In today’s volatile market, the path to building a profitable professional service firm is filled with numerous roadblocks, such as fierce competition, rising costs, labor shortages, supply chain bottlenecks, etc. To mitigate these risks, PS firms have to forward plan and anticipate future requirements proactively to build an optimized talent pool.
Workforce planning is the key ingredient that helps professional service organizations achieve their immediate and long-term goals by leveraging a skilled workforce.
It guarantees that the right number of skilled service professionals are available for projects at the right time and cost. So, it’s evident that workforce planning is the need of the hour for all professional service firms.
However, while creating a workforce plan, these firms must consider numerous environmental and organizational factors that play a crucial role in the planning process. Some of these factors include economic conditions, technological advancements, government regulations, organizational goals, financial health, etc.
This blog sheds light on internal and external factors influencing PS firms’ workforce planning.
Before that, let’s start with the basics.
1. Why is workforce planning critical in professional service (PS) firms?
Workforce planning is the continuous process of forecasting, analyzing, and identifying current and future resource requirements. It helps organizations balance labor supply against demand as well as helps them strategize for future capabilities.
Robust workforce planning ensures that all resource requirements align with the company’s overall business objectives. Therefore, it enables PS organizations to efficiently meet their operational and strategic goals. Furthermore, it plays a vital role in managing workforce risks preemptively, such as staffing shortages, skill gaps, increased overhead costs, etc.
In addition, it helps PS firms improve operational efficiency, identify cost-effective global resources, and maximize productive utilization, resulting in reduced labor costs. Finally, it fosters sustainable growth by allowing organizations to identify future skill needs and take relevant measures ahead of time.
With the help of effective workforce planning strategies, PS companies can identify talent shortfalls and implement suitable training and development programs and appropriate hiring and retention strategies to bridge the gap. Therefore, it helps them reduce employee turnover, retain high-performing consultants, and build an optimized workforce.
Now that we understand the importance of workforce planning in professional service organizations let’s delve into the factors that influence it.
2. Factors that influence the workforce planning process in PS firms
Enlisted below are the external and internal factors that influence workforce planning in PS organizations:
2.1. External environmental factors
Environmental factors denote conditions that are outside the control of organizations. Nevertheless, they play a critical role in shaping business success, having a positive or negative impact on the organizational workflow.
Let’s understand their influence on workforce planning in detail:
A. Technological evolution
Technological advancements like ML and AI in an era of automation of the service sector have led to the obsolescence of legacy skills and systems. Professionals in PS firms, such as IT and audit accounting, must regularly upgrade their technical proficiency to keep up with evolving tech innovations. However,
“According to a survey, nearly nine in ten executives and managers say their organizations already face a skills gap or expect one to develop by 2024.”
Therefore, as part of workforce planning strategy, PS organizations must consider technological trends and advancements to address skill gaps and prevent obsolescence. For example, in IT consultancy firms, programmers must stay abreast of the latest programming languages, such as Python, Swift, Apache Groovy, Kotlin, etc., to deliver customized solutions to their clients. In addition, it also prevents billable losses for the organization and helps gain a competitive advantage with a skilled workforce.
B. Economic conditions
One of the most important external factors that influence workforce planning is the shape of the economy. For example, an economy experiencing a tremendous boom would have a thriving job market with a huge supply and demand for skilled resources. Therefore, PSOs can frame their workforce planning to hire more talented consultants and professionals based on their immediate and future goals.
In contrast, an economy experiencing a recession can witness a surge in unemployment rates, a decline in consumer spending, and sluggish GDP growth. Therefore, most PS firms resort to layoffs or hiring freezes to protect their profit margins. Moreover, since they rely heavily on their existing employees to fulfill client requirements, PSOs have to adjust their operational workforce plan to avoid employee burnout and maintain optimum productivity levels.
C. Workforce migration
Workforce migration is the movement of labor across geographies or industries. Geographical and occupational mobility affects the availability, participation rate, and skill levels of the labor pool within an economy or industry. Moreover, migration, especially on a large scale, changes the labor composition of the entire region.
