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Our recent webinar with David Hofferberth, Principal of SPI Research, was one of the best attended so far this year, with hundreds in attendance. David shared highlights from the SPI Research 2011 Professional Service Maturity Benchmarking Study, showcasing best practices of leading professional services organizations. SPI first introduced the Professional Services Maturity Model benchmark report in January, 2008. Since that time, more than 4000 professional services organizations have adopted these metrics to measure and manage business performance. If you attended this webinar, we’d like to thank you for your participation! If you couldn’t make it, I hope you’ll take a few minutes to catch the recording. You can also receive your own copy of the benchmarking study (valued at $995).
The folks who attended had a number of great questions, and we thought it would be helpful to answer some of them here:
My experience is that the metrics are a huge issue. Product companies are not usually set up to measure consulting/services metrics, and this can cause both misunderstanding of value add and ultimately a decision to reduce/shut down operations. What are your guidelines to us for the use of the SPI benchmarking study? Can we reuse and incorporate these results (with the appropriate recognition of source) during a consulting assignment or is the information limited to internal use only?
We don't mind you using the results on a limited use basis, as long as you credit SPI Research as the source. But please do not copy the report as that would violate copyright protection. This is how we protect our intellectual property.
What is revenue leakage?
Leakage is the amount of money that should have been billed and collected, but is not. Many Professional Service Organizations (PSOs) fail to collect all the time and cost information and it doesn’t get billed. In many instances, PSOs eventually realize they forgot to collect and invoice for something, but don’t do it until the project is complete.
Are you a proponent of centralizing a Project Management Organization (PMO) into a single organization, or practice- or region-based PMO that's decentralized but controlled via common standards?
I would start with a central PMO. As the organization grows you could add a reporting practice or regional PMOs.
In general, what are the high level differences in the maturity model when viewing a standalone PSO versus an Embedded PSO
You will usually see lower utilization for the embedded. This model lowers sales and marketing because the product side typically pays for the sales and marketing. But embedded services organizations also have lower profits (except for 2010)
Does project margin as calculated include practice overhead?
No
How do you start the process with large companies that have several different locations?
We start with the executives at the company headquarters. Then, we usually meet with a large group of representatives from all the locations. We review the benchmarking process, help them benchmark their divisions, and then we conduct interviews.
How does SPI calculate billable utilization (such as net of holidays or vacation)?
We base it off a 2,000 hour work year, which is 50 weeks at 40 hrs a week. In other words, we divide total billed hours by 2,000.
What is KPI?
Key performance indicator
Service organizations with which I have worked have very varied "non billable" time—such as time sheet and billing—which employees must perform just to keep their jobs. How much of this "grey area" time is considered "normal"?
We account for 386 hours of non-billable and administrative hours each year.
What is the average/median hourly bill rate for the PSOs in your study?
The average bill rate for a Business Consultant is $179/hr. A Technical Consultant bills $166/hr.
