Just-in-Time Resourcing® - RTM Consulting

RTM Consulting 855-786-2555 [email protected] www.rtmconsulting.net

Just-in-Time Resourcing®

Part 2

Managing the Resource Pool

Randy Mysliviec President & CEO

mailto:[email protected]

http://www.rtmconsulting.net/

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Copyright © 2007 - 2019 RTM Consulting, Inc. All rights reserved. Just-in-Time Resourcing® is a

registered trademark of RTM Consulting, Inc.

Managing the Resource Pool for Just-in-Time Resourcing®

Introduction Part 2 of the Just-in-Time series describes new methods, processes, infrastructure and tools required to more effectively manage your resource pool to enable Just-in-Time

Resourcing® (JITR) – getting the right person in the right place at the right time.

Roughly thirty years ago the manufacturing industry embarked on a journey to transform itself from a carryover of the industrial revolution to more efficient ways of creating products using modern technology. This included the introduction of robotic gear which replaced manual labor tasks with technology that could perform the same work at a lower cost, and with higher and more predictable quality. The industry also began to understand that it needed to find ways to eliminate the cost associated with idle inventory, and lower lost opportunity costs due to short supply of parts when a peak in demand occurred. This was the beginning of what became known as just-in-time manufacturing, whereby parts are predictably supplied at precisely the time needed and timed to always changing demand forecasts. The consulting and professional services industry remarkably finds itself in a similar state as the manufacturing industry was in thirty years ago. Simply said, processes, methods and tools have failed to keep pace with the large disruptions in traditional labor sourcing and management methods. Off-shoring, near-shoring, globalization, price pressures, increasing competition – all things we read about and deal with every day have changed the way we manage labor. Unfortunately, too many companies have responded with stop gap and tactical measures, in many cases compounding the problem or delaying the inevitable need for real process change.

The Business Imperative for Just-in-Time Resourcing®

Over the next decade growing competition and marketplace change will continue putting unprecedented pressure on service providers to rapidly adapt and innovate in every facet of service delivery. Effectively and efficiently sourcing and managing resources will be the new high-water mark for the industry. Similar to how manufacturers learned through advanced inventory planning techniques to have the right parts available at just the right time, services providers are now challenged to provide the right resources at

the right place at the right time - ‘Just-in-Time Resourcing®’.

Interestingly, most professional services providers today struggling with utilization problems and resulting high labor cost, have reacted by pushing labor off-shore to lower average hourly labor costs. While off-shoring is certainly a desirable and necessary



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part of the strategic labor equation, implementing better demand forecasting techniques is necessary to address the strategic need for sustainable business transformation.

Analogous to targeting near zero inventory for a manufacturer, professional services providers should target constant full billable utilization of on-board resources. Table 1 illustrates the economic value of efficient management of utilization.

# of Billable resources at $150/Hr.

Annual Revenue from 1% Increase

Annual Revenue from 7.5% Increase

Annual Revenue from 15% Increase

1 3,120 23,400 46,800

25 78,000 585,000 1,170,000

100 312,000 2,340,000 4,680,000

750 2,340,000 17,550,000 35,100,000

Table 1

Since idle resources are a sunk cost, the revenue amounts in table 1 drop straight to the bottom line as profit.

Objectives of Effective Resource Pool Management The outcome of effective resource pool management affects many stakeholders throughout the enterprise. Finance is expecting the business to deliver on forecasted revenue commitments to support pro-forma estimates. Delivery teams need to hire, train, and deploy the right resources in the right places at the right time. Sales teams want on-time quality implementations resulting in happy customers. And so on. Therefore, some key objectives for effective resource pool management include:

• Financials o Deliver on forecasted commitments o Achieve target margins

• Revenue o Deliver on forecasted commitments o Avoid missed or lost opportunities resulting from resource deployment

issues

• Skills Management



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o Enable skills balancing (by region or geography) o Development of needed experts in key technologies

• Delivery o On-time and on-budget o Consistently high quality

Key Benefits of Effective Resource Pool Management Resulting benefits from effective resource pool management include:

• Effective project support and execution

• Improved talent and skills management

• Supports a JITR system

• Lowers costs

• More satisfied customers and employees

• Leads to more revenue and profit!

