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KPIs For Planning Your Emerging Tech Services Delivery Size

Our article "Guarding Against Down Quarters" gave you the essential tools to forecast your sales and understand the activities in your control to increase your pipeline. But with sales forecasts and a deeper understanding of your pipeline comes the need to hire quickly and effectively. You must be able to expand your team to serve your customers' demands while maintaining the quality of your output.

The delivery team's capabilities are critical for every service company but are even more important for an emerging tech services company. In an emerging tech company, you must navigate a talent shortage as you grow your team. A rapidly changing market environment compounds the problem.

This article will guide you on the KPIs you need to look at when growing your team in a healthy manner. For the advice provided in this article to be valuable, we expect you to have at least 15 people in your delivery team and have appropriate structures built within the team.

Target Utilization

Our article on essential KPIs for tech service companies mentions that the target utilization should be 85%. But you may strategically target a lower utilization. If you have longer training periods and are growing rapidly some of your utilization will be eaten up by the training period. In addition, running a services company is about matching your amount sold to your delivery capacity. The amount sold in the future is always an unknown. But you can make the strategic decision if you want to err towards having spare capacity or err towards saying no to customers. Your decision here is a part of a larger strategy and you will need to set your target utilization according to the company's strategic direction.

Team Composition

A premium tech services provider focuses on value rather than hours worked. You should be opinionated on the composition of the team needed to solve the customer’s problem. By being opinionated you can plan accordingly. When you’re making a hiring plan you need to plan separately for each of the roles including the seniority level. Recognize that deviating from these requirements means you are making a portfolio decision.

Attrition Rate

As you’re growing you’ll need to hire more to increase your delivery capacity. As you plan for the increase make sure you are also modeling the attrition of your employees. You’ll need to model by role, and by location since different roles and locations have different cultures for employee retention. You also need to be aware that you may have to bake in some redundancy to deal with attrition into your model. This will also be reflected in your target utilization.

Contractor Network

We talked about the difficulty in hitting the balance between sales and delivery capacity. The biggest problem with increasing delivery capacity is full-time hires increase your fixed costs. You need to build a robust contractor network that can supply you with talent that meets your needs. These relationships can be mobilized faster than hiring in the market and you have more faith in the quality of talent.

While technically these relationships can be two-way in practice this is rare. Usually the relationship is one way with one party subcontracting to the other. At small sizes, you can maintain these relationships with a freelancer network. But as you grow maintaining that network may get too burdensome and you may decide to build relationships with smaller service providers. The contractors will cost more and having too many contractors will hurt your orgs culture so you have to limit your usage of contractors. 80% FTEs vs 20% contractors provides a good balance.

Time To Hire Per Role

This is the average time it takes to hire an employee for a specific role. Understanding this can help you plan your hiring process in advance, ensuring that new team members are onboarded in time to meet project demands. This again varies with location. E.g., our experience hiring in India is there may be an upto 90 day notice period requirement and after waiting for that period there is a 50% chance they may decide on another position without any notice.

Ramp-Up Time Per Role

Different roles may have different learning curves. Knowing how long it typically takes for an employee to become fully productive in their role allows you to plan for training and onboarding, ensuring that projects are not delayed due to new hires' learning periods. In our observation, while the expectations from senior hires are higher, ramp-up times for junior engineers are longer.

Recruiter Capacity

Most likely the delivery team is not directly responsible for right-sizing the recruitment team but delivery will be the largest customer of recruiter capacity. So you should work with the owner of the appropriate function to make sure the recruitment team has the capacity to meet your hiring needs. As you’re going through this process, you should consider the number of hires, the capacity for the different types of roles, and how deep of a pipeline you want to manage.

Aligning Delivery Hiring With Your Tech Services Business

Your forecasts and targets will dictate the delivery capacity you need to plan for. This article gives you the essential elements to model the needed capacity and costs for hitting the low and high range of your bookings targets. Fortunately, if you have done proper modeling you’ll have close to a one-quarter lead time to plan delivery capacity.

Using and improving the KPIs in this article will let you plan your delivery capacity. This is essential not just for making sure you are able to fulfill customer needs but the costs for your delivery team can easily exceed two-thirds of total expenses. So getting the delivery costs correct is essential for financial strategy.

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