Understanding and consistently optimizing resource utilization throughout an organization is crucial for improving a company’s profitability. However, it can be difficult for both businesses and employees to know where to begin.
How Can You Improve Utilization?
According to SPI Research, billable utilization should be the top Key Performance Indicator (KPI) that every business should be tracking. In order to strengthen both the company as a whole and their own careers, employees need to begin to proactively understand and improve billable utilization, rather than waiting on their managers to review their schedule and provide them with feedback that isn’t actionable.
The key to strengthening utilization lies in three I’s -- Individual, Initiative, and Incremental -- each with their own unique ways of improving an employee’s impact within a company.
While it’s overall utilization that most companies measure, improving utilization at the individual employee level will contribute to strong and long-lasting improvements. Managers should focus on what they can do to affect this on a person-to-person basis, rather than simply making sweeping changes in the hopes that it will lead to overall utilization improvements.
Companies can enable individual improvements by putting performance insights into their employees’ hands through a performance management solution, helping them to see their real-time utilization rate instead of waiting for weekly or monthly supervisor reviews. In doing so, team members can proactively improve their utilization by seeking out the right assignments and working with the rest of the team more effectively.
Every individual’s billable utilization combines for a company’s overall utilization. In addition, motivated employees can naturally encourage others, creating a ripple effect across departments. As such, impacting workers on an individual level will cascade for even greater gains in overall utilization and higher profitability.
Improving utilization cannot simply be the result of streamlining your business processes and keeping your employees moving from task to task. Long-lasting strong utilization rates require motivated employees who take the initiative and seek out the right projects for themselves.
Allowing employees to surface real-time utilization numbers can help them understand their own billability and take the initiative they need to perform up to company expectations. As they take steps to improve their value within the company, employees will be able to have concrete numbers to back up their worth during evaluations. The result is greater daily motivation and empowered employees who create new business strategies, seek out the right tasks for their own applicable skills, and take time to consider how they can become more effective within their company.
The Pareto Principle indicates that 80% of a company’s revenue will come from 20% of its resources. As such, it’s important that your most valuable team members stay motivated and that the rest begin to take more initiative through gaining greater awareness of their utilization rates. The result is a larger amount of resources each contributing more to your company’s overall profitability.
Once you have figured out what changes improve utilization and just how much more profitable your company can be as a result, it may be tempting to try and increase your rate as fast as possible. However, an incremental approach to improving utilization is for the best when it comes to long-term success.
It’s crucial for managers to remember that utilization improvements should not be forced as high as they can go and at the cost of sacrificing other aspects of a healthy, productive work environment, such as unbillable productive time. Incremental improvement over time helps team members avoid burnout, learn how to use their workdays more effectively, and prevent high turnover rates, which will hurt profitability. Managers should strive to balance employees’ non-billable and billable time to improve their utilization rates appropriately without eating into the time necessary to grow as an employee.
“Individual utilization is the number one metric for most service-based businesses, yet few organizations give their consultants the power to see and manage their own billability,” said Jeanne Urich, Managing Director of Service Performance Insight.
Why is individual employee billable utilization being neglected? It’s possible that businesses have simply never determined the difference that even a small increase in utilization rates can make.
Calculating Your True Potential
It can be difficult to truly understand the impact of increasing utilization rates even slightly. That’s why Mavenlink created the Gain Calculator, which helps you measure your workforce size, utilization rate, and billing rate to see how you can make a sizable impact on your company through utilization improvements.
Try our Gain Calculator and get a better understanding of how improving your utilization by even a small percentage can massively improve your company’s profits.