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Most organizations are familiar with the discipline of supply chain management (SCM): the process of planning, implementing, and controlling the operations of the supply chain to satisfy customer requirements as efficiently as possible. The specifics of supply chain management – managing the movement, use, and storage of all raw materials, work in progress, and finished goods from origin to consumption – are well understood in the manufacturing industry. In fact, manufacturing companies have invested millions of dollars in software to optimize their supply chain processes. Within the professional services industry, the concept of a fully integrated and optimized supply chain management process is not commonly applied.
But market trends and related challenges are driving the need for professional services providers to apply a similar supply chain concept in their organizations: talent supply chain management. We will define the key processes within talent supply chain management and illustrate how small improvements to those processes can significantly affect the overall performance of an organization.
First, let’s clearly define talent supply chain management. Building on the concept of a manufacturing supply chain, we define talent supply chain management for professional services providers as follows:
Talent supply chain management is the complete and integrated process required to hire, retain, and assign professional services professionals to successfully win business and execute client engagements as efficiently as possible.
Like a well-designed manufacturing supply chain, a comprehensive approach to managing the talent supply chain can reduce costs, add product value, extend resources, accelerate time to market, and solidify client loyalty. With an integrated talent supply chain management environment you can expect to:
- Enhance revenues by improving delivery performance and speeding client response
- Improve talent productivity at lower costs
- Fine-tune the precision of forecasts and shorten planning cycles
- Leverage suppliers for greater service and better pricing
- Improve service quality and produce more technologically advanced service lines for better client value
- Enhance internal communications, collaboration, and processes for greater employee satisfaction
- Produce more reliable financial information
To achieve these benefits, professional services providers must reorient their thinking about internal processes and begin to treat the talent supply chain as a competitive advantage. Instead of focusing on discrete tasks, such as hiring talent and staffing projects, think about leveraging a holistic, integrated talent supply chain that gives you the ability to identify, recruit, retain, and optimize effectively the talent needed to satisfy your clients.
Market conditions are driving the need for professional services organizations to foster an integrated talent supply chain. After a sharp period of decline, professional services providers (including consulting, IT, tax, and audit companies) have recently enjoyed a modest rebound in revenues. Table 1 documents the slight revenue growth realized by 11 of the services providers tracked in the Technology Professional Services Association (TPSA) index of technology services providers. Because more companies are using professional services and deep discounting has declined, professional services companies can once again focus on recruiting and retaining staff rather than on simply surviving.
Despite the slight uptick in top-line revenues, bottom-line profitability remains under fire in many pure services companies. Table 2 illustrates the increasing pressure on bottom-line profitability experienced by the same industry leaders from the TPSA index.
Professional services providers clearly must improve operations to improve these bottom-line results. But they must do so in a context of three complicating 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. For example, as companies expand into central and eastern Europe, they want access to local knowledge about emerging regulatory landscapes and business practices. As a result, even the largest professional services companies must hire and staff homegrown talent to provide localized advice and to sell services locally. Globalization does not just affect the largest professional services providers. To compete, even small and mid-size organizations must extend their global reach, either through organic growth, acquisition, or flexible partnership models.
More recently, professional services providers are being asked to leverage global resources to reduce project team costs. Offshore providers are pricing services aggressively, winning engagements that historically were only awarded to providers with a local presence.
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