The Three Biggest Resource Forecasting Challenges and How to Solve Them
The latest episode of Kantata’s Professional Services Pursuit Podcast focuses on why resource forecasting continues to be one of the largest inhibitors at services organizations, and recommendations for how to overcome this challenge. Banoo Behboodi hosts the episode, with special guest Marc Lacroix, who is a partner at RTM Consulting and on the board at the Resource Management Institute (RMI). Marc is both a practitioner and a researcher, helping professional services organizations optimize their operations through effective resource management. The discussion revolves around the latest — and first of its kind — research report from RMI, which focuses entirely on resource forecasting.
The blog below looks at the three biggest challenges associated with effective resource forecasting — poor data quality, inability to effectively use skills databases, and overly complex pricing models — and the best practices to overcome them. To hear the entire discussion, listen to the episode or read the transcript here.
Challenge #1: Poor Data Quality
According to Marc, “forecasting is probably one of the hardest problems to solve in terms of getting good resource management processes in place. I think it boils down to data quality being the biggest inhibitor.” A common barrier to accurate forecasting is a lack of proper, up-to-date data. Marc finds that one root cause of poor quality data can be found in the backlog. Marc says, “as delivery teams, the backlog data is the data we can control. So we can’t blame anybody else for the quality of the data that we have within our own purview, it’s our backlog, it’s our project plans that are the problem.”
Best Practices:
- Recognize Unrealistic Workloads on Project Managers
Marc references some of his interactions with clients, revealing, “we’re seeing now more and more PM’s getting assigned 10, 15, 20 projects at a time. And if you think of how challenging it is to try to maintain project information in a complex system, that’s a little bit of overload.” So, reducing the workload on PMs can have an immediate impact on the quality of data. - Simplify Project Plans
“The other thing we found too is sometimes organizations are getting a little too complex in the way they’re creating their plans and so it creates a lot of complexity to actually maintain,” says Marc. Simplifying project plans can clear up time for project managers to actually update data in a timely and accurate manner. - Understand Which Business Processes Are in Flux
“We also discovered that people say the business is pretty fluid, things do change a lot,” Marc says. With business processes and tools in flux, it’s difficult for project managers to actually maintain the right data, or even know which data needs to be updated. When things change, make sure the people in charge of delivering projects know the impact this has on the data they are putting in the system.
Challenge #2: Failure to Effectively Use a Skills Database
According to RMI’s research, only 31% of organizations report having the capability to forecast skills. This reveals that nearly 7 out of 10 services organizations do not have the tools or processes in place to understand the skills they need to service their current and future clients. Marc shares, “I’ve definitely seen over the past three to four years that more attention has gone into skills database design and implementation than ever before.”
The dilemma is that even if an organization has a skills database in place, they are not actually using it to understand what skills they have — and what skills they will need in the future — to meet demand and drive superior customer experiences. Marc explains, “Companies are failing to use a skills database to make smart resourcing, hiring, and training decisions.”
Best Practices:
- Incorporate Skills Data in the Sales Process
It’s not enough to simply implement and deploy a database of skills. According to Marc, “the real goal is to tie [the skills database] to more of the sales process and pipeline to understand ‘if this opportunity or these sets of opportunities are in our pipeline, what will that mean in terms of my skills and ability to staff them in the future?’”
To be successful, skills data needs to be incorporated in the sales process and the CRM platform, when deals are still in the pipeline. Marc says, “sometimes organizations wait until the project’s sold and ready to start being staffed when they could have started doing that a lot earlier in the process.” Marc believes the best way to incorporate skills into the sales process is to “use technology to really develop what skills are needed upfront — while it’s still in the sales cycle so you can effectively forecast and plan ahead for being able to meet the needs of what’s in the pipeline.” - Promote Cross-organization Collaboration
In order to have a skills database that is up-to-date and effective, you need buy-in from a number of different areas of the organization. Marc says, “an effective skills database requires a broad collaboration with the delivery leaders who know the business. So I’ll call them a practice leader or delivery manager or people that represent some of the different tools, technologies or delivery areas that you’re in. They all need to be engaged to contribute to what goes in the skills database.” - Keep the Data Simple at the Start
When a skills database is first implemented, companies tend to feed the system with overly complex data that becomes unwieldy or difficult to analyze. “Simplicity is certainly better — start small and grow,” says Marc. “I think people overcook their skills taxonomies a bit and try to get down to the version level of the product technology.” Keep in mind, skills data is effective when it can actually be applied to a use case. According to Marc, “you have to come back up and apply use cases to say how am I gonna use this data and how much is enough to make an informed decision or to contribute to my analysis that I’m doing?” - Establish Governance of the Skills Database
Marc says the best place to anchor this governance is in the resource management office, if your organization has one. The project management office or another operational home is also appropriate, but the key is assigning a specific team to govern the skills data, “making their main responsibility to facilitate the process of keeping the data up to date and healthy.”
