Metrics for Internal Service providers
post # 201 — September 28, 2006 — a Managing post
Ted Harro, a regular participant in the conversations on this blog, has submitted this topic for us to react to (These are Ted’s words):
Many people serve as internal consultants or advisors. The more they act with the same intensity as outside providers, the more value they will bring to their company, the better they will get, and the more fun they should have.
Internal consulting is a bit different from being an external consultant. You have a very limited market, and you canâ€™t fire your clients. Since prophets are rarely celebrated in their own land, you are positioned differently with your â€˜clients,â€™ and must engage with them differently
One of the challenges is figuring out the right metrics to use in monitoring and managing internal consulting groups (or any other staff advisors.)
A few obvious metrics used by outside providers still apply to in-house providers: client satisfaction (post-engagement surveys, internal referrals) and staff (employee satisfaction surveys, skill development monitoring)
You could also try to monitor â€œmarket positioningâ€ – share of core capability work done in-house, share of overall capability work â€˜under managementâ€™ (for example, acting as a broker for outside resources, such as the in-house legal department managing the outside law firm providers.)
The most difficult area is financial performance. Most internal groups are cost centers. Few companies still use â€œinternal pricing and bill-backâ€ systems anymore because it turned into an administrative nightmare.
A few initial thoughts:
Measuring the utilization of in-house staff (hours engaged/people hours available) still works, though it is a hygiene measure and does not describe effectiveness.
Leverage could work (ratio of total people to senior practitioners, defined by credentials and pay grade)
It would be tough to use a margin measure. I suppose you could do a ratio of overhead cost to employee cost.
Rates are the real question. If in the outside world rates are the market’s perception of your unique value, how do you do that in the inside world? Overall department budget? ROI/hours invested?
(but ROI can be a tricky number for a lot of internal consultants)?
Clearly, if it could be measured, â€˜valueâ€™ is the ultimate measure for internal consultants.
In many firms, internal groups generally track it by how much budget they get, but this seems incomplete to me somehow.
(End of Ted’s Question)
Ted has posed so many questions that Iâ€™m going to â€˜hold my fireâ€™ until all of you have the chance to jump in. (Also, Iâ€™m traveling in Europe and I’m a bit jet-lagged!)
However, I would extend the challenge by pointing out that, in these days of outsourcing, internal groups probably will need to develop metrics that are at least part-way comparable to those being used by the outside providers pitching your management for YOUR job!
So, what metrics are used where you work to measure internal consulting / advisory / staff work?