Labor (staff, professional services) Software/software maintenance

25 to 35 percent 10 to 20 percent

Hardware/hardware maintenance/hardware depreciation 20 to 30 percent

Determining IT spending decisions is a critical factor in enhancing firm profitability. Estimation and benchmarking of IT spending provides focus and validation of the firms current spending and investment strategy. This process can also educate senior management and provide deeper insight into company-specific IT spending and its impact on profitability. Regardless of the outcome of the benchmarking exercise, firms should invest only in projects that meet the business or strategic criteria of their organization.

benchmarking human resources

HR departments should be managed as strategic assets and that HR performance should be measured in terms of its strategic impact on the business of the firm. Such an initiative forces managers to regard HR as an entity that must be structured and managed to create value.

While viewing HR as a strategic asset is certainly a best practice, planning and implementation can be successfully undertaken only if staff understand how their jobs contribute to company success. Often, employees dont understand how their job fits into the big picture.

The people factor is a simple concept: Investing in human creativity delivers high returns in terms of job satisfaction and shareholder returns. Implementation requires sustained attention to a set of basic rules. In a poor economic climate, managers who are overly focused on achieving short-term returns through cost cutting often run against the grain of the people factor. People must understand where they fit into the overall strategy and believe they are valued. Evidence suggests that companies with the foresight to see beyond immediate business difficulties will emerge from a business or economic downturn with renewed strength.25

When developing, managing, or expanding the human resources department to meet a companys changing needs, it is important to focus on the services HR provides. A firms approach to building and staffing its HR function should parallel its approach to client service and should be guided by some key qualitative and quantitative determinations. Service firms understand the need to not staff a client engagement or project with too many or too few professionals or too inexperienced or too senior professionals. Similarly, firms should seek the same balance of staff to handle the most important element

Data communications

Miscellaneous/supplies/travel expenses

5 to 15 percent 5 to 10 percent

in its own organization-its people, also known as the inventory that goes home at night. Exhibits 2.16 and 2.17 illustrate target ratios of partner to professional staff for law firms and management consulting firms.26, 27

partner leverage

For each partner in a typical management consulting firm, there are an additional five to six FTEs in other positions. This includes other professional positions, leveraged at 1:25 to 1: 75, and a support staff position.

average personnel ratios by firm size for law firms

As the size of the firm increases, the ratio of associates to partners/shareholders increases. The most significant increase occurs when firms grow from 75 to 150 lawyers to greater than 150 lawyers. The ratio of associate to partner/shareholder jumps from 0.69 to nearly 1.

No organization achieves 100 percent satisfaction among employees; however, the firm must strive for high levels to ensure proper retention of professional staffand high-quality delivery of services. As a company grows, it is imperative to instill equality and to document the companys policies and

1.00

.90 .80 .70 .60 .50 .40 .30 .20

Less than 9 9 to 20 21 to 40 41 to 75 76 to 150 Over 150 Number of attorneys in firm

Exhibit 2.17 Average Personnel Ratios

procedures. Whether your firm has 20 or 1,000 employees, you must have an employee handbook that outlines everything that affects how employees are treated. Rules are helpful both in sports and professional arenas, and employees want to know what the rules are and what happens when they are not followed. In many ways, a firms employee handbook mirrors its approach to business, where attention to detail and explanations of services are provided. Consequently, an employee handbook can serve as a good benchmarking tool. (The CD-ROM accompanying this book includes a sample listing of policies and procedures that should be considered for inclusion in standard employee handbooks.) Chapters 10 and 11 cover the topic of employee retention and satisfaction in more detail.

applications and limits of benchmarking

Benchmarking can be an invaluable tool for the professional services firm executives. While it can provide insight for improvement in areas such as quality, costs, revenue, and time, benchmarking does not provide the definitive answer to every business problem. As with any analytical tool, benchmarking has a number of limitations and can even pose potential challenges. However, none of these need be insurmountable. In fact, attuned executives can use the following issues to their advantage during the early stages of the