Employee realization reporting will tell you how well you’re converting allocated hours into bankable bucks. But how do you do it?
Employee realization reporting shows how much of your resources’ time you used compared to what you forecast. Or – put another way – how well you realize revenue from your resources’ allocations.
There’s often confusion about what employee realization reporting is. Is it the same as utilization? Or billable time? And we know not all resource managers track employee realization rates, even though it’s a key metric for measuring operational efficiency…
If you’re in the dark about employee realization, we’re here to shine a spotlight on this oft-misunderstood metric. You’ll learn what it is, why it matters, and how it differs from its more famous friend, billable utilization. Plus how to calculate it, interpret it, and improve it.
Realization reporting refers to tracking actual vs. planned resource utilization. In a project-based business, it involves comparing the planned hours of work for each team member with the actual hours worked.
Any discrepancy between the two figures could indicate:
Either way, it indicates room for improvement, as both can impact schedule, budget, and profitability.
People often confuse realization and utilization – especially billable utilization. And it’s an easy mistake to make. After all, both are concerned with monitoring resource allocation and usage. Both aim to increase efficiency and productivity. And getting either wrong costs you money.
However, realization is about tracking how effectively resources are used compared to what was planned. Whereas utilization is concerned with measuring what proportion of their available time people spend on work.
Think of it like this:
Both scenarios can impact project profitability – but the cause of the discrepancy is different.
Despite their differences, both concepts are important in resource management because they help resource managers to:
Let’s look into the benefits a bit more before getting onto the math…
When you’re already monitoring so many workforce planning metrics, why add another row of stats to your reports? Because employee realization figures help you improve your operational efficiency on multiple levels.
They provide insights into both the accuracy of your forecasting and how well employees convert their billing potential into revenue. This – in turn – provides a basis for data-informed decision-making and improvements. Here’s how tracking employee realization rates can help.
Employee realization rates directly impact the financial performance of an agency. Higher realization rates mean that employees are effectively converting billable hours into revenue, ultimately leading to improved profitability. By closely monitoring and optimizing staff realization rates, agencies can enhance their bottom line and financial stability.
Tracking employee realization helps resource and project managers understand how long tasks actually take – rather than making their best guess. This lets them improve the accuracy of their forecasting and resource allocations in future – reducing the risk of delays, bottlenecks, budget creep, and wastage.
As a professional services business, you’ll likely have utilization goals – an optimum utilization rate you aim to achieve. That utilization rate can be undermined by a poor staff realization rate. When employees aren’t occupied as productively as you predicted, it represents a wasted opportunity for billable utilization.
Realization reporting helps monitor variance between projected and actual resource use. This lets managers spot discrepancies and make adjustments to ensure projects stay within budget before it’s too late. See how easy this is in Runn with our visual variance chart.
Employee realization reporting helps identify overutilization or underutilization. Recognizing and correcting this helps maximize productivity and improve cost efficiency – by ensuring people, their capacity, and billable hours are optimally used.
Realization reporting provides insights into how employees spend their time. This helps managers assess performance based on people’s actual output. It can also identify areas where additional training or support is needed to improve staff performance or productivity.
Employee realization is calculated by comparing the actual time spent by an employee spent on a task or project, compared to the time allocated.
To determine how much time someone spent on a task, you need to track it. Time-tracking tools are your friend here. You could also ask the employee to manually log their time, but that’s likely to be less accurate. [Learn how to introduce time-racking without alienating your employees]
This information should be available in the original project plan. It’s probably based on historical data about how long this sort of task has taken in the past, or a guesstimate based on talking to someone with expertise in that type of work.
Here's the employee realization calculation:
.avif)
So if someone was allocated 8 days to complete a task but only spent 6 days on it, the calculation looks like this:
.avif)
This indicates that the individual used 75% of the time allocated for the task.
Ok, so you’ve done the math. What does your employee realization percentage actually mean?
In general, 100% or thereabouts suggests good resource utilization and efficiency. Put simply, it means employees are converting potential billable hours into revenue effectively, and that your estimates for how long work should take are reasonably accurate.
