professional services: how leaders harness talent and grow margins

Professional ServicesHow Leaders Harness Talent and Grow Margins

SPISPIResearchResearch

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Speakers

R. David Hofferberth, P.E.Managing DirectorService Performance Insight

Betsy Bland Vice President - Financials Workday

MJ GuruField StrategistWorkday

Join the conversation #WDAY @Workday | @SPI_Research


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Today’s Agenda

Professional Services

Market Trends

Introduction to Workday PSA

Expected Customer Benefits

Product Demo

www.spiresearch.comCopyright © 2015 Service Performance Insight All rights reserved. Not for distribution.

Introduction

6

Service Performance Insight (SPI Research) is a global research, consulting and training organization dedicated to help professional service organizations (PSOs) make quantum improvements in productivity and profit. In 2007, SPI developed the PS Maturity Model™ as a strategic planning and management framework. It is now the industry-leading performance improvement tool used by over 10,000 service and project-oriented organizations to chart their course to service excellence.

The core tenet of the PS Maturity Model™ is PSOs achieve success through the optimization of five Service Performance Pillars™:

1. Leadership – Vision, Strategy and Culture

2. Client Relationships3. Human Capital Alignment4. Service Execution5. Finance and Operations

SPI provides a unique depth of operating experience combined with unsurpassed analytic capability. We not only diagnose areas for improvement but also provide the business value of change. We then work collaboratively with our clients to create new management processes to transform and ignite performance.


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10

20

30

40

50

60

70

Observation

Matu

rity S

core

The PS Maturity™ Model

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220 firms, 9 PS markets70% NA, 21% EUR, 9% APac


Human Capital Maturity Matters!220 PSOs

8

Levels 1 & 2 Level 3 Levels 4 & 5

Percentage of firms surveyed 55% 25% 20%

Year-over-year change in PS revenue 8.2% 10.6% 13.9%

% of employees billable or chargeable 71.4% 76.9% 82.6%

Employee ramp time (days) 137 121 104

Employee billable utilization 66.1% 73.6% 79.4%

Projects delivered on-time 73.6% 79.7% 88.2%

Annual revenue per billable consultant (k) $184 $204 $219

Annual revenue per employee (k) $151 $176 $189

Profit (EBITDA) 1.4% 12.3% 29.8%


Inconsistent Profit5-year trend

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2010 2011 2012 2013 20140%

2%

4%

6%

8%

10%

12%

14%

16%

18%

50%51%52%53%54%55%56%57%58%59%60%

16.1%

13.5%

16.8%

11.4%13.2%

58.8%

52.8%

54.7%

51.7%

58.8%

Year

EBIT

DA

% o

f T&M

Pro

jects


Billable utilization rises, but so does attrition

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2010 2011 2012 2013 20145.0%5.5%6.0%6.5%7.0%7.5%8.0%8.5%9.0%9.5%

10.0%

6.78%

7.41% 7.24%

8.27%

8.90%

Employee Attrition

2010 2011 2012 2013 201465%

66%

67%

68%

69%

70%

71%

72%

67.5%

69.6%70.3% 70.1%

71.0%

Employee Billable Utilization


Employee Attrition Hurts!

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Attrition % of Obs. Revenue Growth

Billable Utilization Project Margin Rev. / Billable

Employee (k)Revenue

Employee (k) EBITDA

None 9.8% 14.2% 69.5% 35.0% $217 $194 19.3%

1% - 5% 29.8% 8.0% 68.4% 34.8% $187 $155 15.7%

5% - 10% 23.9% 10.8% 70.5% 37.1% $202 $174 12.8%

10% - 15% 18.5% 11.4% 74.1% 33.8% $208 $181 10.3%

15% - 25% 15.1% 7.7% 72.8% 34.9% $193 $160 10.5%

Over 25% 2.9% 0.4% 69.2% 36.3% $179 $105 5.2%

Total / Avg. 100.0% 9.6% 70.8% 35.2% $198 $167 13.1%


What does SPI Research see as the biggest concerns for Talent Management in the next few years?

