sasha-peasyprojects-netSasha Papov, Technical Writer
2 min read

 

What are the KPIs for consulting professional services firms?

Key Performance Indicators (KPIs) for consulting firms are metrics used to evaluate the effectiveness, efficiency, and overall performance of the consultancy. These indicators provide insights into various aspects of the business and help in assessing the achievement of strategic goals. Here are some common KPIs for consulting firms:

KPIs continue to be an invaluable tool in enabling the tracking of progress in relation to organizational objectives. In the context of professional services, they can also act as a means of predicting profitability, customer satisfaction, employee morale, and more. Here are 6 KPIs for professional services firms that your company should be tracking in 2024:

1. Utilization Rate

Measures the percentage of billable hours compared to total working hours.

The utilization rate is one of the key metrics for a service business. It looks at how much of an employee‘s time is being spent on billable tasks and is expressed as a percentage. For example, if an employee can potentially work 35 hours in a given week and 30 hours have been spent on billable work, their utilization rate would be 85%.

As a general guideline, service companies should aim to achieve a utilization rate of between 85 – 90% to maximize profitability.

To calculate:

Utilization rate = Total billable hours / Total hours available

 

2. Resource Capacity Utilization

Resource Capacity Utilization is a critical metric for organizations seeking to achieve operational excellence. By effectively managing and optimizing the utilization of resources, companies can enhance their overall efficiency, reduce costs, and improve the delivery of products or services.

Resource capacity utilization is a foundational metric for professional services firms. It gives a company a glimpse into how “loaded” or, in some cases, “underloaded” their resources are. It‘s also an essential metric for answering the question, “Can we take on another project”?

To calculate:

Resource capacity utilization = Reported time / Resource Capacity

3. Employee and Client Satisfaction:

Reflects the quality of service and client relationships

We‘ve all heard the adage that happy employees are productive employees, right? According to a Gallup report, satisfied employees can increase profitability by up to 21%.

There are many ways to measure employee satisfaction. For best results, try implementing 2 or more of these methods:

  • Using the Employee Satisfaction Index (ESI)
  • Conducting employee surveys
  • Using the employee net promoter score (NPS)
  • Installing an employee suggestion box
  • Having one-on-one meetings
  • Using specialized software

Client Satisfaction reflects the quality of service and client relationships

Share project progress with clients and enable them to evaluate results within a unified platform

 

4. Profitability of Professional Services Industry Projects

All service companies strive for profitability. Despite this fact, surprisingly few organizations actually follow through with measuring project-level financials, resulting in uncertainty as to whether the project was actually profitable or not.

Project profitability, in its simplest form, can be calculated by looking at the difference between Project Revenue and Project Costs.

The challenging part is tracking the project-level financials that will give you a clear picture as to how much money was spent versus how much was billed for.

Learn more about project financials in our Ultimate Guide to Project Finances.

5. On-time / Service Delivery

Timely project delivery is a key factor influencing customer satisfaction and loyalty for service companies. Consistently delivering projects on schedule is a strong predictor of repeat business

Methods of measuring OTD (On-time delivery) can vary based on the unique nature of each organization, however, a simple calculation is as follows:

OTD = On-time deliveries / Total deliveries

6. Earned Value

Earned value is a good way to gauge the performance of a project against the original plan (budget and timeline).

There are two key parameters used when completing an Earned Value Analysis (EVA).

  1. Cost Performance Index (CPI) – shows how well the project is performing relative to its budget.
  2. Scheduled Performance Index (SPI) – calculates how well the project is performing relative to its timeline.

To calculate:

Scheduled Performance Index

Learn more about completing an Earned Value Analysis: How to Calculate Earned Value Analysis

 

Keeping Track of KPIs for Service Business Does Not Have to be Stressful

It can be challenging to keep tabs on KPIs for professional services firms, especially when you already have a mountain of work on your plate. However, tracking KPIs can be made a lot easier by getting organized and leveraging technology to do the heavy lifting for you. The effort will be worth it in the long run!

Birdview helps service organizations achieve measurable results by providing key metrics at all stages of the service delivery lifecycle. Schedule a personalized demo today to learn more.

Choosing the right KPIs depends on the specific goals and focus areas of the consulting firm. Regularly tracking and analyzing these indicators can provide valuable insights for making informed decisions and driving continuous improvement within the consultancy.

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