Is employee utilization the key to a company’s success?
If so, how can you get the most out of your workforce?
Business data for a function or department shows how well employees are performing. Focus on selecting the right performance metrics. It is beneficial to understand how they impact the company’s profitability.
What is the employee utilization rate?
It is the percentage of an employee’s time that is available for billable tasks. That is the percentage of total work time you bill for administrative tasks. Mostly it’s commonly used in professional services. It can be a valuable statistic for evaluating employee productivity.
However, to estimate the rate, you must calculate the total hours your employee works. Then you need to determine how many of those hours you can bill. It depends on the function of the job. Each project includes administrative tasks and day-to-day activities. It has work such as composing emails and attending meetings. So no one can devote all their time to billable work.
Importance of tracking employee utilization
It is a simple metric. Yet tracking and measuring this metric can increase productivity. It also improves employee engagement at work. Knowing your staff engagement rate can also benefit your business. You can set profitable service prices and compensate your employees. As a result, it can help you make smarter hiring decisions.
You can also determine if your staff is over or underworked. It will help you determine whether to implement new HR practices. This metric will check both the efficiency and management of your company’s resources. Each employee should be performing their duties.
They must also contribute to the growth of the company’s revenue. Once clear, you can assess whether the pace you try to achieve is met in the various departments. Reviewing staffing levels will reveal both good and bad elements of performance. It will help the company close gaps and focus on what is working.
How to calculate the utilization of employees?
Here are the six practical ways to manage employee utilization in an organization. There is a simple formula to calculate:
“Median employee utilization = billable hours / eligible hours worked.”
During allocation, take resource availability into account:
Managers need to ensure resources are available before assigning them to projects. It helps to avoid over- or under-utilization. Managers must consider vacation and non-chargeable work when giving tasks.
For example, a developer may put 40% of their capacity into a billable project and 20% into a training program. Managers can confirm the developer’s availability before booking them on another project. It ensures that you deploy skilled people and use resources efficiently.
Track estimated vs. Real-time:
It’s easy to think you know how long an activity should take. But you will see the difference once you compare the expected and actual time for everything your team does. Overestimating or underestimating real-time is equally unfavorable. Underestimating can lead to the expansion of the project scope and incorrect invoicing.
On the other hand, overestimation can lead to low productivity and delayed business growth. In either case, your staff may overlook or duplicate tasks. Tracking expected versus actual performance at each stage of client work is helpful. It helps identify avoidable losses of minutes that can add up to valuable hours.
Furthermore, it’s necessary to track total working hours by using automated paystub software. In this way, you don’t need to hire separate staff for this activity.
Mobilize resources from non-billable to billable tasks:
An employee’s performance declines when they perform non-billable tasks. For example, a senior marketing representative does administrative work. It could be attending internal meetings or preparing marketing proposals. Their morale drops because they are not using their skills.
Managers should check their employees’ work hours and assign them chargeable tasks. It can help the company increase its productivity and profitability. It improves the performance of its employees.
Collect employee feedback:
We know that data is vital. But there are occasions when no amount of reporting can show whether your employees are struggling. They may be performing their duties effectively. Utilization is also increasing, but that will only last for a while. A shift in one team’s tasks has created a bottleneck for another.
But the impact needs to be visible in your reports. Try to prepare for and avoid these scenarios. You can do this by having frequent one-on-one meetings with your team. Casual meetings can make employees feel more comfortable and encouraged. It can help them stick to a set work schedule. These conversations can identify problems before they become serious.
Encourage regular vacations and breaks:
Although it may seem odd, research suggests that frequent breaks increase productivity. