Loyal clients are the bedrock on which any professional services (PS) business builds long-term success. According to Bain & Company research, a 5% increase in customer retention can boost profits by up to 75%. That’s a major incentive to strengthen client loyalty. As markets change and company culture shifts, having clients that depend on your services provides reliable, ongoing income. So, putting clients first is essential.
At the same time, sacrificing too much for the sake of client loyalty can lead to suboptimal financial performance as well as burnout for your most valuable resource—your employees.
If you’re struggling to meet client expectations without internal sacrifice, you’re not alone. According to research recently commissioned by Kantata and conducted by Forrester Consulting, 87% of surveyed PS decision-makers said creating loyal clients was a high or critical priority. However, 53% are experiencing poor client retention. This asymmetry drives many people-powered organizations to prioritize the happiness of client stakeholders above all else, which can actually harm the business.
So, how can professional services leaders address the unique challenge of going above and beyond to build loyalty while still maintaining a profitable and properly functioning professional services organization? The key is finding the right balance.
Balancing Business Priorities
Even when your company consistently delivers a strong service and has built long-term client relationships, client satisfaction demands consistent hard work and the ability to continually meet shifting needs. Fostering happy clients is time-, money-, and resource-intensive. Considering the implications of that time and cost, it is possible to be too accommodating to clients. If your company is always prioritizing client satisfaction at the expense of everything else, other important areas of your business will be impacted.
Kantata’s ebook, “Walking the Tightrope: Equipping Decision-Makers to Balance Key Priorities With Confidence” highlights the many ways in which client satisfaction, profit margins, and employee satisfaction are heavily interlinked in PS businesses. Focusing too much on any one area will affect the other two, and over- or under-adjusting can create a seesaw effect. Let’s look at some common issues.
Too Little Focus on Client Satisfaction
Profit margins are essential to success, providing companies with resources to enable growth and retain competitiveness. However, PS organizations that increase profit margins as much as possible may inadvertently decrease allocated project resources to the bare minimum allowed by the statement of work (SOW). In turn, this can force team members to cut corners and negatively impact the quality of your work.
An accurate SOW will prevent overly demanding clients from pushing past the scope of work and eating away at profit margins. An SOW should reflect the realities of work while also ensuring you can fulfill the promises you made to the client. Cutting corners and cutting down on team size may seem like the easiest way to fulfill client demands on the cheap, but clients will notice a drop in service quality.
A hyper-focus on profits may be a short-term path to financial gain, but it’s also a fast track to lower client satisfaction and potential loss of clients.
Too Much Focus on Client Satisfaction
On the opposite end of the spectrum, PS firms that sacrifice everything for the sake of a happy client may win that loyalty—but risk the health of their business and their workforce.
When clients become dissatisfied with work, the first instinct is often to work harder, sacrificing projected profit margins and the healthy utilization rates of team members to meet the client’s expectations.
This is why accurate SOWs are so essential – they help guide conversations around which client expectations are reasonable and what to do when expectations around the scope change. Scope creep can have an obvious impact on profitability, but the effect that shifting goalposts on projects can have on team members is even more damaging. When priorities are always changing, the lack of structure and mounting pressure of escalations and fire drills increase the likelihood of burnout. As seen in this report from Gallup, employee over-work and burnout can lead to high turnover rates, which jeopardizes a firm’s resilience.
Ultimately, it’s important to remember that you can only do so much to keep clients satisfied and that some clients will be better served taking their unrealistic expectations elsewhere. Before you sacrifice everything for a client, remember they can’t be loyal to a company that goes out of business.
The Just-Right Balance
So, how can you keep clients satisfied without negatively impacting the rest of your business? The goal should be to provide clients with high-quality work in line with the parameters set by an accurate SOW. This will allow you to deliver work on schedule while staying profitable. An accurate SOW also ensures work is well organized, can be done over an appropriate time period, and keeps employees satisfied in their day-to-day tasks.
To build SOWs that set up teams to maintain the just-right precise balance, ensure bid teams are working with professional services to deliver a realistic plan of action that includes timelines, deliverables, responsibilities, and milestones which have been agreed upon by all stakeholders. Avoid “gold plating,” or overpromising and setting unrealistic expectations in an effort to impress new clients. Also, be sure to communicate to clients what the official scope change process will be while defining the statement of work.
Having the right technology in place to help manage this and provide the visibility and collaboration capabilities that will ensure success is key. Be sure to use a solution that supports both the development of accurate SOWs as well as the automatic provisioning of these SOWs to delivery teams, ensuring they know precisely what was sold.
According to SmallBizGenius, 65% of a company’s business comes from existing customers. A strong long-term customer base will give you the stability and profitability that’s needed to fuel predictable growth. When these clients work well with your company and understand how you run projects, you can protect the well-being of your employees, your finances, and your long-term success.
Walk The Tightrope with Clients, Profits, and Employees
Balancing all aspects of your business isn’t easy. Success often requires a speedy response to issues and smart improvements in how you operate. By the time you understand what mistakes you’ve made and how various elements of your business have been impacted, it may be too late to save a client relationship, maintain your margins, or retain a valuable employee.
Modern purpose-built professional services software like Kantata is designed to not only house every process that’s linked to your client relations, profit margins, and employee utilization, but also to give managers real-time, detailed insights into these aspects of the business to make fast and effective decisions on demand. Combining a deep understanding of your organization with best-in-class software will allow your firm to thrive for years to come.
To learn more about how to balance clients, profits, and employees without over- or under-correcting in any one area, download Kantata’s eBook, “Walking the Tightrope: Equipping Decision-Makers to Balance Key Priorities With Confidence.” And to hear about emerging talent trends impacting the delicate balance professional services organizations need to maintain, register for the webinar “Powering Performance Through Talent Engagement: Key Insights from SPI’s 2023 Professional Services Talent Benchmark.”
Kantata takes professional services technology to a new level, giving people-powered businesses the clarity, control, and confidence they need to optimize resource planning and elevate operational performance. Kantata’s purpose-built software is helping over 2,500 professional services organizations of all shapes and sizes in more than 100 countries to focus and optimize their most important asset: their people. By leveraging the Kantata Professional Services Cloud, professionals 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.