Across project-based businesses around the world, there is one common challenge that pressurizes team leads and project managers. Poor utilization of their people, which is the single most important resource in talent-based organizations like architecture, engineering, and construction management companies, law firms, advertising and marketing agencies, IT services firms, and accounting organizations. Only what is measured will improve and that holds true within project teams too. For project leaders, this drills down to insights on two crucial parameters – the utilization levels or productivity of employees and the realization level or the profitable outcomes.

However, maintaining a balance in the way your employee workloads are managed is also a key responsibility for project managers. Project leaders are all too aware that besides valuing productivity and employee performance, it is equally important to help them deliver at their optimal capacity and maintain a healthy work-life balance. By measuring utilization, you will gain the ability to see who in your workforce is underutilized or overutilized, so that you can take timely and corrective actions. Let’s dive into how visibility into these data points can make a massive difference to businesses and the impact of measuring resource utilization.

Small changes, huge results

According to SPI Research, the top performing 5% of firms surveyed have taken measures that helped them achieve billable utilization levels that were 15% higher than their peers (75% versus 65.3%). Even a small increase in utilization can mean a significant difference when it comes to a firm’s overall revenue picture. Furthermore, firms that have been more successful in retaining key employees, have delivered more projects on time and seen lower project overruns.

Discover the power of small changes in projects.

These high-performing firms have also reported implementation of real-time visibility as a key reason to drive profitability and performance. Firms that have enabled real-time visibility have achieved higher realized utilization levels (68% versus 62%), delivered more projects on time (79% versus 60%), and had lower attrition levels (5.1% versus 10.4%). And most importantly, these firms delivered their projects more profitably, seeing an average project margin of 35% compared to 26%. There is immense value in having real-time visibility across your organization. If organizations have this visibility and can adeptly measure what tasks their employees are spending time on, they can bring about required changes to bring employee productivity at optimal levels. But more than just that, measuring utilization has a significant financial and operational impact.

Financial impact of utilization

In the absence of utilization insights, you could be missing out on a revenue opportunity that would have been possible with a marginal increase in the billable hourly utilization of every employee. The numbers reveal the true financial impact of measuring billable utilization.

Say a team has 250 billable resources with an average billable utilization of $175 per hour at 70% utilization level (equivalent to 123 billable hours, assuming a month has 160 total available hours). They will generate $4.9M per month in revenue.

However, without utilization insights, it would be difficult to spot if certain projects are draining a lot of their time and if scope creep is affecting the profitability of these projects. In addition, teams could be sitting on a mine of revenue opportunity, unaware of the ability to increase utilization from 70% to 72.5%.

All other factors, kept constant, a 2.5% change in the utilization level (72.5%), the project team can generate $5.075 million per month (an increase of $175,000 per month), at zero additional cost. It would translate to $2.1M over the course of the year- directly adding to the firm’s bottom line.

The above said, utilization is linked to operational success as well. It impacts the firms ability to implement the projects, manage the client experience as well as keep the attrition levels under control.

Operational impact of utilization

Managing the balance between higher utilization levels and avoiding employee burnout, is a tight ropewalk and keeping a track on the utilization percentage can help keep an eye on it. Balancing utilization rates across the resource pool ensures that skills are mapped to projects effectively and employees are engaged with the projects without, driving on-time and on-budget project delivery.

Over-utilizing employees on low-priority tasks while many critical projects continue to face staffing challenges, leads to unequitable work environment. Few of the employees are overutilized resulting in burnout while others may have the skills but are not given relevant opportunity resulting in disengaged employees.

In either of the above cases, the turnover rate of the organization increases which puts additional pressure on teams to deliver the same project with lesser number of resources. The leads to additional employee burnout, further fuelling the vicious resignation cycle.

The opportunity cost in addition to the urgent / adhoc hiring cost of an expensive resource adds on to the project cost. A quick view of the existing utilization rates of the talent pool can help teams address this gap effectively, by allocating less utilized resources to priority projects, thus saving cost and increasing employee engagement.

By building visibility into the financial and operational impact of employees’ utilization, their contribution to the revenues and growth objectives can be measured. Visibility into utilization levels will also give you timely insights on when resources will be done working on an existing project and who will be available to take up new projects.

Feeding two birds with one seed

With right information at fingertips, project managers can account for the financial and operational nuances, while ensuring projects are completed on time employees are engaged and motivated.

Successful project-based businesses rely on the delicate balancing of managing utilization across the resource pool. With the right system that enables the needed visibility into teams’ utilization levels, project managers and business owners can take informed decisions for any project. Researches and surveys have revealed that organizations that track their utilization rates consistently, have shown dramatic performance improvements over firms that did not have real-time visibility. As the team members report on the non-billable and billable tasks, businesses get more control of its resources and a clearer perspective on time management.