Therefore, it can inadvertently influence the workforce planning of businesses operating within the economy. For professional services firms, it impacts the accessibility to skilled consultants. For instance, it can be challenging for PSOs to find and recruit qualified personnel if there is an increased exodus of workers from the region. As a result, they have to revisit their hiring and compensation strategy to find suitable consultants outside their home location.
D. Socio-cultural and industrial trends
Demographical factors such as socio-cultural trends are another vital consideration for workforce planning in professional services firms. Socio-cultural trends such as more women joining the workforce, early retirement, and the need for better work-life balance affect how PSOs attract and manage their talent pool. For example, a greater influx of women into the workforce is an opportunity for PS firms to bring more diversity into their workplace.
As a result, the workforce plan can be revamped to incorporate new DEI (Diversity, Equity & Inclusion) strategies to build a more inclusive and equitable work environment.
Moreover, industrial trends play an important role in shaping workforce planning. For example, the growing popularity of remote and hybrid work has compelled many PS organizations to change their company culture from traditional in-office work to WFH (work-from-home) model. Moreover, trends such as hyper-personalization and 24X7 customer services have pushed PSOs to adopt AI-powered solutions to elevate the client experience. Therefore, workforce planning must be evaluated periodically to ensure it syncs with developing socio-cultural and industrial trends.
E. Employment laws and regulations
Government laws and regulations affect the workforce planning process of a PS firm. They must abide by local, state, and federal labor laws regarding HR procedures like hiring, firing, compensation, working hours, and health insurance. Failure to follow these regulations can put the company at risk of fines, lawsuits, and even business closure.
Therefore, as part of workforce planning, the HRD must stay up-to-date on the latest government employment regulations and ensure that new compliance standards are implemented across the enterprise. Further, they must continuously adapt the workforce plan to incorporate the regulatory changes into the internal strategies. For instance, if the government introduces a new bill around overtime allowance, the PSOs have to modify their internal overtime policies to accommodate the same.
Now let’s look at the internal factors and understand their effect on workforce planning.
2.2. Internal organizational factors
Internal factors are elements that are within the control of an organization. These factors determine the direction of the workforce plan and how it’s implemented across the enterprise.
Let’s understand their impact in detail:
A. Business objectives of professional service firms
The operational and strategic business goals of PSOs lays the foundation for their workforce plan. For example, for short-term goals such as diversifying the types of services offered to clientele, PSOs will formulate an operational workforce plan to upskill their consultants and enhance efficiency at the individual, team, and department levels. Consequently, it will help the firm attain short-term goals, improve performance, reduce attrition, and enhance profitability.
On the other hand, the PSO will develop a strategic workforce plan for long-term goals, such as opening offices across multiple locations. Here, the company will identify the skill requirements and accordingly hire junior and senior practitioners from those locations with relevant expertise and industry experience to fulfill various positions across the organization. In the long run, when the operational and strategic goals of the PSO evolves, the workforce plan can be fine-tuned to achieve immediate and future business priorities.
B. Financial health of the organization
An organization’s financial health and growth phase greatly influence workforce planning. For example, a rapidly growing PS firm would concentrate its efforts on resolving the immediate and pipeline staffing needs. Therefore, the HR personnel would focus on hiring new consultants, both permanent and contingent, to meet current and future project demands. On the other hand, a downsizing PSO would aim to reduce their existing staff to cut down on labor costs and improve profitability.
Alternatively, a financially mature PS firm would put more emphasis on achieving its strategic business goals. As a result, they would prioritize hiring professionals with specialized skill sets to fulfill critical strategic roles. Simultaneously, they would invest in appropriate training programs, job-specific compensation packages, and employee benefit incentives to build a highly qualified workforce. Therefore, the workforce plan will transform depending on the financial health of the PS firms.
C. Skill levels of consultants and professionals
When PS firms are formulating a workforce plan, they need to consider the number of employees and the nature of skills required to fulfill the company’s business goals. The HRD can assess the organization’s current capabilities and conduct a gap analysis to understand whether there is a shortfall or excess of consultants. To bridge the gap, the company can use suitable resourcing treatments.
