A Balanced Scorecard for

Running a Professional
Services Organization
By Team Kantata
Contents

3 Introduction

4 Balanced Scorecard:
Elements Overview

6 Four Essential Elements of a

Balanced Scorecard

7 Using Executive Dashboards to Monitor KPIs

8 Company Summary Dashboard

9 Customer Health Dashboard

10 Company Wealth Dashboard

12 People Dashboard

13 Growth & Value Dashboard

15 Summary
INTRODUCTION

A professional services organization is

a complex business, requiring careful
management of different motivations
and demands across a wide spectrum of
contributors: consultants, project managers,
contractors, salespeople, customers,
suppliers, and partners. In maintaining an
optimal balance of these different groups, the
elements below should be considered.

A Balanced Scorecard for Running a Professional Services Organization 3

Balanced Scorecard:
Elements Overview

Business An overall long-term view of what the business is aiming

Strategy to achieve

The products, services, and annuity services that the

Propositions business delivers; the value they provide; and their
competitive advantage

Sales Execution
How sales opportunities are identified and sold
Strategy

Does the platform guarantee uptime? Will data continue

Business
to be available at a required level of performance in
Operating Model
situations ranging from normal through to “disastrous?”

Can users access data in near real-time? How much time

Finance and does it take for your data to become available after your
Operations request or event? Typically, data latency is measured in
seconds or milliseconds.

A Balanced Scorecard for Running a Professional Services Organization 4

What is a Balanced Scorecard &
Why is it Important?
Traditional management reports consist only of historical financial information; for
small businesses, this is often enough. At this smaller scale, the management team
understands the business well and the directors can hold a full picture of the business
in their heads. However, as a business grows, it gets more complicated: there are more
people involved and responsibilities must be delegated or growth will be constrained
by a lack of management bandwidth. Common objectives are required that are
communicated throughout the business and everyone needs to know how they are
contributing to success. Looking at indicators of future performance becomes more
important than simply analyzing historical numbers and tracking business performance
against strategic goals becomes a key part of day-to-day operations.

A balanced scorecard is a strategic planning and management tool that is used to

align business activities to the vision of the organization, monitor performance against
strategic goals, and communicate performance both internally and with external
stakeholders. This technique emerged so that businesses had clear visibility into their
strategic plan while keeping track of normal day-to-day operations.

The balanced scorecard approach considered here, therefore, includes both

operational and strategic measures for a professional services business. It combines
an overview of current business health together with indicators regarding strategic
direction and it provides early identification of issues and opportunities so that timely,
pre-emptive action can be taken.

A Balanced Scorecard for Running a Professional Services Organization 5

Four Essential Elements of a
Balanced Scorecard
1. Operational and Strategic Goals:
Operational goals would include traditional monthly and quarterly revenue and margin
targets. A strategic financial measure might be revenue for a particular service line
the business wants to grow, or a customer acquisition target for a newly established
geography.

2. Leading and Lagging Indicators:

A lagging indicator might be revenue, profit, or utilization for the previous month.
A leading indicator might be the sales pipeline, attrition, or, of course, revenue and
demand forecasts. It is important to look at leading indicators so that timely action can
be taken. For example, if supply (available resources) is forecast to be insufficient to
deliver the work that has already been sold, the business needs sufficient time to take
corrective action and recruit the necessary additional resources required.

3. Variances and Trends:

Trends and variances are important because they look at performance against target
or at how performance varies over time. Variances may be against budget or forecast,
against last month, or last year. Trends often provide more valuable insights: It may be
more important to notice that this month is 10% below last month’s performance and
the trend is downwards rather than that it’s still 5% above budget.

A Balanced Scorecard for Running a Professional Services Organization 6

4. Financial and Non-financial Measures:
A non-financial operational measure might be utilization. In fact, for a business doing
work on a time and materials basis, utilization has to be one of the fundamental
KPIs. Financial measures should provide insight into which parts of the business are
performing better and those where attention is needed. This might be across different
business units, service lines, sales channels, etc. It is important that managers
throughout the organization are aware of their own performance and how it compares
and contributes to the business as a whole.

Using Executive Dashboards to

Monitor KPIs
To see a balanced scorecard in action, we’ll now look at how the Kantata Cloud for
Professional ServicesTM incorporates KPIs into a holistic set of scorecards for services
organization executives. Kantata provides a suite of interactive dashboards that deliver
true insight into the historical and likely future performance of the business, providing a
real-time view of your services organization. These dashboards combine the essential
elements of a balanced scorecard that enable executives, senior management, and line
managers to:

01 Better understand performance across key areas of the business

02 Identify areas of potential improvement

03 Easily measure performance against agreed targets

A Balanced Scorecard for Running a Professional Services Organization 7

04 Provide stakeholders with underlying trends and predictions to
help assess
Kantata’s Executive Dashboard Suite consists of the following five dashboards, which
we will go into in more detail in the following sections:

• Company Summary Dashboard

• Customer Health Dashboard
• Company Wealth Dashboard
• People Dashboard
• Growth & Value Dashboard

Company Summary Dashboard

The Company Summary Dashboard surfaces a set of headline measures that
represent the overall position of the business. These show the historical and projected
performance of the business and indicate areas — such as revenue performance
against plan, levels of work at risk (ie., undertaken without PO cover), or margin
contribution by business unit — that require more detailed investigation.

Key measures in the Company Summary include:

1. Forecast Revenue versus Target:

A breakdown of actual and forecast revenues assists in strategic decisions on where to
focus for future business growth.

2. Sold versus Delivered Margins by Account:

An analysis of how projects performed against the original plan identifies situations
where a sold project cannot be delivered as promised and acts as an early indicator for
potential customer satisfaction issues and areas where there is a disconnect between
the sales and delivery functions.

