The cobbler’s children

Professional services organizations (PSOs) have a noble calling: I like to think of them as business therapists, using their broader, outsider’s perspective and bird’s eye view to help clients understand how to resolve their challenges. They are masters of this, truly, and they are remunerated accordingly. Which makes it extremely interesting that so few leaders of PSOs seem to apply the same treatment to their own businesses. It has all the hallmarks of the classic story of the cobbler’s children.

To be fair, when you’re confident in the stability of the successful business you’ve built up it’s difficult to question the foundational ideas that got you there. As any business grows, what was once straightforward becomes more complicated; processes and procedures grow organically and piecemeal to fit minor, day-to-day operational needs. The trouble is that you’re so close to the day to day operations, it’s difficult to get the objective distance needed to see how truly limiting this can be for further and sustainable business growth.

A further problem is the stealthy way it occurs. Like scope creep on a project, ‘efficiency creep’ occurs as the business lurches forwards until one day you realize the systems and processes you have in place just can’t cope anymore. What’s troubling is the way it’s too often viewed like the dripping tap at home: an inconvenience that you somehow never find the time to address. In the business, it’s hard to simultaneously concentrate on the sales and delivery that lead to growth and improvement of the very systems and processes that support them. Were this a client, consultants would advise them to look at performance daily, starting with investing in whatever is needed to make this possible.

So why don’t PSOs follow their own advice? A couple of possibilities:
– Priorities: PSO leaders are simply too busy to look at ‘non-business critical’ challenges. But seriously: is it really acceptable to wait three weeks for information crucial to running your business?
– Ownership: PSOs tend to be run by collegiate partnerships, which presents two difficulties. First, someone has to recognize the importance of the issue and step forward. Second, they have to convince their partners that the risk to income is greater than the investment required. Often, it can take a conditional capital injection from investors to trigger investment in a particular challenge

When it comes down to it, those who lead PSOs are essentially managing supply and demand. In the famine or feast rollercoaster that is consultancy, PSOs are either flat-out delivering or flat-out selling. There’s no time to step back and take stock, to continually evaluate whether or not the business is even doing the right things.

Even where the problem is recognized, dealing with it can be delayed because of the perceived difficulty or risk in doing so. Who wants to sort the unscrupulous from the genuine vendors? Who wants the disruption to business operations? Who wants to go through the often-painful process of bringing everyone on board? Who wants to take ownership of the risk that all that effort could be expended on something that ultimately might not work?

Such concerns are understandable, but unfounded. An established market for off-the-shelf professional services automation (PSA) software has grown over the last decade, and literally thousands of PSOs across the globe have blazed the trail to achieve massive benefits. While it’s sensible to be skeptical of diet pills that promise to make you leaner and fitter, it’s folly not to adopt a healthy diet and exercise regularly. PSA is as risk-free as it’s going to get.

Successful leaders make the time to find objective distance. They fix the leaky tap despite their anxiety about the deeper plumbing problems of which it could be a symptom because they know ignoring a problem won’t make it go away. They know the real name of the game is increasing company value, so they pick their timing, they get people on board, and they make a success of the change

The day-to-day focus of a PSO is often on revenue and utilization. But when it comes to selling your consultancy business, EBIT and growth rate determine value, and you won’t maximize those without up-to-date systems and processes. And when valuations can be as much as 34 times the post-tax profit, why would you accept a 12% EBIT when 19% has been proven realistic time and time again? Physician, heal thyself!

Type: White Paper


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