The Fundamentals of Effective Resource Pool Management

We will discuss two fundamental aspects of resource pool management:

• Foundational elements – the infrastructure needed to support the resource pool management aspects of a JITR system (Note: demand forecasting is discussed

as an essential element of a JITR system in Just-in-Time Resourcing® Part 1)

• Process and methodology to execute effective resource pool management

Foundational elements

Warm Pool Recruiting:

In Just-in-Time Resourcing® Part 1 we discussed the need to modernize the way we

recruit and train new employees. There are many ways we have traditionally accomplished acquisition of people such as recruiting firms, hiring fairs, web-boards, etc. Today’s environment requires less expensive and more responsive approaches to acquiring the right people to arrive at the right place at the right time. This timeline must also allow for proper on-boarding and training of new personnel. A proven technique is the adoption of a “warm pool” recruiting program, driven by a continuous recruiting process vs. the start/stop method deployed by most firms today. The warm pool approach uses methods to create “warm” candidates in a pool that are later recruited into permanent roles in a “just-in-time” hiring system to meet specific job or project needs.



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Figure 1: Warm Pool Recruiting

Employee Training

The subject of training and re-skilling could take up an entire paper on its’ own. Key points to consider are:

• Define your skills roadmaps and have a plan as to how each key skill is developed

• Build reasonable estimates into budgets/utilization estimates for training time

• Leverage technology assisted training – it is a proven and cost-effective way to build skills

• Consider developing employee/technology certification programs which are growing as a way to validate effectiveness of training, and improve the predictability of and quality of work

• Use your PS Automation system to help keep track of available skills

Building a bench:

Building a bench of resources is a critical element of a JITR system that enables the “right time” element of JITR. For too long companies have viewed building a bench unnecessary, defaulting to hiring only when a contract is in hand. Contemporary thinking on investment in a bench is changing, and must change. Reality is that the lost

Warm Pool Concept

• Continuous recruiting e.g. monthly

• Selected cities/sites

• Target profiles

• Web ads to attract candidates

• Keep ‘em warm till ready to hire



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opportunity cost of losing a deal because you could not serve it quickly enough, or the failure to find needed resource in time to serve a committed project, can more than offset the cost of funding the bench. The bench is also a source of often needed resource to support business capture needs which helps avoid disruption of resources already committed to client funded projects.

Talent management and retention:

There are many aspects of talent management and retention e.g. training, career management, job rotations, compensation, morale management. Some key elements to consider are:

• Career management – high achievers are very marketable, looking for rapid career progression. Your firm should provide appropriate career progression steps supporting this need in an affordable manner. A good way to show career progression is through the creation and publication of a career map or ladder which is used for ongoing employee development planning and discussions.

• Job rotations – PS employees commonly like to learn new things, take on new challenges. Making rotations a part of your culture will reinforce building a more responsive and adaptable workforce.

• Training – as discussed earlier

• Compensation – There are many sources of information to benchmark compensation levels and methods. Compensation should be considered a very important element of JITR as it relates to impacts on recruiting and retention.

• Sources of labor – this highly complex topic could drive a book all on its own. For work that is typically more static e.g. less travel required, common low cost sites today are India, S. America, China and the Philippines. More and more, companies are finding that mobility of people from these sites is more affordable and possible. This opens up the use of offshore/near shore resources to less static work such as systems integration projects.

Peak-load workforce strategy and planning:

The peaks and valleys of resource demands can make the process of maintaining a consistent level of full-time resources difficult. Hiring and firing people with every change in your resource demand profile is not workable, particularly from an employee morale point of view. Therefore, establishment of a temporary pool of resources will help smooth the peak-load demands of your business. Determination of the size of the temporary pool should be made using historical and forecasted data. Typically modeling a particular level as a starting point is helpful. A PSA system is particularly helpful in identifying opportunities for peak load needs.

Packaged services/solutions



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The whole topic of packaged services and its potential impact on resource management is more than can be covered adequately in this white paper. Key points to be made are that packaged services a) improve the predictability of resource skill needs since a forecast exists/should exist for sale of these services, b) improve the accuracy of resource forecasts since the base skills needs for a particular packaged service is known in advance.

Centralized resource planning

Certainly less of an issue for the smaller enterprise, centralized resource planning is essential for the medium to large enterprise aiming for effective JITR. Particularly in situations where the resource pool is shared across organizational boundaries, the establishment of a Resource Management Office (RMO) can help play a neutral role and break down any fiefdoms that may exist in the enterprise. Typical functions for centralized resource planning include resource planning, project staffing, and corporate JITR process development and governance.

Professional Services Automation (PSA) systems:

Surprisingly, some PS firms today manage their resource pool either without the help of automation, or with simple tools generally not up to the task of today’s business needs. Considering the impact of just a few points of utilization of a typical labor pool, justification of investment to automate this important task is usually easy. Resource management software (also commonly part of or referred to as PSA software) exists to create a data base of resource pool information, enter and track project needs and progress, and produce reports/queries capable of reducing determination of project staffing needs by up to 90% (a human element is still needed to finalize resource selections).



