Utilization goals are somewhat underestimated. Here's how you can drive success with them.
If you are looking for ways how you can do more with less in the professional services industry — this is the right stop for you.
Resource utilization goals have a proven track record of helping businesses optimize workflows and increase revenue without having to go up in headcount.
In this article, we are going to explore in more detail what resource utilization goals are, show you what they might look like in professional services firms, and demonstrate how you can benefit from them.
A utilization goal is a target or objective set by an organization or individual to make the best use of available resources or assets. Utilization goals can be related to various aspects of business operations, such as production capacity, employee productivity, equipment utilization, or inventory management.
Suppose you are a digital agency creating projects for your clients. The hours your experts put into the projects they are assigned to count for billable work which you can later charge for. However, they will also attend internal meetings and do admin work, which doesn't mean direct revenue for your company. And it is the combination of billable and non-billable work that you use to calculate utilization rates.
Here's the formula for billable utilization.
Having those utilization goals in place will help you ensure your resources are spending their time right and optimize processes that bear little direct value to the overall outputs of the business.
When planning a new project, set concrete targets on how you want your resources to spend their time. Ideally, you shouldn't set a utilization goal for more than 80% for your employees. That means you shouldn't expect more than 80% of their paid work time to bring revenue.
During a business day, it's perfectly normal to take short breaks, have some coffee time, take a short walk, etc. — all of these contribute to the productivity of your people but at the same time, they cut the hours someone works on a project. Nevertheless, expecting people to open their laptop at 9am only to close it at 6 pm is just not realistic.
Let's look at a success story here.
TribalScale, a digital innovation firm from Canada, wanted to streamline their resource allocation and get more out of their people's time.
With Runn, they have been able to visualize allocation gaps and cliffs, track their billable hours, and establish a healthy utilization rate.
Having resource utilization goals in place is a mark of a solid business methodology, one that aims to make the most of available hours, while also empowering people to be their most productive selves.
Let's look into the reasons you need to set utilization goals in more detail.
When your team members know what kind of output is expected of them and have goals driving their performance, it is easier for them to maintain high productivity levels.
People tend to work 20% better when motivated, a Gallup study found. Performance goals, along with monetary incentives and other company perks like extra days off or hybrid work, are very effective for motivating people to put more effort into everything they do.
With clear utilization goals in place, you can help your staff organize their work in a way that brings about higher performance outputs and saves time on tasks that could be deprioritized.
With no resource utilization goals, much of your team's time will, to put it bluntly, slip through the cracks. It's like going to a shop with no grocery list — you will end up buying more, forgetting the core thing you came to buy, and going over the budget you had established prior to the trip.
Another danger lies in the fact that you might get the feeling that you don't have enough resources to begin with and might need to hire reinforcements. However, it's possible that you do have enough resources, you are just not getting the maximum value out of their time.
When tracking resouce utilization, you will also keep on top of your billable utilization, those hours you will later send an invoice to your customer.
The way this usually works is that your employees register the time they spend working on those projects and other non-related tasks. Using this information, you can be sure to always bill accurately while also getting enough data to create utilization reports.
After all, project billing can be a hassle. But if you have all of that time registered in a system, that will remove any potential miscommunication with your customers.
Here's what this dashboard looks like in Runn.
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With resource utilization comes better resource visibility.
You get to enjoy a bird's eye view of your people, see who still has some availability in their calendar, and who is already overbooked. Resource utilization is a constituent part of the overall resource management science. And when done right, it pays off on every level.
On top of that, resource utilization can also help you see how much value each employee is bringing — perhaps two people in an identical roles deliver considerably different outputs? Is one resource much more productive than the other one? Is their utilization focused on the tasks that bring tangible value?
With utilization reports, you can have all the data to pinpoint those performance trends early on and optimize workflows for better business outcomes.
In the grand scheme of things, utilization goals will help you increase project profitability and overall business revenue. They help you make projects more focused and people — more productive.
Not to mention the smart use of resources and rock-solid business reputation you can gain by delivering more value to customers. Utilization goals will help you measure twice before you assign resources, add or remove tasks, and do project forecasting.
Note: Measuring utilization starts with time tracking. Here's how to introduce time tracking without alienating your employees.
Ultimately, setting resource utilization goals is one of those resource management best practices you don't hear about much.
However, by investigating your resources and how they spend their time, you can determine precise goals that will help drive better performance outcomes and higher business outputs.
Curious to see how Runn can automate this process for you? Book a call with us today!