Meanwhile, a lower realization percentage suggests an issue – like poor forecasting, operational inefficiencies, or underutilization of resources.
Likewise, above 100% indicates that work is taking longer than predicted, for whatever reason.
Consider your first employee realization figure as a benchmark and seek to improve it over time (see below).
Remember, it isn’t about who’s not pulling their weight or earning their share! It’s about optimizing efficiency for the benefit of the business and its employees – so people are never bored, never burned out, and have their chance to grow.
We’re passionate about this. Read our take on the kinder way to interpret resource management metrics ➡️
Before you seek to improve your employee realization rate, you need to understand what the problem is.
Is your forecasting proving inaccurate? In which case, you need to improve your project planning processes, perhaps making better use of historical project data to inform forecasting.
Are people unable to complete their tasks in a reasonable timeframe? In this case, you need to investigate why and make improvements, for example, by providing additional training or streamlining processes.
Here are some ways to improve resource realization rates, depending on your needs.
Review your resource planning processes to make sure it’s leveraging all the data available to you. For example
Provide training and development opportunities for your resource managers and project managers to enhance their skills in forecasting, estimating task durations, and utilizing data effectively.
If you don’t have ready access to this data, understand the negative impact this has on project outcomes and look to collect and centralize this information in future. A resource management platform is specifically designed for this…
Just like utilization rate, budget and schedule variance, and other resource management KPIs, you need to track staff realization rate regularly. You don’t want to be in a position where your forecasting has been off for months and you don’t realize (no pun intended).
You need to know ASAP if there’s any discrepancy between allocated and actual hours worked, so you can make adjustments and get your forecasting – and productivity and profitability – back on track.
You can benchmark your staff realization rate internally and externally. Internally, you can calculate and compare realization rates
This helps you assess your overall realization efficiency, plus analyze differences between departments, projects, or timeframes.
Externally, you can compare your organization's resource realization rates against industry benchmarks and best practices.
If you spot any trends in employee realization, you can identify best practices to share with others, plus potentially profitable opportunities for improvement.
If employees are taking longer than planned to complete their work, they may need upskilling or training. Better-skilled employees complete work more confidently and competently, and often faster than employees with less advanced capabilities.
This can improve staff realization rates as well as project outcomes. An investment in your people is an investment in your business 💪
Learn how to conduct a skills gap analysis in your organization ➡️
Don’t forget to upskill project and resource managers in the art of forecasting and resource scheduling. This can help create more accurate project plans and resource allocations, which means you’re more likely to achieve high employee realization.
Another reason realization rates might be inaccurate is if people don’t have the tools they need to maximize their productivity – or if processes aren’t fit for purpose. Look for opportunities to streamline processes, especially automating manual tasks that can be a real time sink.
For example, if a graphic designer is taking much longer than expected on artwork, could it be the software they’re using or poor access to files? Implementing a Digital Asset Management system could greatly accelerate the creative process.
Don’t forget to give your resource and project managers the tools they need to maximize their productivity too. If they’re wasting time working in spreadsheets and manually reconciling resource allocations, you’re never going to achieve optimum scheduling.
Realization rates are part of a bigger picture – the benefits of effective resource management overall.
Resource management improves project success and organizational performance by making sure your resources are earning money, not burning through it. And that they have a well-balanced workload that brings out their best for your business – and doesn’t lead to costly employee burnout and turnover.
If this sounds good, discover more about the benefits of centralized resource management – including reduced resource risk, improved productivity, higher profitability, enhanced capacity planning, and more.
You’re probably expecting a pitch now for how Runn can calculate employee realization for you. But Runn doesn’t actually do this – yet.
It’ll make its way onto our comprehensive product development roadmap in due course. For now, we just wanted to share some knowledge that might help you make better data-informed decisions about your resources. It’s kinda our thing.
Good luck!
And, as always, if you want to chat about improving your resource management with our nifty software, get in touch.