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Leadership Development & Succession Planning – Who, how, internal/external

Talent Pool – Talent Cliff, STEM, H1B, Boomers, Millennials

Hiring / Onboarding / Retention – Speed, cost, quality, compensation (pay, bonus, benefits, leave), collaboration, training (technical, personal), personal preferences

Delivery – Resource management, availability, 3rd party, utilization, quality


Each Department is Dependent on Others

• Services offered• Competitive

positioning• Market expansionExecutive

• Revenue / Emp.• Backlog• DSO• EBITDA Accounting

& Finance

• Time & expense• Project margin• Invoicing Service

DeliveryMarketing

& Sales

• Mktg. & Sales cost• Pipeline• Bid price• Client profitability

Human Resources

• Employee cost• Recruit/hire• Pay• Benefits• Training

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How do the Millennials compare to the Baby Boomers and how should the organization change?

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Age of Workforce % of Obs. Growth Attrition Billable

Utilization On-time Delivery

Rev. / Billable Employee (k)

Revenue Employee

(k)EBITDA

Under 35 18.5% 15.6% 9.7% 72.3% 76.3% $152 $124 16.3%

35 - 40 36.0% 10.2% 10.3% 71.4% 75.6% $198 $163 8.4%

40 - 45 30.5% 7.6% 9.0% 71.4% 80.7% $208 $174 11.6%

Over 45 15.0% 8.7% 4.0% 66.2% 82.9% $226 $200 20.7%

Total / Avg. 100.0% 10.2% 8.8% 70.8% 78.4% $197 $165 12.7%


As Organizations Grow, So Do Inefficiencies

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Org. Size (employees) % of Obs. Employee

AttritionRamp Time

(Days)New

Clients Bid-to-win

Ratio% of Emp.

located at/near HQ

Executive Real-time Visibility

EBITDA

Under 10 10.0% 4.4% 103 31.8% 5.69 65.6% 3.95 16.6%

10 - 30 22.3% 6.0% 131 29.9% 4.90 66.3% 3.58 14.6%

31 - 100 30.9% 9.4% 128 29.3% 4.80 51.5% 3.68 12.4%

101 - 300 20.0% 12.5% 121 29.0% 4.63 39.4% 3.45 10.6%

301 - 700 10.0% 11.2% 129 25.2% 4.55 27.4% 3.37 15.5%

Over 700 6.8% 7.8% 141 25.7% 5.77 28.0% 3.25 11.1%

Total / Avg. 100.0% 8.9% 126 29.0% 4.92 50.5% 3.58 13.2%


Use Information to Drive Visibility, Efficiency and Control

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Client Relationship Management (CRM)

• Map client needs• Look for up-sell / cross-sell potential• Optimize selling price• Build pipeline• Improve client satisfaction

Human Capital Management (HCM)

• Optimize resource pool• Manage employee cost• Develop compensation structure• Improve employee development• Reduce staffing cost

Professional Services Automation (PSA)

• Improve resource management•Collect project costs•Utilize PMO• Increase services delivery quality• Reduce service delivery cost• Reduce delivery time

Enterprise Resource Planning (ERP)

• Manage cash flow• Improve DSO• Improve margins• Manage all practices

Business Intelligence (BI)

• Exploit strategic advantage• Focus on organizational improvement• Analyze business processes

Refine strategy based on analysis• Determine “optimal” services, clients, etc.

SellStaff Deliver Collect

Analyze


Leading Firms Utilize PSA

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Determine the services with the highest potential for growth and profit and focus

on hiring and retentionPlan Optimally

Sell services with available skill sets, price to optimize revenue and profitIncrease Sales

Focus on skills in demand, develop compensation and training to minimize

attritionOptimize Talent

Efficiently manage resources, projects, time, quality and cost

Deliver Efficiently and Effectively

Manage profit per consultant, client, practice, region, etc.Maximize Profit

Key Performance Indicator (KPI) With PSA

WithoutPSA ▲

Year-over-year change in PS revenue 10.3% 9.0% 14%

% of employees billable or chargeable 76.6% 68.5% 12%

Bid-to-win ratio (per 10 bids) 207% 170% 22%

Employee billable utilization 71.7% 67.4% 6%

Quarterly revenue target in backlog 50.1% 41.3% 21%

Project Margin 37.0% 30.9% 20%

Annual revenue per billable consultant (k) $199 $188 6%

EBITDA % 14.2% 8.2% 74%


Integrated PSA Increases Performance and Profit

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Key Performance Indicator (KPI)