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A summary of foundational elements is provided below:

Figure 2 – Foundational Elements

Process and Methods for Management of the Resource Pool

With the foundational elements in place, executing to forecasted need is where the rubber really meets the road. Key process and methods for effective JITR are:

• Start by hiring and assigning only the very best project managers. Pick the right people for this job and everything else gets easier.

• Find the best balance of cost and skills to staff projects – Every customer wants the “A” players on their project. The art to staffing a project is to find the right balance of cost, skills, and project management. Sometimes resource availability will dictate use of labor from higher cost pools than desired, or vice versa. Re-balancing the base of skills is a constant exercise requiring continuous discipline and process improvement. Making these choices requires that the PS organization look at its gross margin performance over a range of projects to accommodate these inevitable resource imbalances. No two identical projects will produce the same profit, but on the average,

Resource Management Foundational

Elements

Warm Pool Recruiting

Bench

Talent Mgt and

Training

PSA System

Peak-load Planning

Packaged Services



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achievement of a target gross margin should and can be the desired outcome. Let your PSA system do the heavy lifting for determining project staffing alternatives.

• Don’t become hostage to expert shortages – Every company has them, but few are effective at solving for these shortages in a systematic way. Your PSA system should be used to identify where specific skills needs will be and when. If your resources are not centrally located, as few are any more, providing the needed level of specialization in each region or geography becomes even more challenging. A proven approach is to create Centers of Excellence in certain skills or service offerings where depth of resource and thought leadership is needed. The centers should be dispersed across your geographic regions. Ambassadors of each center are geographically located, and act as a virtual member of their particular center of excellence to maintain proficiency and provide regional input on marketplace activities and needs. Regional skills needs are calibrated to forecasted needs and ongoing rebalancing of specific skills is performed to optimize resource location and utilization. Where peak-load depth is needed, people travel or are temporarily relocated as virtual teams form to service a particular project.

• Replenish the bench – As you consume resources from the bench, begin to backfill them with resources your forecasting system tells you are needed in the future. Avoid the temptation to ‘save’ money by vacating the bench. If your forecasting is done correctly, managing the bench investment as part of the overall cost of delivery can be easily manageable.

• Require weekly (or daily is even better) reporting of time on projects. This builds the necessary data to feed a JITR system. Your PSA system will be infinitely more valuable to your company if project data is kept current. With near real time project start and stop information, higher utilization will result.

• Organizational considerations for the mid to large enterprise – establishing the “resource pool” – breaking down the fiefdoms – this is probably the toughest issue most enterprises will tackle. Failure to do this part well will mean the difference between success and failure. The need is to adopt shared resource pools for services, much in the same way companies have done for other more commonly shared services such as finance, human resources, and legal. There are three important rules to establishment of a shared PS resource pool:

1. No particular department “owns” the resource. The resources are recommended for a particular project by the RMO. The team responsible for execution of the project makes the final choices of the team, considering tradeoffs of other client and company needs.

2. A suitable personnel management system must be put in place to make clear to each employee who is managing their career, setting goals, doing evaluation, recommending merit pay and promotions, etc.



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3. Senior management must proactively and visibly support the governance necessary for this model to work.

Measuring Success

Measuring effective execution of your resource management processes will provide valuable feedback for continuous improvement and monitoring. Some key measures include:

▪ Utilization – There are three important elements to measuring utilization. 1) How will I measure utilization to include giving proper consideration to training requirements, vacation/illness time, internal meetings and staff work? 2) How will I record utilization? Time reporting will require some form of simple and convenient method to capture project work, preferably daily, to drive accurate utilization data and timely client billing. 3) What utilization targets will I set and will my targets vary by job type and skill? Utilization targets should be set with an educated view of the marketplace, and what will be competitive using some industry benchmark(s) for comparison.

▪ Overtime – Measuring overtime is critical in two important ways. 1) It ensures a balance of workload, critical to maintaining employee morale and preventing “burnout”, particularly for highest performing employees who are typically most in demand. 2) Helps manage yield/gross margin on projects. Planning for some level of overtime is common as a way to improve profitability where exempt employees are doing the work.

▪ Cost/time to hire/train – Tracking on-boarding time and costs, particularly for rapidly growing enterprises is important. This critical measure helps drive resource planning (how far in advance do I need to hire to ensure just in time project delivery?) and financial performance.