For example, in a financial advisory firm, if there is an excess of financial advisors or investment consultants, the supervisors can initiate upskilling/retraining programs, bring forth future work, or sell extra capacity at a discounted rate. In case of shortage, they can implement out-rotation and backfill or hire permanent and contingent professionals. As a result, the PSO would revise the workforce plan to mitigate the mismatch of supply and demand proactively.
D. Top talent retention strategy
Growing market competition, combined with an aging population that’s retiring from the workforce, has made it extremely challenging for PS firms to find top talent. Pertinent labor shortage across the globe means firms are competing for the few available resources in the market. In addition,
“A study reveals that around 43% of freshers and 38% of associates hired for intermediate-level positions in PS firms resign within six months.”
Therefore, PS firms must establish a solid onboarding process to prevent the attrition of new consultants. Additionally, they must ensure that consultants’ competency-based salary packages match the market standards. Further, investing in Individual Development Program (IDP) and a 360-degree feedback mechanism can ensure higher employee engagement and motivation, which could lead to higher employee retention. Therefore, robust retention strategies can help PS firms retain skilled professionals and reduce turnover.
E. Consultants’ mobility within the organization
Most PS firms have an internal mobility strategy for moving consultants between different roles vertically and laterally. Employee mobility enables organizations to optimize productivity and performance while helping consultants grow and diversify their portfolios. Companies usually shuffle their workforce in three ways – relocation, succession planning, and job rotation opportunities.
PSOs with multiple offices may mobilize their existing professionals among the different locations as and when required. Moreover, HRD can create a succession plan for critical roles to ensure that there are suitable replacements to take over the positions in the event of unplanned attrition or retirement. Additionally, the company can ensure that senior consultants who have been in the same position for two years are rotated to different roles. This enables senior practitioners to learn new skills while reducing the likelihood of burnout and attrition.
Now that we know the effect of various factors on workforce planning let’s look at how modern workforce planning software can help PSOs.
3. How does modern workforce planning software help PS firms?
Workforce planning has become crucial to safeguard organizations against unstable market conditions. As a result, modern professional service companies are deploying advanced workforce planning solutions to derive the best value from their human resources and future-proof their business.
The tool offers 360-degree resource visibility into critical parameters such as demand, availability, capacity, location, financials, etc. This bird’s eye view enables you to identify and allocate competent and cost-effective resources for consulting projects. Moreover, the software makes it easy to build and manage a mix of permanent and contingent workforce.
The advanced forecasting capabilities and capacity planning feature can help you anticipate future requirements and forward plan for seasonal variations. You can identify excess/shortfalls of professionals ahead of time and take preemptive course-corrective action to bridge the gap.
Furthermore, you can leverage real-time reports such as forecast vs. actual, utilization heat maps, project vacancy, and people on the bench reports to make better business decisions. The forecast financial reports can help your company monitor financial variances and take remedial steps to reduce resourcing costs.
The skill matrix can help you update and maintain the consultants’ professional attributes, qualifications, and competencies in real time. It comes in handy when developing employee retention and succession planning strategies. Further, the What-If analysis features enable you to perform scenario-based modeling and simulation to arrive at the best possible outcome for various business scenarios.
A pioneering workforce planning software can help your company enhance organizational efficiency, reduce employee turnover, maximize profitability, and foster business sustainability.
4. Key Takeaways
“No matter how good or successful you are, your business and its future are in the hands of the people you hire.” – Akio Morita, Co-Founder of Sony.
The success of professional service firms largely depends on how smartly they utilize their resource pool. PSOs can leverage effective workforce planning practices to ensure they are well equipped to meet their short and long-term business goals.
Recruiting the right people with the right competencies at the right cost and then keeping them within the business is a critical aspect of workforce planning. Therefore, good workforce planning helps firms to adapt to changing labor and market conditions more proactively. By keeping the factors mentioned above in mind, PSOs can develop robust strategies that address workforce-related issues and foster sustainable growth.
5. The Saviom Solution
SAVIOM is the market leader in offering the most powerful and configurable solution for managing your enterprise resources effectively and efficiently. With over 20 years of experience, this Australian-based MNC has created its global presence across 50 countries and helped more than 100 customers achieve their business goals. SAVIOM also has highly customizable products for project portfolio management, professional service automation, and workforce planning software based on business requirements.