As a business, your top priority is to achieve maximum growth, along with optimum productivity. Project managers allocate resources to ensure the timely completion of projects. Resources like talent are dynamic, and there may be several shifts in them during the life of the project. Simply adding and allocating resources does not guarantee sustainable growth and maximum productivity; the resources must also be utilized most efficiently. You must be open to reassigning resources as and when the situation demands it so that they are used most effectively. Resource utilization, and in turn resource optimization, is thus more vital than mere resource allocation. It ensures that you get the most out of the resources available to you.
To attain your business goals, you must grasp how to better allocate resources as well as improve the utilization rates for your business model. Let’s take a look at the significance of resource utilization and see how allocation can impact your business output.
Understanding Resource Utilization
Resource utilization measures how effectively you are using the available resources, mainly your team, and directly affects the success of the project. It allows you to evaluate and monitor team productivity as well as helps analyze ways to improve it. It ensures that you are using all the resources within your organization to their highest potential.
Your project is streamlined and organized with resource allocation, but ultimately it will be a success only through proper resource utilization. You need a system to keep a check on existing resources and assess if they are being used optimally, that is if your allocation has been apt. Resource utilization will also give you the flexibility to assign resources to multiple projects parallelly.
You can check to see how well-utilized particular team members are, thus enabling you to plan and execute the project smoothly. This measure clarifies how effectively and efficiently various resources are being used and helps you make sure no team member is under or over-utilized. Resource utilization is an important business metric especially for service-oriented companies like consulting, taken are, or engineering firms.
Resources are fully utilized when they have a full workload in terms of hours per week. Overall resource utilization includes the total time an employee spends at work on all the activities put together. These may include different types of activities.
- Billable utilization: when resources are doing work that is being billed to the clients or work for which the client is paying. This paid work must be part of the production workflow.
- Non-billable utilization: this is work for which clients cannot be billed like training, pre-sales research or even internal processes. All this work is essential but will not be paid for directly by the client. These work hours enhance the working of the organization and would in turn improve the work done for the client. You need to track this time as well as it will eventually convert into higher fees for the client.
While the proper allocation of resources is important, it is not enough to ensure the smooth execution of the project. You also need to measure how well these resources are then being utilized. Ineffective utilization can lead to delays, going over budget, dissatisfied customers, unmotivated staff members, and even wasted resources. With the help of utilization rates, you’ll be able to monitor the actual billable time. You can also make adjustments promptly to minimize any wastage. This is of prime importance for service companies that rely heavily on customer service.
Resource Utilization Rate
Once you realize how important it is to keep track of your resource utilization, your next step is to calculate it. Simply put, it is the ratio of actual work done to the capacity of a resource.
resource utilization = actual number of hours worked/ total number of working hours
This value shows what percentage of your team’s time is spent in productive billable work. For instance, if an employee works on a project for 130 hours out of 160 working hours in a month, his utilization rate is 130/160 = 81.25% for that project. The goal is to maximize the utilization rate. A too-low utilization rate means the project is not profitable, while a too-high rate would indicate the resource is being overworked. For machines and equipment, this rate should be 100%. When it comes to human resources, the ideal rate would be about 80%.
Resource utilization is an indicator of how productive employees are. Keeping tabs on the degree to which resources are being utilized helps businesses in:
- Resource planning – By studying each employee’s utilization level the project manager can take proactive action to improve the use of resources and better plan operations.
- Monitoring performance – Real-time data helps project managers to keep a check on the utilization levels of individual team members and reallocate resources as required.
- Keeping a check on billable utilization – Supervisors can rework schedules to ensure optimal use of work hours on billable activities.
- Forecasting new resource requirements – By analyzing resource utilization patterns, project managers can plan requirements for future projects in the pipeline.
- Addressing training needs – Project managers get an overview of the required skillsets for each project and can plan to provide training and shadowing opportunities so employees can meet future demands on the business.
Alt tag: Resource Utilization
Optimal utilization is the process of maximizing the use of resources to get the most out of their available capacity. Since people are the main resources being managed in the service industry, they need to be taken care of if they are to get job satisfaction and feel valued. People need to feel they are enriched by each project that they undertake. Their vacation time, training needs, skills enhancement, work environment, admin duties, etc also have to be kept in mind while calculating this.
Utilization rates help plan the project optimally. Project managers use schedules to predict utilization rates of resources and work to optimize them. Under-utilization is counter-productive for the company as it loses money and frustrating for the employee too. Project managers can rework schedules to ensure optimal allocation of work amongst the team members, and fill in gaps in their schedules. Over-utilization indicates that the team members are overworked and this can lead to project delays and employee burn-out, which would ultimately lower productivity. It’s an indication that it may be time to hire more staff.
Estimating resource utilization will also make your sales team aware of available production capacity and help them pitch for new business accordingly. You can allocate resources in the most optimum manner and forecast sales as well as recruitment needs.
Project managers can use these methods to maximize utilization of resources:
- Use a Work Breakdown Structure – Prepare a detailed list of each task that is part of the project. By breaking down the project to this micro level, the project manager can plan the resources required for the execution of each task. Resources like personnel, equipment, premises, etc can then be allocated to ensure maximum productivity. A resource calendar can track the availability of resources.
- Work in coordination with other projects – Project managers who share resources need to coordinate to ensure that allocated resources work optimally on both projects without conflicts, so as not to delay either. A resource pool can help keep a track of organizational resources.
- Monitor the utilization rate – Supervisors can track the utilization rate of each resource to ensure that team members are spending optimal time on billable work. Regular utilization rate reports help monitor the health and viability of the project. You will know how effectively and productively you are utilizing your resources to meet client expectations. Gaps in predicted and actual utilization rates become clear. Over- and under-utilized resources can be identified. Any deficiencies can be quickly assessed and corrective action is taken.
- Modify the project schedule – Project schedules need to be adjusted throughout the lifecycle of the project to ensure that resources are used most efficiently to meet the deadlines.
- Invest in updating resources – Project managers can assess any gaps in the training needs of their team and provide the required training to ensure they have the required skill set. They will also be able to monitor when equipment needs to be serviced or updated. Such investments are necessary to maximize productivity.
Use eResource Scheduler to Measure and Track Your Resource Utilization
Resources are your business’s most important asset and you must utilize them most productively. Tracking resource utilization levels is imperative to any project. A Herculean task when done manually, advanced resource management tools like the eResource Scheduler are available to help you keep tabs on resource and project performance in real-time. It not only helps you measure your utilization levels at all macro (organization, project, etc) and micro (team, individual, etc) levels but also keeps it updated in real-time. You can customize the reports to meet your requirements and use them for making the necessary management decisions to optimally use all resources.
Company Bio: ENBRAUN is a software product and service company. eResource Scheduler is its Flagship software product.