As a result, margin visibility is shifting to earlier in the workflow. It is no longer enough to understand a project’s margin at the end of the year, quarter, or even the end of the project. The healthiest professional services businesses, in addition to targeting about a 60 percent margin, keep profitability highly visible while projects are in flight.
Another key metric for profitability is bench time. This refers to the time that salaried employees are kept “on the bench” or not working billable hours or towards fixed-price engagements. When referring to full time employees, high bench time is the bane of profitability efforts. Thus, metrics on bench time serve a maturing business well.
It always surprises me when businesses are eager to better understand utilization and bench time and yet vehemently resist timesheets. No one likes timesheets, granted, and I used to be as guilty of time-sheet dodging as the worst of them. How many Monday morning Slack messages did I receive from justifiably irate payroll managers? Too many to admit in writing. However, timesheets are thus far the best way to understand what your staff are truly doing with their time; and to a professional services business, time is money.
One change to the time-sheeting process can ease the burden on employees. Have employees list the total hours worked on a project in a day instead of each start and stop time. To companies that are not used to this approach, it can appear more burdensome, but again and again employees report preferring it, and companies who make this switch rarely want to return to “clock in, clock out.”
Regardless of how you capture it, data that quantifies bench time is essential to answering the question “What is everyone doing all day?” Or as one of my work-friends and I used to teasingly say to each other “What DO you do here?” The answers will likely inspire interventions, even tiny ones, that will ultimately make the business more profitable; and in this year of margin-obsession, few companies can avoid reckoning with these details.