In the professional services industry, what makes your operations move forward are your resources. In order to ensure that your organization is working at its highest level of efficiency, it is important to closely monitor your resource's utilization levels.
By having a better understanding of your organization’s current and future needs, this will not only help your organization to more efficiently manage current work levels, but also give you a better understanding of what your future requirements are. You will then be able to review these occupancy levels in order to help your organization answer questions such as: do I need to hire more staff? Should I start looking for subcontractors to help fill the gaps? Or do I put more effort into business development (if you see that there will be a slowdown)?
This ability to review utilization rates by department or by type of resource will give a better idea of which groups have a higher level of demand than others. This can not only help from a human resources standpoint, but from a more strategic position as well as this may help you identify potential trends within your company and current industry demands.
So what is a good benchmark of number of hours that should be calculated in order to evaluate if your resources are working to capacity or not? Out of 2,080 workable hours in a year, you should plan for 1,840 productive hours available by resource (after benefits), when calculated on a 40-hour work week.
As a general rule, a professional services organization should look at the breakdown of types of hours as follows:
- 75% of an employee’s time should go to billable hours
- 15% should be reserved for employee training and personal development
- 10% should be allocated to other functions that are inevitable for billable employees (general meetings, work with business development and other tasks that don’t fit into the latter)
By having this type of breakdown available, you’ll be able to have a more accurate portrait of where your business needs to put emphasis to make sure that no one is “sitting on the bench” for too long. What is also important to keep in mind is the difference between utilization and profitability. It is important not to lose sight of the 25% of your time that should be dedicated to non-billable work as it doesn’t mean that it may not be profitable in the long run, such as in the case of business development. That is another reason why it is crucial to have a system that will let you categorize these different types of activities without penalizing your resource’s objectives. Learn more about this topic in our blog article about the Essential Project Report #5 – Resource Productivity.
The Utilization by Resource report is number 6 of 7 essential reports that JOVACO feels you should be reviewing in order to more efficiently manage your project-based business. Learn about the other reports that you should be analyzing within your business by reading our eBook
By JOVACO Solutions,