As a project manager, you want to ensure that employee time is used in the most efficient and productive manner. You want to be aware about your employees’ productivity and time utilized on various projects. It, therefore, is necessary to track how they spend time on productive tasks that bring revenue from clients vs. tasks that cannot be billed.
Employee utilization will help see which of your employees are at the brink of a burnout so that you shift the workload onto other resources. Therefore, tracking utilization is of utmost importance if you want to plan employee workloads and allocate tasks as per availability. Your ability to track utilization also determines how effective you are at maintaining a balance between profitability and employee satisfaction.
What you need to track: workload and profitability
When it comes to employee utilization, the two key metrics you need to track and measure are utilization rate and realization rate.
Your utilization rate is a measure of how much employees’ available time is being utilized vs the total time calculated as available on hand.
Utilization Rate = Total hours worked/ Total available hours of the employee
You need to be aware of the soon approaching breaking point or when the total hours put in by the employees start outgrowing their available hours.
Utilization rate will help detect overutilization or underutilization of resources, to thereafter help manage employee time with that in mind.
Your utilization rate is a measure of how much employees’ available time is being utilized vs the total time calculated as available on hand.
Utilization Rate = Total hours worked/ Total available hours of the employee
You need to be aware of the soon approaching breaking point or when the total hours put in by the employees start outgrowing their available hours.
Utilization rate will help detect overutilization or underutilization of resources, to thereafter help manage employee time with that in mind.
Here are the five things you must do to manage utilization while maintaining profits:
1. Optimize utilization: See which resources or resource groups are under-utilized.
Often, as a project manager, you do not have the right tools that give you visibility into your workforces’ soon approaching end-of-projects or tasks. As a result, you may not be aware of which resource is likely to be free in the future and at what point of time. The lack of visibility also extends to future projects and available resources, resulting in employees being under-utilized and hence less profitable.
The fix: Ensure that you have a detailed view of every resource’s utilization now as well as into the future. This will help determine each employee’s average utilization rate to know how much time they would typically take to complete a given set of tasks. You can also gain insights about what type of tasks each employee is best suited for. You can then assign more tasks to decrease bench-time and, thus improve profit margins.
2. Don’t lose out on billable utilization: Know when resources are utilized but clients are not billed
Quite often, you would realize that although some clients are charged a fixed fee, the time and effort put in by your employees is enormous. Typically, these projects witness a lot of employee hours going into iterations or in addressing changes. Not tracking the actual utilization also means that you are servicing the client for free!
The fix: Ensure that employee time and utilization on different projects are accurately tracked. If there are changes to the project, make sure the extra time is recorded so that it does not affect the employee’s overall utilization.
3. Balance utilization level: Identify which resources are overcommitted and reassign work accordingly
There are times when you are guilty of allocating more work to a handful of selected high-performing employees. It leads to over-utilization of some resources while others remain under-utilized. Invariably, you will notice the new hires or inexperienced team members would end up not getting the required opportunity while many others don’t have time to breathe. You need to therefore balance utilization across your resource pool. You do not want to be in a situation where a few resources are utilized 110% while many others perform well below utilization targets.
The fix: Ensure your project management system provides up-to-date information about location, qualification, experience, skills, cost, availability, and more. This way, you can identify resources who meet the minimum qualification criteria. This way, instead of overloading few critical resources or team members who fulfil the minimum requirement, fresh hires or those on bench can work alongside high performers and learn on-the-job.
4. Optimize capacity levels: Produce long term forecasts of required resources
At times, you would come across the same available employees getting booked for multiple projects. Then, there will be times when you may face a sudden resource crunch because of over-dependency on a certain employee who is sick and unavailable, and there is no ‘Plan B’. To overcome these situations, you need to analyze the demand and plan for a corresponding capacity beforehand. This way, you can avoid unplanned hiring and unanticipated expenses.
The fix: Get the required visibility into future projects and the required levels of utilization in terms of expected employee hours and skills. With this data, you are empowered to create long term forecasts on resource requirements, both in terms of timeframes and skill sets. This will ensure that projects never run out of the right resource capacity levels, and resources are billable and profitable.
5. Take informed project staffing decisions: Cut the guesswork and take informed project staffing decisions
There are times when you would be looking for a resource with a specific skillset. However, despite having these resources you may not have booked them due to lack of visibility into employee skills and availability. In such a situation, you may end up hiring despite having capable resources in-house. Such hirings often come at a cost and it can become a major concern, eating into your project profitability.
The fix: Leverage tools that match requirements, nuances, and needs with the right employees. Such solutions will help you look for the in-house talent first and take informed hiring decisions. This guides you to determine the number of people you can onboard from the existing resource pool and accurately forecast how many hires you would then require.
If the above sound familiar to you, a Professional Services Automation (PSA) has the solutions to your challenges. Here are the benefits you can unlock by using a PSA to manage utilization effectively:
Drive on-time project delivery – By using a PSA to build visibility into your utilization, you can then overlay project requirements and schedules to create an appropriate resource plan. It will ensure that you have the right resources available to meet the client’s expectations and project milestones, contributing to on-time project delivery.
Minimize attrition and elevate employee satisfaction – A PSA will also ensure that resources are utilized proportionately on projects that match their skills and at the same time make sure that high value resources aren’t overcommitted. This helps avoid employee burnout, while reducing attrition.
Marginal increase in utilization = Positive impact on profits
An SPI study has found that using a PSA solution has a big impact on employee utilization and performance.
| Key Performance Indicator | Firms that use a PSA | Firms that do not use a PSA |
|---|---|---|
| Level of employee billable utilization | 75.3% | 68.1% |
What you need to look at is not just the relative 11% increase in billable utilization (from 68.1% to 75.3%) but what it really means in terms of revenues.
For example, if you are a 50-employee organization: this 11% would translate to 7,500 more billable hours per year. With average bill rates of $200 per hour, your revenue grows by $1.5 million.
To balance utilization and maintain profitability you therefore need to take more insight backed decisions and not rely on guesswork. Employee utilization insights form the backbone of consistent, profitable execution of projects. Utilization insights are hence very critical for the future of your organization.
Tags:
