It is easy to just look at your financials when you want to evaluate your projects. Don’t get me wrong, the bottom line when analyzing your projects is important as it is the lifeline of your business. Yet sometimes you need to dig a little deeper to see what activities are being conducted across your organization to have a complete picture of your project-based business.
When looking at resource productivity, you should be looking not only at the total number of hours billed, but also the type of hours that were recorded. Since there are activities that are not billable but are vital to your business, it is important to have the breakdown of these different types of activities when analyzing your resources.
A best practice for professional service firms is to code activities into different categories: billable, productive and non-billable (or non-productive). Having a category that is considered “productive” can help your resources put the emphasis on certain activities that are deemed more important by the organization but not directly billable to a particular party. This will ensure that a resource is not penalized on their overall KPIs when performing these tasks and therefore keep the resources aligned on overall company objectives. These types of activities are usually linked to customer-facing activities or business development opportunities that are important for the organization to keep moving forward but not always billable. To learn more about the impact of the different types of productivity codes, read this blog article on “Should You Manage Employee Performance Based on Profitability or Productivity?”.
What are some of the effects if you decide to strictly manage by billable hours and how profitable the particular resource is? When an organization assigns goals that are exclusively linked to profitability, you may be creating an environment that is solely focused on short-term profits.
This may happen because resources across your organization may begin to lag in other areas since this evaluation process does not encourage activities such as business development, training and personal development. In the short-term, you may not notice too much of a difference, but in the long-term this may cause you to miss out on new opportunities since it may make it more difficult for the sales team to have the support they need to close new business or for all resources to stay up to date on the latest innovations and trends. Finally, there may also be missed opportunities for solidifying customer loyalty since there is less of an importance placed on customer support which may not always be 100% profitable in the short-term, but important for long-term growth and references.
This is just one of the essential reports that you should be reviewing in order to better manage your project-based business. Take the time to read our eBook
By JOVACO Solutions,