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Leveraging the Talent Supply Chain for a Competitive Advantage
Talent Supply Chain is also known as :
Talent Supply Chain Management,
Talent Supply Chain Management Solutions,
Talent Supply Chain Solutions,
Supply Chain Issues,
Supply Chain Council,
Integrated Talent Supply Chain,
Physical Supply Chain,
Supply Chain Team,
SAP Business Management,
SAP Business Chain,
SAP Business Decisions,
Competitive Advantage,
Entire Supply Chain,
Talent Supply Chain Management System,
Supply Chain Management Solutions.
SAP Thought Leadership
Talent Supply Chain Management
CONTENTS
- Executive Summary
- Market Trends
- Globalization
- Focus on the Individual Over the Brand
- Client Sophistication
- Internal Inefficiencies
- Critical Services Offering Development
- Inefficient Talent Management
- Difficulty Managing Project Resources
- Inefficient Demand Management
- Complex Supplier Management
- Introducing the Talent Supply Chain
- Talent Management
- Resource Management
- Demand Management
- Supplier Management
- Conclusion
EXECUTIVE SUMMARY
Today's professional services climate is challenging. Customers
demand local delivery of global services. Sophisticated clients
want consultants with deep industry or functional experience.
And when clients select a professional services provider, the
decision increasingly hinges on a few select individuals rather
than on brand equity or the reputation of the provider alone.
The professional services industry depends almost exclusively
upon human resources. Talent is your most important ' and
expensive ' asset, and it differentiates your organization from
other professional services providers. Because payroll and benefits
typically constitute more than two-thirds of operating costs,
how well you utilize and manage your workforce can mean the
difference between average and stellar performance.
A recent survey of over 250 professional services providers by the
Technology Professional Services Association (TPSA) indicates
that the top three management priorities are: hiring talent that
aligns with the long-term strategic vision of the organization,
retaining talent, and managing resources effectively. The study
underscores the fact that hiring, retaining, and staffing talent is
critical to a services provider's ultimate success.
Building on the manufacturing concept of supply chain optimization,
innovative professional services providers are improving
the return on their investments in talent with holistic, end-to-end,
optimized talent management. From recruiting and retaining
only the best and brightest to anticipating demand, planning
resources, and working effectively with subcontractors ' services
providers must link offering development and talent, resource,
demand, and supplier management. The objective? Create a
streamlined, highly efficient talent supply chain that can help
them realize a competitive advantage.
We will identify the market trends driving the need for an integrated
talent supply chain and describe the internal inefficiencies
professional services providers must overcome to optimize their
talent supply chains and grow profitably. We will also discuss the
innovative business practices and technologies that enable services
providers to support an effective talent supply chain, integrating
offering, talent, resource, demand, and supplier management in
a holistic manner.
MARKET TRENDS
Professional services providers ' including consulting, IT, tax,
and audit firms ' have recently enjoyed a modest rebound in
revenues. But despite the slight uptick in top-line revenues,
the Technology Professional Services Association (TPSA) reports
bottom-line profitability remains under fire in many professional
services providers. (For more details on the TPSA market survey,
see the thought leadership document titled Using Talent Supply
Chain Management to Overcome Challenges in the Professional Services
Industry.)
Professional services providers clearly must improve operations
to improve their bottom-line results, but they must do so in
the context of three market trends: globalization, the focus on
individuals over the brand, and client sophistication.
Globalization
Global clients require global support. They want consultants
who are fully versed in local cultural, language, and compliance
issues. And faced with growing offshore competition, global
services organizations must aggressively improve their ability
to manage and deploy talent on a worldwide basis. Even small
and midsize companies must extend their global reach, either
through organic growth, acquisition, or flexible partnership
models.
Focus on the Individual Over the Brand
Clients are increasingly making hiring decisions based upon the
individual talent of services providers rather than by company or
by brand. To establish credibility with a potential client, services
providers must be able to match individual skill sets to specific
client needs so they can put the right consultants in front of
the client as early on in the selling process as possible. In short,
professional services providers must understand what skills
clients want for a particular project and where those skills are
available ' either internally or through a partner.
Client Sophistication
As more ex-consultants work in industry, clients become increasingly
discerning, routinely expecting services providers to offer
highly seasoned consultants and to provide greater visibility
into engagement pricing and structure.
To address these trends and compete effectively in this market
environment, professional services providers need to make sure
they can retain the talent they need. Doing so requires that services
providers gain insight into the entire talent supply chain and
optimize the talent they have ' tasks often complicated by internal
inefficiencies. Professional services providers can't accomplish
those goals because they are hamstrung by their own processes.
INTERNAL INEFFICIENCIES
Professional services providers must address a wide range of operational,
organizational, and planning challenges if they are going
to optimize their talent and improve bottom-line performance.