▪ Cost per full time employee (fte) – Just as a manufacturer would strive each year to reduce unit costs, well run PS firms will view labor cost management in the same way. With cost of living driving wages higher each year, and benefits costs accelerating, a constant effort to find and build lower cost labor pools is critical.

▪ Training time – Key to maintaining high morale (and consequently lower employee turnover making your JITR job easier) is an effective training program for employees. Training effectiveness is a whole subject of its own, but important for JITR is for the enterprise to create a means to offer, promote, and measure investments in training.



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About RTM Consulting and the Author

Cincinnati-based RTM Consulting provides strategic and operational advice to assist

technology companies with increasing revenues and margins by leveraging services

more effectively. Specializing in Resource Management and Services Business

Optimization, RTM Consulting helps teams responsible for professional, consulting and

support services achieve the benefits associated with successful services portfolios.

With its unique Just-in-Time Resourcing® solution and Business Acceleration Services,

RTM Consulting helps large, medium and small firms move beyond theory to practical

application of industry best practices and achievement of exceptional results in the

shortest possible period of time.

Randy Mysliviec leads RTM Consulting, providing high impact advisory services for

technology companies’ service businesses. Acknowledged by industry sources as an

expert in Global Resource Management (GRM) and author of the Just-in-Time

Resourcing® brand of solutions, Randy advises multi-national companies with the

complex challenge of operating services teams serving the global market. He is a

founding member of the Technology Professional Services Association (TPSA – now

TSIA - the Technology Services Industry Association) and served as a member of the

TPSA Advisory Board. Randy is also a contributing author for PSVillage.

Copyright © 2007 - 2019 RTM Consulting, Inc. All rights reserved. Just-in-Time Resourcing® is a

registered trademark of RTM Consulting, Inc.



Copyright © 2007 – 2019 RTM Consulting, Inc. All Rights Reserved.

Who We Are RTM Consulting provides strategic and operational advisory services to technology companies and other industries to assist them in increasing revenues and growing margins by leveraging consulting, professional and support services more effectively.

What We Do Our unique and services specific strategic frameworks and transformation models, combined with talented consultants, help accelerate time to value in everything we do to help you gain competitive advantage. We cover the entire services domain spectrum including consulting and professional services, technical support, field support, education services, managed services, and services automation tools. Some of our services include:

Strategic Planning Services - We use our extensive leadership experience to help services organizations build the right strategy and operational model to make value creation and delivery a reality.

Services Business Optimization - Our skilled practitioners help you identify and implement best practices necessary to transform your services business into the most efficient and effective operation possible.

Resource/Workforce Management - We help you focus on ‘Getting the Right Person in the Right Place at the Right Time’ with our Just-in-Time Resourcing® (JITR) solutions.

Project and Portfolio Management - Our unique PMO/PM frameworks will help your organization efficiently run projects on-time, on-budget, with consistently excellent quality.

Channel Optimization - With a unique ‘Shift to the Left’ strategy based on our advanced support model frameworks, we can help your company lower costs while improving service quality moving more support from on-site to on-call and on-line.

Skills Development/Training - We enhance the soft skills of your services personnel to complement their product, business and technical knowledge with services specific curriculums in consulting soft skills, resource management and project management, services selling and more.

PSA Consulting - We provide an objective third party assessment and assistance in choosing the right automation solution for your needs – and assist you with implementation to achieve the benefits of your investment.

Services Revenue Generation Consulting - Turning services into an engine of growth is a growing priority for every technology company. We understand how to help you better market and sell your company’s solutions with more focus on value and outcomes to meet changing marketplace dynamics.

How We Do It Our highly disciplined management consulting and operational services include:

Rapid Diagnostics to identify opportunities to improve business performance.

Implementation Services to make solution implementation fast and effective.

Business Planning Services to turn your vision into a realistic operating plan.

Business Acceleration Services to accelerate your time to value with RTMC solutions.

The Challenge Technology service providers and other human capital intensive service organizations including hardware, software and consulting companies, internal shared service organizations and outsourcing entities all know that efficient management of human capital, project processes, and other service delivery and go-to-market related processes are key to market success. Today’s challenging business environment makes running a services business highly dependent upon having lean and proven business and operational processes designed for peak performance.

The Solution Our unique combination of decades of services and outsourcing operational experience coupled with solutions targeted to the services organization allow us to work with large, medium and small firms to move beyond theory to practical application of industry best practices and achievement of exceptional results in the shortest possible period of time.

Our mission is to help consulting, professional and support

services organizations get better at what they do

Company Capabilities Overview

Contact Us: www.RTMConsulting.net 855.786.2555 (855.RTMC555) [email protected]

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