With Non-Integrated PSA

With Integrated PSA

Without PSA

Bid-to-win ratio (per 10 bids) 4.45 4.83 5.14

Annual revenue per billable consultant (k) $188 $189 $205

62.0%A standardized delivery methodology is used 64.2% 69.2%

EBITDA 8.2% 13.8% 14.4%

% of employees billable or chargeable 68.5% 76.1% 76.9%


Get the red out in Human Capital

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Organizational Demographics Consulting Rus Peer Average

Survey Average Level 1 Level 2 Level 3 Level 4 Level 5

Year-over-year change in PS revenue 0% - 5% 11.71% 9.96% Year-over-year change in PS headcount 0% - 5% 10.18% 8.12% % of employees billable or chargeable 60% - 70% 76.2% 75.1% % of PS revenue delivered by 3rd-parties 1% - 5% 12.9% 12.3% Well understood vision, mission and strategy 5 3.84 3.81 Confidence in PS leadership 3 4.07 4.01 Employees have confidence in PSO's future 3 3.89 3.87 Embraces change - nimble and flexible 3 3.77 3.76 Employee annual attrition 15% - 25% 10.0% 8.9% Recommend company to friends/family Neutral 4.28 4.24 Management to employee ratio 1:10 10.8 10.0 Time to recruit and hire for standard positions (days) 60 - 90 days 58 62 Time for a new hire to become productive (days) 30 - 60 days 54 64 Guaranteed training per employee per year (days) 10 - 15 days 8 8 Well-understood career path for all emp. 3 3.17 3.14 Employee billable utilization 50% - 60% 74.2% 71.0% Projects delivered on-time 40% - 60% 80.8% 78.3% Average project overrun Over 30% 7.9% 8.9% Annual revenue per billable consultant (k) $150k - $200k $193 $197 Annual revenue per employee (k) $150k - $200k $158 $167 EBITDA 3.5% 10.2% 13.2%


Peop

lePe

ople

ProcessProcess

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Service Performance Insight®

Accelerate Service Productivity & Profit™

Follow us on:

www.SPIresearch.com

Introducing Workday Professional Services Automation (PSA)

Betsy Bland, Vice President, Financials

Revolutionizing Enterprise Software


“If there is one company that we believe could rival Salesforce.com in terms of being a major disruptive force in enterprise software, it is Workday.” - Canaccord Genuity Investment Research

Top HRProduct

2005 - 07

Dave Duffield

and Aneel Bhusrifound

Workday

2008

Financials

2009

Payroll

2010

Unified Talent & HCM

2011

Integration Cloud

Workday for iPad®

2012

Time Tracking

2014

Student Recruiting

23languages

Big Data Analytics

2013 2015

mobile

Professional Services

Automation

UK Payroll

Insight Applications

23

2524

Best Places to WorkBay Area







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http://www.workday.com/customers/financial_services/commerce_bank.php


Power of the People

“Services firms are uniquely people-driven

organizations.

They depend on the knowledge and skills of a

talented workforce to sell, staff and deliver a

range of services….”


The Fragmentation Dilemma

HUMANRESOURCES

RECRUITINGEXPENSES

TIME TRACKING

REPORTING &ANALYTICS

BILLING

FINANCIALS

RESOURCEMANAGEMENT

PROJECTMANAGEMENT

PROCUREMENT


Professional Services success starts with people.Successful projects, healthy margins, and delighted customers are the result of a

professional services solution that places people first.

Professional Services Automation


Workday PSA Key Capabilities

Operations

Financials

Talent

Analytics


Workday Differentiators

Human Capital

Management

PredictiveTalent Insights

Advanced Resource

Management

Single Solution for HCM & Financials

Modern User Experience &

Mobile


Demo Workday PSA


Q&A

Thank You!www.workday.com


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http://www.workday.com/

professional services: how leaders harness talent and grow margins

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