These challenges vary from offer development and supplier
management to retaining the best and brightest consultants,
planning resources effectively, and increasing visibility in the
sales pipeline.
Critical Services Offering Development
To optimize its talent supply chain, a services provider must evaluate
the specific service offerings it takes to market. Do the services
you offer support your organization's strategic vision? Does your
organization even have a vision or long-term plan? Most services
providers realize the importance of supporting a strategic vision.
According to the TPSA survey of over 250 professional services
providers, the two top talent management priorities are hiring
talent that aligns with the long-term strategic vision of the
company and retaining this talent, as shown in Figure 1.
At a minimum, every services provider should have a vision that
guides the development of service offerings and a basic talent
road map for getting there. Clearly, different service offerings
require different technical and industry expertise. If you do not
articulate your offer development or service delivery vision,
you may recruit for and invest in service areas that no longer fit
your strategic and financial goals.
Inefficient Talent Management
Clients are demanding higher levels of talent ' whether it is specialized
industry expertise or local market experience. This places a
premium on your ability to find and keep the best resources. You
can be inundated with hundreds of resumes to fill one or two
openings. And because top performers can generate as much as
two to three times the output of the average performer, services
providers need a way to quickly and efficiently identify, recruit,
and retain top candidates.
Most services providers realize that optimizing talent management
is crucial. As Figure 2 shows, 68% of surveyed companies
acknowledged that, when taken together, core talent management '
including retention, recruitment, training, and knowledge
management ' trumps performance and compensation when
it comes to staff development. These results clearly underscore
the importance of these core tasks to your success.
But in a startling disconnect, 85% of the survey respondents rated
their talent management and staff development programs as
standard, rudimentary, or, worse yet, nonexistent, as shown in
Figure 3. In short, professional services providers are not satisfied
with their current talent management and staff development
processes ' areas overwhelmingly important to their success.
You have a significant opportunity to improve these critical
talent management areas ' and reap the benefits of doing so.
Difficulty Managing Project Resources
The single largest budget line item for any professional services
provider is human resources, so it's imperative that you get the
most from your investment in consultants and staff.
Unfortunately, due to limited visibility into the project pipeline,
staffing decisions are often driven by availability alone instead of
being driven by the careful planning needed to ensure project
success and client satisfaction. As a result, services providers are
not using their talent pools to their fullest potential. Without
clear insight into the roles needed and skill commitments for
each project ' as well as a complete understanding of each
consultant's skill set ' it is difficult to staff projects optimally.
Services providers need full visibility into the skills available for
projects, and they must conduct capacity planning more efficiently
and holistically. In lean manufacturing, parts are delivered just in
time for manufacturing. Using this analogy in the professional
services industry, you must be able to "deliver" consultants just
when and where they are needed. With this ability, your organization
can realize the most profitable project result possible,
including satisfied clients. By mastering this balance of supply
and demand, you optimize resource utilization while retaining
the flexibility you need to meet client expectations.
Inefficient Demand Management
The goal of most professional services providers is to grow business,
but often ineffective sales planning inhibits providers' ability to
plan for and acquire profitable new clients. Without proper analytic
tools, small and midsize providers focus on top-line revenue
growth at the expense of margin. And all too often, the services
director or the partner responsible for acquiring new clients and
projects tracks the critically important sales pipeline using an
offline, siloed solution. With only periodic updating, new project
opportunities are communicated to the rest of the organization
when the deal closes, often just days before the project kickoff. In
many cases, this process sets off a mad scramble to staff the project
with available resources without the luxury of an objective
review to identify and staff the project with the best combination
of consultants and skill sets.
With limited advanced planning, inefficient staffing decisions
prevail, prompting the unnecessary use of third-party contractors.
As Figure 4 shows, more than 50% of the respondents to the
TPSA survey identified lost revenue opportunities and a decrease
in client satisfaction ratings as the primary problems associated
with improperly forecasting client demand based on available
skill sets.
Without visibility into committed and future client demand for
resources, management can't answer and plan for addressing
even the most basic questions, such as:
- What are the resources needed for committed projects?
- Is there proper coverage available within the current
workforce?
- What are the expected resource needs for proposed projects in
the pipeline?
- How will we fulfill committed and future resource needs?
- Have we considered all options, such as retraining existing
consultants, partnering with another company, hiring new
consultants, and using short-term contract consultants?
Working in isolation, the services director may lack the historical
data needed to analyze the impact of scoping, pricing, and staffing
decisions on the profitability of services. Without this analysis,
you can't proactively identify which skill sets are required to staff
promising new services and which skill sets are no longer in
demand. To optimize results, professional services providers need
a structured, more scientific approach to demand management '
one that integrates directly with resource and talent planning.
Complex Supplier Management
Professional services providers are increasingly using subcontractors
and lower-cost offshore resources to assist on engagements.
