Quote for the Day
“Focus on being productive instead of busy.”
Claim your FREE Productivity Audit for Professional Services Firms
Having survived the disruption caused by Covid, Price inflation, Brexit and the war in Ukraine, the economy is starting to improve. But clients are still very cost-conscious and there is more competition than ever. Most practices have taken the opportunity to adopt flexible working practices and remove the obvious costs by reviewing their profit and loss account. But this only takes you so far.
Productivity is traditionally defined as being recovery, which is work billed and paid, or expected to be paid, divided by capacity, which is standard chargeable hours multiplied by standard hourly rates. This is typically in the range of 75% to 95% depending on your policy of setting hourly rates. The average for the firms taking part in this survey was 81% with a low of 68% and a high of 91%.
Many of the factors contributing to this formula are hidden because they do not have a specific line in the profit & Loss account. In my experience, almost all professional practices have failed to leverage process improvement to its fullest extent. To do this, you need to seek out any activity that does not add value to your client. This is done by looking at the whole of your business process from acquiring the client through delivery to collecting the cheque at the end of the job.
My approach to the lean process is just as applicable to a professional service firm as manufacturing. It’s all about doing more with less. I use a continuous improvement approach by harnessing your team’s knowledge through project teams operating on an eight-week cycle. Imagine what your business would look like in twelve months’ time if a new problem was even partially solved every eight weeks.
I have recently completed a Productivity survey of professional Service Firms in the Northwest. The results that follow are anonymized.
The survey showed that the average lost profit per fee earner was £24,000 and ranged from a low of £7,000 to a high of £45,000.
The top three issues revealed by the survey are:
- Doing too much work on a case – Most firms are giving a Rolls Royce service for the price of a Mini. There needs to be better feedback from over-runs to improve scoping the assignment and pricing the job.
- Under delegation – Work is not always passed down to the lowest capable person.
- Rectification of Errors and Mistakes – Too much senior management time is taken up with investigation and then putting right errors and mistakes.
Henry Ford had a saying about his advertising spend. He said that half was wasted and if he knew which half, he would cut it.
I have the same thought about productivity in professional service firms. My rule of thumb is that half cannot be touched but the other half can be addressed with the help of process review and using internal project teams to drive the changes. According to the findings of my recent survey, if you are the average Professional Services Business, you could generate £12,000 additional profit for each fee earner per annum, recurring every year. What would the impact be on your firm of taking this approach?
There is a clear cost benefit to your firm and, remember, the savings you make will be there year after year.
To check if you qualify for a free Productivity Audit contact me by email firstname.lastname@example.org and let me know your name, your firm’s name, turnover and the number of employees.