved its leverage through its software. Someone once told me that PWC was more of a software company than a consulting firm. How true that is does not matter-they were able to capture their knowledge in their software, and then charge fees to customize and install that software multiple times.
The common thread between both the Accenture and PWC approaches is that the software and the methodologies both tend to free up more time for the high value consultants to focus on the unique and more complex issues faced by their clients. This not only adds value to the clients, thus justifying higher rates, it also enables the firms to generate far more revenue from their high value resources.
What can you do?
When I tell professional services organizations that they need to have more leverage, I am frequently told that they cannot afford it. The alarming thing about this is that leverage is much more critical to organizations in a growth mode when they have very few high value consultants than it is with a firm that has thousands of them. It is also alarming given that there are some fairly simple high impact solutions to this problem.
The first step of leveraging your most talented consultants over a broader range of projects requires a relatively small amount of effort, but the payback is significant. You want to leverage your technical architects, your business architects, and your thought leaders, and to a much lesser degree, your project managers. Project managers can be leveraged over a couple of jobs, or over several projects at the same client site, but many times firms try to spread project managers too thin, resulting in missed target dates, overruns, unprofitable projects and unhappy clients.
Depending on the current backlog, you might want to have your stars carry a workload of 3 to 5 clients or prospects. If you are concerned about how to backfill for them on their current projects, or get the clients to accept them in a part-time role, the following techniques may be helpful:
o Capture their unique knowledge in white papers or in your methodology.
o Measure them on their ability to educate and mentor less experienced staff.
o Have them conduct training sessions for less experienced consultants.
o Increase their billing rate to a point that clients are comfortable with their part-time role-the added revenue makes up for potentially lower utilization.
o Create chat rooms or communities of expertise to enhance sharing of knowledge and experiences.
If you are not doing some or all of the above, you are not creating a culture of sharing knowledge and embedding best practices into your methodology. You are probably setting yourself up for failure. These practices not only enable you to generate more revenue from your team, but they also expedite the professional development of your staff and thereby increase the value of your staff to your clients and to your firm.
Impact of Leverage on Growth Strategies:
In the explosion of Internet consulting firms that took place in 1999 and 2000, two prominent firms adopted two different models. Firm ‘A’ took the minimal leverage approach. They experienced a lot of success in two or three of their markets, but found it difficult to get traction in new markets. This was no surprise, as they never let their best people out of the Northeastern cities, while new offices struggled and failed in new geographies. Firm ‘B’, on the other hand, determined that quick penetration of new markets was critical to their growth plans. They developed a culture of sharing knowledge with an emphasis on teamwork. To help achieve this goal, they created the role of “catalysts” selecting technical experts who had been with the firm for some time. Through the use of catalysts, Firm “B” was able to disseminate their culture and technical proficiency rapidly into new markets. Catalysts were not committed to one office or one project. They were tasked with supporting multiple offices and jump starting new projects. Not only did catalysts provide expertise to remote project teams and sales teams, they also facilitated communications between offices, which provided a huge benefit.
Steps to take in Transition:
Many of you are trying to transform your professional services practices from a “body shop” model to a high value “solutions” model. The key to this transition is selling the client on letting you take responsibility for how you deploy your resources to achieve the project objectives. Under the body shop model you would more than likely commit people on a full-time basis. When your firm instead becomes accountable for delivering the total solution within a tight time frame and under considerable fee pressure, you must have full control over your resources. With full resource control and an effective methodology for delivering the solution, you can achieve greater degrees of leverage and manage your business more effectively.
The approaches highlighted in this paper serve to illustrate the concept and power of increasing leverage. There are other tools and techniques in use that help achieve the same objective, including:
o Knowledge Management system and tools
o Training Programs
o Feedback mechanisms
o Project structures
o Quality Assurance Programs
What you use depends on the specific nature of the services you offer. All of the items in the list will help to make you more effective and profitable. How and when you use them is the key to success.