As the CFO of a major professional services firm, I faced the same challenges that many senior managers face; What do you measure? Why do you measure? How do you measure? What does it tell you? How does it help the business?
After many years of growth, our business was grappling with a slowing market. Like every professional services firm, keeping staff billable and maximising staff utilisation rates was paramount to profitability, but in a rapidly changing market this became increasingly challenging.
Our old systems and reports told you at the end of the month how your group had performed: a little late to do anything about it. Sound familiar?
Lag indicators are OK in good times, but useless in bad times
In a rapidly changing marketplace, monthly lag performance indicators are just far too late. Fine in the busy times, but basically useless in more challenging times.
We had options; for example, extra staff could be engaged from other areas or current team could move to other groups, do training or take a few days of well earned rest – but those options to smooth utilisation rates were only relevant if managers could access insightful utilisation data at the time, not a month after the fact.
Managers needed to balance their teams’ workload and available hours on a weekly (real time) basis. On a Monday morning looking at work for the week vs available staff. Allowing critical business decisions to be made with the right information at your fingertips and without messy spreadsheets peppered with individual hacks.
Beating the clock to provide measures in time to act lifted productivity 4-5%
My challenge was get the data in sufficient detail and present it to line managers quickly enough to enable them to make these decisions – and make them quickly enough to impact on our bottom line, not just report accurately on historical events.
Using Tridant expertise and the IBM Cognos software suite we were able to link to legacy time recoding systems and provide this data in drill through dashboards that were updated automatically as soon as time was entered by staff.
It seems obvious now, but this small investment to identify what we need to measure and then give the right people the right tools to access those measures and use them to make decisions improved firmwide productivity circa 4-5%. In a major professional services firm where staff utilisation is the key determinant of profitability, that shift from historical reporting to near real time insight was key.
Lessons learned: Tips on where to start the measurement journey
Measuring without a vision is a nightmare, sucking up resources in your business and driving decisions in what may be the wrong direction. Measuring from multiple perspectives gives you balance. A rule of thumb starting point in a balanced scorecard approach is to start by developing measures from four perspectives. For example, depending on your Vision (your “Why”) and the changes needed for your organisation to get there (your “Gap”) you might develop measures for:
- Financial perspective – Example: Reduce overhead costs and improve utilisation
- Customer perspective – Example: Maintain customer satisfaction
- Internal perspective – Example: Reduce process overheads and time to execute
- Learning & Growth perspective – Example: Develop a process excellence culture.
This enables you to ask questions about your organisation’s future guided by four different perspectives. Using multiple perspectives keeps objectives inter-related, protecting the business from changes in one area that risk having a negative impact on other areas.
Lessons learned: Tips on measures that actually help
Peter Drucker’s oft-quoted assertion: "What gets measured gets improved," remains true. It is impossible thought to tell you what your business measures should be. You probably can see why already. YOUR measures need to be relevant to YOUR "Why", YOUR “Gap” and YOUR identified focus areas and objectives to bridge that gap. I can still give you some tips, which work across most industries and businesses.
- Lead & Lag – Each objective should have a lag measure, which is a measure that describes the end result, and a lead measure, referring to the activity that should achieve the result.
- Measurable – Somewhat obvious, the measures need to be measurable. Do you have access to the data required? Can you produce a measurement report without excessive time or complexity?
- Well defined – Have the measure defined, recorded and agreed up front.
- Realistic stretch targets – Baseline information is available and a target is set that is a stretch but also achievable.
- Incremental – Measures are long term and incremental, they build on one another. E.g. Measure “has X been achieved” is an action that must be completed before beginning measure Y. Good measures will have incremental targets over a long term, generally 1 to 3 years.
Lessons learned: Tips on getting help
I ran the finances of a multi-million dollar professional services firm. I have enough grey hair to safely claim that I know a thing or two about financial analysis. Yet when it came to finding ways to present operational data in meaningful ways to line managers in near real time, I got help. Why?
The short answer is because it just makes sense to use specialists. Could I have done it myself? Perhaps. But I would probably have lost months in research and software vendor negotiations and implementation. As a CFO there is a cost to that. Time spent on one project, is time taken off 100 other equally important projects. Talking to business intelligence specialists, like Tridant, enabled me to clearly articulate the business challenge and leave them to come back to me with a coherent solution. It paid clear dividends for our organisation.
About Wayne Banks
Wayne Banks has 30 years’ experience advising organisations on business performance improvement. He is a chartered accountant, company director and has been a relationship manager for large corporates including BHP Billiton and GE. Wayne’s background in technology services ( CA, CSC, UXC ) will assist in taking your business on the journey into cloud services and ensuring maximum value to your organisation.
Wayne has been Chief Operating and Financial Officer for several large professional services organisations with responsibilities for Australia, the Asia-Pacific and in his last role globally.
As co-founder of the Ignite Alliance, Wayne will leverage his passion for performance and bring all the tools and techniques from large corporates to improve the value of your business, helping you grow your business faster than ever before.
The Ignite Alliance exists to grow your business and achieve your goals. For each phase of the business life-cycle , from starting up (entering a new market), growing fast, optimising your business, dealing with the challenging times and disruption.
Partnering with our customers as their trusted advisor, Ignite Alliance provides business planning, growth strategies and optimisation services in Asia Pacific region. For further information please contact Wayne directly – firstname.lastname@example.org