In an Increasingly Competitive Market, Professional Services Firms Need a Focused Approach
According to the Bureau of Labor Statistics, the professional and business services is one of the fastest-growing segments in the industry. As a result, services organizations are clamoring to adapt to meet the needs of both their clients and the rapidly evolving spectrum of services for project-based work.Our recent 2019 State of the Services Economy research report highlights some of the top challenges these organizations face. Specifically:
- Eighty-five percent responded that client expectations are increasing, and
- Seventy percent indicated their business experienced a spike in competition during the last 12 months.
The report illuminated a binary scenario where organizations that effectively respond to this level of competition and change will be the survivors and the high performers. Those that don’t may continue to exist, be acquired, or go out of business. If you don’t pay attention to client needs and acknowledge the competitiveness of your market, you will get clobbered. Given the fierce competitive environment, organizations must find ways to differentiate themselves and ensure they have a viable long-term business strategy.
Build Trust to Meet Client Expectations and Thrive
For client services businesses, success depends on meeting your client’s expectations. When 85 percent of respondents say the same thing — that client expectations are rising — it’s a clear sign that the industry is becoming more competitive as clients are becoming more demanding. Doing a poor job of defining client expectations for a particular service or level quality makes it unlikely that expectations will be met.
Repeatedly meeting expectations builds trust with your clients. When services organizations fail to meet expectations, trust is lost. When that trust is lost, rebuilding the relationship is extraordinarily difficult.
The responsibility of a client services organization is to maintain relationships by identifying, understanding, managing, and meeting expectations. Meeting client expectations requires the alignment of your entire workforce. This is complicated by the increased reliance on subcontracted resources (in excess of 40% of a team) to augment client services teams. Leveraging a hybrid workforce requires a continuous effort to communicate and cascade client expectations across teams.
Become a Focused Expert
Eighty-two percent of respondents indicated they have delivered a greater range of services than during previous years. It’s tempting to expand your portfolio of offerings to grow your business however, for smaller organizations, branching out too quickly introduces considerable execution risk.
Instead, smaller organizations should focus on service offerings in which they are expert. While clients increasingly want a wider range of services, stretching a small organization too thinly in the interest of serving every client need, is likely to result in missed expectations. To focus their services offerings, smaller organizations can leverage the following approaches:
Align the workforce to the core offering
This alignment will allow for the right workforce mix and the ability to charge premium service rates for their specialty. For organizations with fewer resources, turnover is especially costly. Smaller firms should hire senior talent who can command premium bill rates, are likely to stay longer, and mentor your junior staff. With more experienced talent in place, less-experienced personnel can be effectively mentored to deliver core offerings and provide the cost structure to deliver exceptional gross margins.
Repeat, repeat, repeat
By delivering repeatable offerings with a well structured personnel team, knowledge becomes embedded in processes, allowing you to staff a better pyramid of senior and junior resources, ultimately making your offering and profitability more predictable.
A Counterintuitive Approach Offers Competitive Differentiation
Though clients want a wider range of services offerings from their services providers, for small firms the solution may be counterintuitive. Narrowing an organization’s focus to core services can help them differentiate by becoming the best at what they do. By adhering to a narrower focus, establishing trust through expectations, and managing the workforce in a way that helps reach these goals, services organizations stand a better chance of competing in this challenging environment.
This article was originally published by Toolbox on July 16, 2019.