The Importance of Performance Benchmarking and How to Get Started

We talk about benchmarking and performance measurement a lot on this blog.

And it’s for a good reason.

Benchmarks imply that you’re actually measuring your progress and your focus is on continually improving performance. And that’s something we can get behind.

Too often the conversation is focused on the next big buzzword or some form of technology that promises to solve all of your problems. An important conversation for sure, but if you can’t measure where you’ve been, or if you don’t truly know where your problems lie, it’s all worthless. The benefits of benchmarking analysis are many: benchmarking helps to manage team performance, assess business performance, and understand the competitive landscape as you grow your business.

That’s true for any business, but for professional services organizations (PSOs) it’s especially important. Because there are little to no physical products, only services, everything comes down to how effectively you are able to use time. This is often measured through an organization’s utilization performance, but, in reality it is an attribute of every aspect of the business. From hiring a new subject matter expert to staffing a project or invoicing for your work, it’s the balance of quality and speed that drives results.

Benchmarks for professional services firms are out there, and we’ll tell you a bit about our favorite benchmark study. But let’s dig in a bit on why we benchmark and how.

What are the different types of benchmarking?

When we think about benchmarking analysis in business, there are two very basic definitions:

  1. Internal Benchmarking: this technique is a way of assessing business performance through measuring areas within an organization with similar metrics or internal processes. Great for quick assessments using available data (assuming you have this data at hand and you trust it), for example benchmarking team performance. The downside is internal benchmarking can be a bit of an echo chamber as you’re measuring against your own company without the benefit of a market perspective.
  2. External Benchmarking: going outside your company to obtain industry data to measure against is where most companies derive the most value. It is how you know if you’re winning against the competition (competitive benchmarking), if you’re operationally effective (practice or performance benchmarking) and what constitutes “good” in terms of your industry

At Projector we focus a LOT on external benchmarking for professional services organizations. Effective benchmarking should always be a part of a business improvement process, it is certainly the goal of implementing a PSA and why Projector’s customers tend to be very successful. And like most PSOs, our customers typically begin benchmarking with the metric to rule them all: billable utilization.

Benchmarking your billable utilization is a good first step, but don’t stop there.

Measuring your utilization performance is just the first step, and every services firm does this in one form or another. I won’t go into the best way to measure your services firm, because we cover that in great detail in various blogs. A good starting point might be our conversation on professional services dashboards, our thoughts on measuring professional services utilization, or this post on the key performance indicators (KPIs) that matter the most to professional services organizations.

Instead, use the visibility you have into your organizational data to establish a framework to measure the KPIs that truly measure performance and get you beyond just the basics.

billable utilization dashboard
This Projector BI dashboard is built on best practices for benchmark reporting.

This is where effective benchmarking activities come in. Benchmarking against your historical metrics helps you understand if changes you made had an impact, and benchmarking against your peers helps you understand where you need to make those changes. That first one is easy, but that second one, not so much.

Evolution vs. Revolution

When you do dig into the operational changes that will positively affect performance, avoid the common mistake of chasing one benchmark at a time. Taking a balanced approach to incremental changes across benchmarks may take more time to show results, but it builds a scaffolding for future efforts as your business and strategy evolve. 

Managing professional services organizations
Companies that use benchmarking successfully undertake a balanced approach to improvement

Take a look at our webinar recording where cover the KPIs that matter most to services organizations and you’ll see the framework we use to think about lagging and leading indicators that feed best practices benchmarking reports. You’ll also see how Projector measures and reports on key performance indicators with Projector BI, the analytics tool built specifically for PSOs to measure and track every aspect of their delivery and financials.

Get Started Benchmarking Your Professional Services Organization

There’s a reason why every year we support the efforts of Service Performance Insight (SPI Research) in their Professional Service Maturity Model Benchmark. This is among the most comprehensive benchmark data for the professional services industry, and we think it is one of the most powerful tools a professional services firm can have—along with a great professional services automation system that is.

So, if you’re like us and believe that benchmarking is a great way to measure your firm’s performance, download the SPI research at the link below. 

You will get instant feedback on how your firm performs compared to the average professional services firm, highlighting areas of strength and weakness. You’ll be able to view your performance across multiple different indicators including utilization performance, profitability performance, staffing performance, and delivery performance. You’ll also see how organizations using professional services automation software performed to identify opportunities to move the needle a bit in your favor. And most importantly, you’ll be able to validate your perceptions of how your firm’s performance stacks up against your peers.

Projector PSA gives you all the tools to start the benchmarking process, operationalize delivery for optimal results and measure and manage performance. Talk to a Projector expert for specifics on how our PSA software can help your organization.

download the professional services benchmark survey from SPI research

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Projector PSA Logo 2020

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