TPSA reports that a majority of the IT services companies benchmarked
use subcontractors to deliver at least 20% of the services
on an engagement. This partner delivery model creates scalability,
flexibility, and certain cost advantages, but it also increases operational
complexity. Services providers must be able to quickly
evaluate and then seamlessly combine offshore components,
specialized expertise, innovative subcontractors, and low-cost
labor if they are going to succeed in the countries in which they
operate.
INTRODUCING THE TALENT
SUPPLY CHAIN
Given the challenging marketplace combined with a number of
internal inefficiencies, professional services providers need to
rethink their internal operations to stay competitive. Specifically,
innovative professional services providers are looking for ways
to holistically link offer, talent, resource, demand, and supplier
management to create and optimize the talent supply chain.
Most professional services providers do not take an integrated
approach to managing the talent supply chain. The vast majority '
80% ' of respondents from the survey indicated that their current
processes for business development, resource management, and
HR management were only somewhat or not at all integrated,
as illustrated in Figure 5.
By bringing together offer, talent, resource, demand, and supplier
management, a holistic approach to managing the talent supply
chain enables real-time allocation of resources and long-term
staff planning, and it provides a global view into what skills are
available to meet future demand.
As Figure 6 shows, the five primary components of the talent
supply chain include:
- Offering development: the process of developing and deploying
service lines as a means of differentiation
- Talent management: the processes used to ensure that the
right employees are recruited, trained, retained, and given the
resources to fulfill current and future client demands
- Resource management: activities focused on optimizing staffing
decisions, covering everything from calendaring to accessing
a skill set database to ensure that you have the right resources
in the right places at the right time
- Demand management: the forecasting and planning component
of customer relationship management (CRM) that involves
identifying and quantifying demand so that you can efficiently
plan for upcoming projects
- Supplier management: the management of suppliers, subcontractors,
and offshore resources means providers can flexibly
meet client needs in local markets
Increasing productivity requires professional services providers to
excel at executing each segment of the talent supply chain, and,
more important, you must integrate these elements if you are to
optimize the overall process. Technology can enable this holistic
approach to managing the talent supply chain. Innovative providers
will be able to significantly increase staffing efficiencies, improve
the utilization of the talent pool, and strategically align talent
acquisition with the long-term organizational goals. Technology
can enable improvement across four of the primary sections of
the talent supply chain: talent management, resource management,
demand management, and supplier management.
Talent Management
Most services providers have spent a great deal of time developing
talent management: the discipline of selecting, recruiting, developing,
and retaining staff. Because talent is the most important
differentiator in the professional services industry, executives
must be able to describe in clear and concise terms what competencies
they will need to satisfy current and future demand and
translate this into actionable hiring practices. Traditionally,
new hires have been evaluated in terms of education, years of experience,
and type of experience. Increasingly, however, services
providers recognize that clients are not demanding talent fresh
from a top business school. Innovative HR departments must
find talent by recruiting from other providers, using headhunters,
and scanning job boards, all while keeping focused on how
each new candidate will address specific client needs.
For example, a services provider intent on designing an organizational
structure that fits its strategic vision of improving industry
competencies literally maps out what skills are available at what
levels ' and, conversely, what skills are missing at each level.
With this systematic approach, you can then make strategic hires
to fill specific industry gaps.
In addition, to staff projects with the level of expertise clients
expect, you can create training and development programs to
build skills in areas that reflect client demand. The success of
these kinds of endeavors depends on your ability to identify and
address labor and skill gaps in a way that minimizes the combined
hiring and training spend. In other words, do you have the ability
to evaluate which is the better option ' hiring a new consultant
with the right skill set or training an existing employee to fit the
need?
Innovative services providers are also developing tools to manage
the influx of resumes resulting from the proliferation of job boards
and online applications. Designed to improve the selection process,
you can use technology to prescreen candidates and present a
select group to the hiring manager or recruiter, resulting in a
smaller subset of highly qualified candidates. This reduces the
time and cost to hire, while improving candidate quality.
Retention strategies ' from paid time off to administrative
support ' also require innovation if you are going to compete
effectively in a marketplace that values industry experience.
Professional services providers can no longer expect to offer the
standard four weeks of vacation. Instead, today's new hires want
flexible time off, such as the ability to work for a year and then
take a sabbatical for a couple of months. And to make the daily
life of a consultant easier, technology can provide easy-to-use
time and attendance tools that minimize frustration over time
spent on administrative activities and provide consultants with
more time to devote to client-facing activities.
