From Project Margin to Business Margin: Getting Real About Operational Efficiency
In professional services and managed services businesses, there's a common trap that many leaders fall into: assuming that healthy project margins automatically translate to strong business performance. But the truth is, project efficiency and business efficiency are two very different beasts.
Understanding and improving operational efficiency requires a deeper look at how your business actually delivers work, uses time, and turns effort into value.
Project Efficiency vs Business Efficiency
Project efficiency is about how well a single engagement is delivered. Are you hitting your delivery targets within scope, time, and budget? What’s the margin on that job? That’s important - but it’s only part of the story.
Business efficiency is a broader measure. It looks at how effectively your entire organisation turns team effort into business value. It accounts for overheads, idle time, rework, and non-billable activity. A business with excellent project-level margins can still struggle with cash flow and profitability if the underlying operations are inefficient.
Understanding Your Actual Cost to Deliver
To assess business efficiency, you need a clear-eyed view of your true delivery cost, and that’s often more than just salaries and contractor rates.
You should factor in:
Overheads (leadership, admin, office/tools, etc.)
Utilisation gaps (unbillable time, idle capacity)
Rework or scope creep
Non-delivery activities (internal meetings, reporting, onboarding)
Without this full picture, margin calculations can be dangerously optimistic.
How Efficiency Gets Eroded
Operational efficiency rarely breaks all at once - it leaks. Here are some common places it disappears:
Poor scoping and underbaked statements of work
Time lost to context switching, admin, or internal noise
Inconsistent delivery methods across teams or geographies
Low-value manual work that could be automated
Junior team members escalating everything due to unclear expectations or lack of enablement
Over time, these inefficiencies compound - impacting profitability, staff morale, and client satisfaction.
Measuring and Monitoring Efficiency
Timesheets might not be popular, but they’re one of the simplest ways to start. When used properly (and not as a stick), they can give visibility into where time is spent and where effort is leaking.
Other useful tools:
Project margin tracking (vs forecast)
Resource utilisation dashboards
Rework and escalation analysis
Client feedback and NPS trends
Post project reviews
Strategies to Maximise Efficiency
Improving operational efficiency isn't just about squeezing more out of your team. It’s about creating the conditions for them to deliver consistently and effectively. Here are some levers to pull:
Standardise Processes and Deliverables
Create reusable delivery frameworks, templates, and playbooks
Encourage consistent onboarding and engagement rhythms
Automate Where You Can
Use AI for first-level triage, documentation, reporting, or even client Q&A
Integrate systems to reduce swivel-chair work
Train and Align Teams
Set clear expectations for what good delivery looks like
Invest in coaching and support to build delivery capability
Design Roles Thoughtfully
Avoid having senior team members doing junior work
Build pods or squads with clear responsibilities and accountability
Wrap
In a market where clients expect more for less, operational efficiency is a competitive advantage. It’s not just about reducing cost - it’s about delivering value more consistently, with less stress and better outcomes.
The gap between project margin and business margin is where real opportunity lives. If you can close that gap, you create a business that scales sustainably.
Interested in improving your firm’s efficiency? At ALLANEX, we work with technology services leaders to simplify operations, improve delivery, and grow margins.