Most Professional Services Organizations (PSOs) bill their customers by hours. And they leak an average of 6-7% revenue due to vacant positions.
Assuming 50% of professional services contracts follow resource-based billing, that is a whopping $6 Billion in lost revenue for the industry as a whole. But if this is so critical why is the industry not fixing this. The challenge is most that PSOs operate on very thin margins. What that means is that they cannot hire resources in advance and keep them on their payroll. They can afford to hire them only once they know for sure that they have a need. Hence the only solution is to minimize Hiring Lag. But revenue loss is only part of the story.
Read my blog Cost of Hiring Lag here to understand revenue loss and some of the other hidden costs better.
In the last decade, I had an opportunity to work closely with many PSOs and take a close look at their hiring practices and some of the key challenges.
- Variety of skills with each project: With every passing year, the variety of skills required to complete professional services projects is increasing exponentially. Project scope is expanding consistently - partly because PSOs are trying to increase their revenue per customer by increasing their bouquet of services (ex: marketing consulting firms offering IT services or IT services organizations offering call center support); and partly because clients also prefer to deal with fewer vendors for their varied requirements. Add to this the emerging areas within each domain such as influencer marketing or DevOps, an average PSO maintains a Skills Master which is 2 to 3 times what it used to manage a few years back.
- Skills of existing employees get outdated: Along with the emergence of new skill areas, many of the existing skills are becoming obsolete. It is a constant struggle for PSOs to find projects which match the skill sets of their current employees. Traditional organization policies in many cases have resulted in a significant percentage of resources having deep expertise in skills that suddenly are becoming obsolete. While many organizations are today putting in place programs aimed at continuously upgrading and assessing skills of their existing workforce, they struggle to match the pace at which skills are getting outdated.
- High Churn: High churn amongst professional services organizations are particularly high with many professionals preferring to work with a specialized function within an organization than being part of a professional organization specialized in a particular function due to an increased sense of ownership, stability, and in many cases better remuneration. PSOs try to negate this by offering opportunities for faster learning and a variety of challenges, but these attract different sets of people. PSO employees also get impacted more during negative economic cycles.
However, PSOs today are reinventing their hiring and workforce management strategies to better cope up with the aforementioned challenges and drive higher margins. Some of the recent examples I have come across are:
- At home professionals: Many PSOs are today attracting a new category of employees who were traditionally not tapped into. This is most common in the call center industry where companies are hiring work-from-home parents, recent retirees, and many others who have constraints in leaving home to work. However, to hire these segment of the population they also had to come up with hiring practices which were different from what they usually do. Tools like Video Interviewing and Online Assessments are becoming essentially here.
- Gig economy: Hiring gig workers is an approach that is often talked about but requires a lot of effort from hiring organizations to make it work. The two most difficult aspects of using gig-workers are creating byte-size assignments that gig-workers can work on and qualifying & hiring them in a time frame which makes sense. If you are hiring a gig-worker for 6 months you cannot afford to spend 2 months qualifying and hiring that person. You need a true just-in-time process and techniques like Instahiring.
- Reuse of Information: Hiring processes are repetitive by nature, especially in professional services. Most companies have 8-10 candidates at the top of the funnel but only 1 of them gets hired. However, there are always 3-4 candidates who did not get hired due to timing, budget or location and in a few months when there is another similar opening, PSOs reach out to these candidates again. When they get re-engaged, they are asked to repeat the same interview & assessment process at least part of which they successfully completed previously. But with online hiring tools, now companies can reuse information such as interview recordings and previous assessment scores to let qualified candidates bypass these steps. This significantly shrinks the hiring cycle making just-in-time hiring a reality.
- Fast-tracked Client Approvals: PSOs have an additional bottleneck to deal with while hiring their candidates as they need client approval for these hires before they can roll out an offer. This exists because many clients believe PSOs bypass the candidate qualification process mutually agreed upon when there is pressure to fill a role. However, many PSOs are today leveraging online assessment and interviewing tools which helps them to provide a complete record of the qualification process candidate went through.
- Offshore Centers/Remote Working: Traditionally most PSOs have their centers in major cities and their talent pool is limited to those in these cities. But with options like remote working becoming more efficient with the advancement of collaboration technology, many PSOs have established remote/satellite teams who are no longer residents of the major cities. This again requires a hiring practice that is completely virtualized without compromising the effectiveness of the hiring process.
- Byte sized learning/MOOCs: Skilling existing employees in a highly dynamic environment poses two challenges to PSOs. First, you need learning sources that are getting updated as fast skill areas are evolving. Secondly, you need to motivate your employees to start learning continuously. Not everyone is a natural learner. The emergence of MOOCs with specialized enterprise solutions is a blessing for PSOs.
- Remote Proctored Certification Exams: Once an employee goes through the upskilling process, it is critical for PSOs to validate the proficiency for two reasons - they need to be sure that their professionals are competent to deliver on their client projects especially in new skill areas, and many times clients ask them to submit proof of skill proficiency during the contract. However, as most of the professionals are at client sites or satellite centers across the globe, they need a mechanism to ensure and demonstrate the authenticity of their skill evaluations. Many PSOs have started to adopt remotely proctored exams to solve this challenge.
Another approach gaining traction in the industry is predictive hiring. There are two main approaches to predictive hiring. The first one leverages the sales pipeline data to understand your potential talent requirement. Talview recently launched its predictive hiring plugin for Salesforce. This is particularly useful for short to medium term requirements which are determined by client projects on the horizon. The second one leverages macro-economic skill trends to predict skill requirements for the future. This is useful to craft medium to long term talent strategies.
Just-in-Time (JIT) Hiring
The panacea for PSOs is JIT hiring. Many of the techniques discussed above are all geared ultimately towards bringing down time-to-hire either by eliminating/automating steps in the process or eliminating competition resulting in better conversions. Talview's own approach of Instahiring aims to drastically reducing time-to-hire while ensuring a great candidate experience and combines many of these techniques to make it easier for PSOs to achieve JIT in hiring.
If you end up trying any of the above recommendations, please share your experience with me at email@example.com.