Resource Management
Another area that most services providers recognize as critically
important is the ability to effectively manage resources. By integrating
the process used to assign resources with both talent and
demand management, you can maintain the highest utilization
levels. Typically, the information on opportunities and resource
management is generated and managed in two different parts of
the organization. To streamline capacity planning, these information
silos must be integrated in a way that is meaningful and productive
so that you can easily balance demand and supply. You
can use technology to systematically compare the sales pipeline,
resources, and current services with an overview of your total
talent pool. With this insight, you can determine whether you
have the right resources ' based on skill set, knowledge, and
experience ' to match your clients' expectations and improve
both calendaring and booking.
Leading services providers strive to balance consultant skill sets
and career aspirations with client needs and expectations. To optimize
resource management, a services provider must consider
timely and accurate information about consultant availability,
utilization, and rates per employee, as well as each individual's
visa status or travel preferences, qualifications, and skills. And
when resource management is executed well, talent management
benefits because consultants are satisfied that they are assigned to
projects that leverage their skill sets and set them up for success.
Using role and skill requirements generated from an opportunity
management system, you can quickly perform sophisticated
searches on a skills database to identify the right specialists for
each project. Leading providers take this a step further and evaluate
talent that can be staffed from lower-cost outsourcing options
and third-party contractors. The result is not just more effective
staffing execution, but also more satisfied clients, better resource
utilization, and ultimately improved profitability.
Demand Management
To manage the talent supply chain effectively, services providers
need to create visibility into the sales pipeline. Amid growing
competition from offshore, product companies, and niche companies,
a services director's goal is to sell more services to both
new and existing clients. Technology can paint a complete picture
of committed projects and resources, giving you a transparent
view into the project pipeline, project schedules, future skill
needs, and talent utilization, as well as the constant evaluation of
existing and potential new lines of service.
Leading services providers take a structured approach to tracking
and managing opportunities as they develop. A more scientific
approach to demand management provides the necessary information
for full pipeline and win-loss analyses. It helps managers
assess top opportunities, predict expected sales volume, calculate
closure probability, and track promising leads. An opportunity
template can help you capture all aspects of a project's scope,
including a client's demand for certain roles and skill sets and the
costs associated with providing them. This information should
be tightly integrated with engagement planning or resource
management, so you can begin evaluating alternatives for staffing
the project, for example, determining whether you can use
available or soon-to-be-available talent or whether you must
contract with subcontractors or a partner.
Supplier Management
When internal resources are stretched too thin, innovative professional
services providers rely on IT to quickly identify and
then effectively use partners, subcontractors, and offshore
resources to flexibly meet clients' needs. Helping to facilitate collaboration
with suppliers, IT can seamlessly integrate subcontractors
into your service delivery processes across diverse markets.
Using tools designed to improve supplier management, you
can create a single, real-time view of all external resources. Leading
software allows you to benefit from integrated resource management
functionality, such as the ability to schedule resources
from Microsoft Outlook. You can use service procurement technology
to perform strategic-sourcing activities, such as bidding
and contract management, not to mention the full range of
operational procurement activities from requisition to payment.
Finally, portal technology can connect partner companies via
self-service access to supplier applications to streamline service
delivery administration and other activities.
CONCLUSION
From globalization to finding the specialized talent that discerning
clients demand, professional services providers face several
daunting challenges that can impede their ability to operate efficiently
and profitably. In addition, providers must continue to
attract and retain the talent needed to help define new service
lines and provide competitive differentiation. Add to this mix the
ongoing challenge of effectively deploying talent when staffing
managers have limited visibility into the sales pipeline, and it's no
wonder that resource planning is often misguided and staffing
disorganized.
In many organizations, rudimentary or manual systems support
talent, resource, and demand management processes, so even if a
provider excels in one area, the overall planning process remains
disjointed and activities siloed. Providers that continue to plan
and staff projects relying on a combination of Microsoft Excel
spreadsheets and management instinct will fail to recognize the
benefits of an integrated talent supply chain.
To boost profitability, innovative professional services providers
are adopting best business practices that improve, integrate, and
then optimize the five segments of the talent supply chain: offer,
talent, resource, demand, and supplier management. With an
integrated talent supply chain, data flows freely to where it's
needed, and you can fluidly manage talent, resources, and
opportunities. In this environment, you can develop a keen
understanding of demand and benefit from highly efficient and
coordinated processes for optimally staffing engagements
globally.
The SAP® for Professional Services solution portfolio provides the
applications and services that professional services providers need
to take a holistic approach to the talent supply chain. With SAP
for Professional Services, you can enhance your ability to focus
on recruiting and retaining the ideal mix of the best and brightest
talent. You have the information you need to put the right
people in the right place at the right time. By adopting IT solutions
that can support a fully integrated talent supply chain, you
can benefit from timely, accurate insights; make proactive business
decisions; and deliver the high-quality, on-time results clients
demand.
To learn more about how SAP for Professional Services can provide
the solutions, applications, and services needed to integrate
the talent supply chain, visit www.sap.com.