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Productivity holds the key to the great British recovery

23rd Oct 2013
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Measuring and monitoring productivity can help bridge the widest productivity gap in 20 years, writes Jeremy Roche, CEO of Financialforce.com. 

The Bank of England’s forecast that unemployment will take until at least late 2016 to sink to 7%, from 7.8 % now, hinges on a surge in how much workers produce an hour.

Britain has suffered one of the sharpest falls in output for a major economy with productivity, the volume of goods and services produced by each working person, dropping by 3.6 % making this the lengthiest decline since records began in 1960. The UK has a long way to go to catch up with the rates of productivity in its major competitors with official data showing that output per hour in the UK is 16 percentage points below the average for G7 economies, the widest productivity gap in 20 years.

With productivity the key to competitiveness and to strong growth, what should organisations do to reinvigorate their workforces and improve their returns on investment?

For many, it will require a back-to-basics approach to their performance management processes to ensure that people at all levels of the organization are delivering value for the business. At a time when every pound of investment counts, productivity has become a key measure. One way of measuring productivity, now extensively used in the US, is to automate the process with specialist software.

Professional Services Automation (frequently abbreviated to PSA) is software designed to assist people businesses (professionals, such as accountants, auditors, IT consultants and other professionals), with project management and resource management for client projects.

This is accomplished by developing metrics to quantify and qualify basic business processes that can then be used to streamline and improve those processes. It is their ability to manage labour utilization that could hold the key to bridging the productivity gap.

It has been said that other than email, PSA can be the most mission critical system an organisation will run. IRM Plc., an international consultancy in the UK that provides strategic cyber security advice across a wide range of sectors, agrees with this view having increased chargeable utilisation from 2% to 80% since implementing integrated Cloud-basedPSA and accounting software.

Utilisation has become the “magic metric” among professional services organizations. Because it directly impacts whether a company’s profitability is flourishing or falling behind, every organisation aims to get this number right.  

But utilization can be notoriously difficult to calculate because of the number of factors that go into the equation.  In order to get an accurate picture, you need to consider billable versus non-billable time, individual situations (e.g. a new hire versus a senior consultant), credited hours versus goodwill hours and much, much more.  

A good PSA will include all the relevant factors when calculating utilisation, providing a more accurate, reliable number. When a 1% change can have a dramatic impact on profitability, this is not a metric that should be left to chance.

Efficiently managing resources is a challenge for everyone, but for a growing company it’s a particularly delicate balance. 

For a growing professional services firm, it’s crucial to use a PSA with a strong resource management component. The services team should be able to slice and dice the data however they need to, as well as see the opportunities sales may have in progress. Without these capabilities, it is essentially planning in the dark.

US firms such as NTT Centerstance and Perceptive Software rely on their PSA application to monitor the demand forecast and manage resources and maximize productivity. With real-time visibility, they are able to quickly initiate recruiting for in-demand skills. PSA access is granted to preferred subcontractors so they become an extension of the resource pool.

Having visibility to upcoming projects along with current activities allows them to schedule short-term work and tasks around longer term project commitments. Keeping a pool of qualified subcontractors allows them to scale to meet demand – while adding subcontractor margin, which improves the bottom-line.

Productivity holds the key to the shape of the great British recovery. With the help of PSA, productivity can be improved through accurate measurement and monitoring and its use could hold the key to bridging that widening gap.

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