A Balanced Scorecard for Running a Professional Services Organization 8

3. Working at Risk:
Revenue that has been booked or forecast against projects where delivery has already
started even though contract terms have not been finalized. This analysis can provide
early visibility to projects that may lead to revenue write-offs.

Customer Health Dashboard

The Customer Health Dashboard presents a series of charts that represent the current
status of customer projects. This is a point-in-time view and represents the current
position, rather than a trend. These charts are used to identify projects which are not
running to plan, where executive oversight and review are required, or where a process
to remedy should be instigated.

Key measures of Customer Health:

1. Project Variance against Budget:

Regularly reviewing the projected margin variance allows executives to see projects
where there could be a risk to customer satisfaction, due to increased timescales and
cost, as well as identifying projects that could impact the overall company margins.

A Balanced Scorecard for Running a Professional Services Organization 9

2. Non-Billable Time and Revenue Write-Offs:
Free-of-charge work is an indicator of poor project health. This may be because of
a commercial or delivery risk, or omissions in the original planning and shows that
customer satisfaction could be at risk. Regular executive reviews of non-billable time
provide an early warning of project issues affecting delivery and satisfaction.

3. RAG Summary Status:

Red Amber Green (RAG) status summaries provide visibility to the engagement
manager’s assessment of delivery confidence and highlight projects considered at
risk together with associated narrative. Regular executive review of this information
provides early visibility to issues affecting delivery and customer satisfaction.

Company Wealth Dashboard

The Company Wealth Dashboard displays a set of financial charts that demonstrate
past and potential future revenues, alongside the cash generation position for the
company. The information presented is used to review progress against the current
plan and the likely outcome for the quarter or year against planned targets as well as
the financial stability of the company.

A Balanced Scorecard for Running a Professional Services Organization 10

Measures of financial health include:

1. Revenue Trend by Business Unit:

Seeing the future demand and likely revenues and margins across business units will
assist in strategic decisions of where to focus investment in go-to-market strategies
and hiring. For example, if the demand is growing in one area and declining in another,
should effort be spent on re-training or hiring into the areas of highest demand?

2. Bookings Pipeline versus Target:

The total possible booking value gives an indicator of the effectiveness of the sales
engine and the likely coverage versus target. Ideally, the possible amount is greater than
or equal to the target for the near term months and is likely to drop below for the months
further out.

3. Projected Incoming Cash:

Forecast invoice amounts, combined with typical payment terms, provide an accurate
forecast for expected incoming cash. Seeing the likely cash inflows and resulting
cashflow projections, will allow solid decisions on investments to be made.

A Balanced Scorecard for Running a Professional Services Organization 11

People Dashboard
The People Dashboard includes measures to demonstrate the historical and projected
performance of billable resources, including open un-resourced demand.

Key indicators for People-related measures include:

1. Resource Utilization:
The historical and forecast utilization as a percentage of available time for resources.
Utilization is an essential indicator of the health of a services business. Getting a
balance between efficiency and resources running “too hot” is critical. The higher the
utilization percentage, the higher the likely net margins will be. But, if it is too high, then
employee dissatisfaction and burnout could cause attrition problems.

2. Average Resource Rates:

The average daily or hourly rates show the revenue-generating potential of your
resource pool. Understanding which business units and roles are commanding higher
rates allows you to better understand market demand and make strategic decisions on
recruitment and retraining while providing the insight needed for reviewing standard
price list rates.

3. Headcount Fluctuation:
Headcount drives revenue and costs, so headcount trends should track in line with
revenue forecasts and any variance will indicate whether there needs to be a focus
on recruitment or sales. If growth is not in line with the budgeted headcount, the
recruitment function should be reviewed for effectiveness, assuming that the demand
is also in line with budget.

4. Joiners and Leavers:

The number of resources who joined the business each month shows whether the
recruitment process is keeping up with forecast demand. While the overall headcount
figure can mask attrition issues, leaver information can identify specific areas of
attrition and prompt a review to understand underlying causes.

A Balanced Scorecard for Running a Professional Services Organization 12

Growth & Value Dashboard
The Growth & Value Dashboard presents measures that demonstrate historical sales
and delivery execution and future growth potential of the business along with the
quality of revenues. These figures can be used to show the trajectory and potential of
the business.

Key measures of growth include:

1. Gross Margin Quality:

The trends of historical and forecast gross margin contribution for each service line.
Understanding the relative contributions of business units and service lines allows you
to better understand the external demand and profitability of the underlying elements
of the business.

2. Engagement Backlog by Month:

A breakdown of the amount of contracted work where revenue has yet to be earned.
Backlog should be regularly reviewed to ensure a healthy buffer exists to smooth lumpy
sales timings.

A Balanced Scorecard for Running a Professional Services Organization 13

3. Book to Bill Ratio:
The ratio between the amount of new business sold versus the revenue earned in the
calendar year. This ratio indicates whether the business is growing or shrinking and is
used to maintain an appropriate investment balance between securing new business
and ensuring the correct level of delivery capacity.

A Balanced Scorecard for Running a Professional Services Organization 14

Summary
Kantata’s Executive Dashboard Suite provides a complete, balanced view that service
business leaders can rely on to guide their decision making for both efficient operational
performance and the long-term achievement of strategic goals, including the key
indicators of both future and historical performance.

The Kantata Cloud for Professional Services is the first purpose-built software tool
created specifically for the next generation professional services organization.
Kantata takes professional services automation to a new level, giving people-powered
businesses the clarity, control and confidence they need to optimize resource planning
and elevate operational performance.

By leveraging the Kantata Cloud for Professional Services, services leaders gain access
to the information and tools they need to win more business, ensure the right people
are always available at the right time, and delight clients with project delivery and
outcomes.

Mind the Gap:

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