Regarding the cadence of upkeep, Marc shares, “certainly a leading practice we propose is no more than annually, twice annually, typically coinciding with a performance management process, but of course ad hoc as well. If you finish a training or a project or something like that, they’d be encouraged to go in there and update the database.” - Keep the Taxonomy Up-to-Date
According to Marc, “we can’t forget that we have to keep the taxonomy itself healthy as well…that probably happens at least once a year, maybe a little more frequently getting some of the experts back together to say [the taxonomy is] serving their purpose.” For example, “ you can run a report to see how many people have rated themselves….you can take any that have not been rated out and add others to keep it healthy and relevant to both the business, as well as the individuals that are using it.”
Challenge #3: Overly-Complex Pricing Models
Projects today are often sold with more complex structures and pricing models. Some examples Marc says he’s seeing from business include: “‘we’re selling more buckets of hours, we’re selling more credits, we’re selling more retainers.’ Those are very difficult to do resource management against.” Credits are technically unscheduled work, and Marc reveals that “it really becomes an elephant in the room because projects have been sold but the revenue has yet to be recognized… so we have all this backlog that is unscheduled and we have no idea what is coming.” Marc shares, “customers might wait and then say ‘I’m ready to spend my money now or spend my credits.’ So that’s an example to me of a trend I feel is increasing, which again makes it more difficult for delivery teams, makes it even more difficult for resource management to handle.” Below are a few ways to ensure you can effectively manage resources in the face of more complex pricing models.
Best Practices:
- Be Aware of the Implications of Pricing Complexities
Understand the structure of services being sold, and how easy or difficult these structures may be to deliver. Marc shares that “the issue might not be that the resource manager just needs to get smarter and more creative on how to do this…instead it may be that the pricing models and the way projects are being sold are actually creating more overhead.”
Marc says, “What I’ve encouraged people to do is look beyond resource management and say, ‘Do you really wanna sell it this way? Do you know the implications of selling it this way? And should you rethink the way you package and structure your services?’ Find a nice balance between being highly flexible to your client while not eroding margins because the model is so heavy on operations to deliver.” - Balance Custom, Flexible Projects and Templates
Services organizations today are seeing unique demands from customers, specifically asking for more flexibility in how a project will be priced and delivered. Marc encourages organizations to think outside the box: “Are there other ways that we can package this up and still fulfill the client? And if we must sell it, are there things that we should think about to reduce the chaos that basically a bucket-of-hours type engagement results in?”
Marc shares, “the real opportunity here is to move from custom services to more packaged and templated services. I think that’s one remedy that pays dividends all across the organization. It’s easier to sell so your sales costs are lower, it’s easy to translate into delivery, so we know what some of the resource requirements are against it. We generally know what impact it’ll have on our backlog.”
“The rule is generally 80-20, 80% of what we sell falls into one of these templates? And it’s actually giving your customers some satisfaction because templatization and packaging shows you’ve done this a hundred times before and [lets] you go forth and say ‘we have a proven playbook process to do this successfully.”
Learn More
This blog is just a sneak peak into the entire conversation between Banoo and Marc. If you’d like to learn more about challenges associated with resource forecasting or more insights into RMI’s recent report, listen to the entire podcast. You can also find the entire RMI Resource Forecasting report here. Subscribe to the The Professional Services Pursuit Podcast to stay up to date on the latest expert advice, trends, and best practices surrounding the professional services industry.