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Improving Utilization – What Every Professional Services Firm Should Know

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Professional Services Key Performance Indicators (KPIs) include; project profitability, revenue per employee, realization, utilization and average billing rate. One of the key measurements, which is often overlooked and more importantly misconstrued, is utilization. Understanding the significance of utilization and how to manage this KPI, can make a significant impact in the success of any Professional Services Organization.

Many people think that striving for 100% utilization of an organization’s billable staff should be the goal. This is absolutely NOT the case. Utilization that is too high can actually cause a great many problems for a company. The main issue is that it stifles growth, and can cause significant customer satisfaction issues. When resources are not allocated efficiently, professional services organizations will find that they do not have the capacity to meet their existing customers’ needs. When a client requires a response urgently, this puts the organization at risk against competitors that can provide the required resource or service sooner. Additionally, the ineffective allocation of resources can result in a loss of new business opportunities if an organization does not have the bandwidth to pitch for new clients, losing to competitors who are better equipped to scale their business to meet both customer and market demand. An organization needs to strive for an optimum utilization percentage. This goal is different based on the specific business.

The inability to accurately forecast resource utilization is a major cost for professional services organizations. By having some resources constantly over utilized, organizations risk losing high-value employees because they are overworked and stressed out. Conversely, underutilized resources are a huge burden to the bottom line. One of the greatest challenges in the professional services industry is having enough employees with the right skill sets available at the right time. This requires being able to access accurate and timely information about current and forecasted utilization on demand, this requires a fully integrated Enterprise Resource / Enterprise Project Management System. In order to maintain the right mix of resources, it’s important for companies to keep a close eye on business being sold and the resource needs for that business. The optimum mix of skills and experience can prove to be the difference between success and failure.

There is no “Silver Bullet” to obtaining an optimum utilization target. It requires an understanding of the types and numbers of projects the organization is forecasting to sell, and an in-depth understanding of the resources needed to successfully sell, deliver and support these client projects. The key to success is to measure, analyze and adjust on a regular basis. If you'd like to learn more about, check out our whitepaper, 5 Tips for Improving Utilization Rates.

by Solugenix, Tennesssee Microsoft Dynamics AX Partner

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