Spending to Save: Formal Skills Evaluation

Right now, everyone we are talking to is hurriedly reviewing their spending initiatives for the upcoming quarters. Where can we save money? What spending can we delay? At times like this, it is important to separate nice to have initiatives from those that drive significant financial benefits. The process of correlating PS business practices to improved operating income is analysis we have been conducting at TPSA for the past three years. Through that work, we have identified multiple practices that are clear drivers for improved PS business performance. One of those practices is formal skills evaluation.

Formal skills evaluation is the process of assessing and documenting the hard and soft skills of delivery staff.  The reason a services organization does this is to optimize the mapping of available staff to customer engagements.

For a business that is human capital intensive, you would think formal skills evaluation is table stakes. Not necessarily so. For the embedded Professional Service organizations TPSA benchmarks, we find only 46% of them have a formal skills evaluation program in place.  Why? I am sure the themes are the same from company to company:

-We are a product company—we don’t have the incremental dollars to invest in programs that optimize service delivery

-We are not sure skills evaluation really buys us anything

Well, if you have a professional services business, you are in the service business. And we believe there is no doubt formal skills evaluation helps improve PS profitability. We have analyzed the practices of the highest performing PS organizations in the TPSA community. We contrast their practices to the practices of average performing PS organizations. In this analysis, we segment PS business practices by their impact on financial performance and the ability of PS organizations to implement the practice. We map the analysis into a two by two grid for members. This leads us to the image for this entry:

Mapping PS Practices

Mapping PS Practices

 

 

 

Formal skills evaluation is mapped in the top right corner because this is a practice pursued by pace setters and it is a practice PS organizations can implement with minimal internal friction.

TPSA is not the only organization that believes investing in skills evaluation drives improved utilization and improved financial performance. RTM Consulting, a TPSA partner, has just published a paper titled Staff a Team, Not a Role.  The paper highlights the importance of skills evaluation to optimize PS performance.  

When implementing a formal skills evaluation program, a PS organization is committing to the following guiding principles:   

Guiding Principles

PS will accurately assess and inventory the skills of delivery consultants

PS will have a formal talent management program

PS will document skills development plans for delivery consultants

 

By following these guiding principles, the PS organization increases its ability to map the right staff to customer engagements.  Yes, this requires PS to spend some money to assess and inventory skills. But it also improves the bottom line. In other words, PS needs to spend some money to save itself from anemic utilization and weak project margins. Skills evaluation is not the place for a human capital intensive organization to cut costs over the next few quarters.

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One Response to “Spending to Save: Formal Skills Evaluation”

  1. Mark Sloan Says:

    Thomas –

    Thank you for your post. I agree with your thoughts and insights.

    One area in particular I would like to expand upon is where you reference that the PS organization is committing to the following guiding principles.” I see this as a commitment to their people – which is extremely valuable. The beauty of this commitment, however, is that it will make their job as leaders of the PS organization so much easier in a number of ways.

    First, they will have a base of knowledge to quickly make staffing decisions – speeding up the process.

    Second, their employees will have much better insight into what they need to do to develop their own skills, making the process of talent management run more smoothly.

    Finally, it will help enhance the overall talent pool making the PS organization less dependent on the 10-20% of resources that typically have the bulk of the knowledge and the highest utilization – helping everyone sleep better at night.

    As the macro economy continues to churn over the next 6 to 12 months, having a comprehensive skills inventory and assessment will be imperative to maintaining profitability.

    Thanks,
    Mark Sloan
    Chief Operating Officer
    RTM Consulting

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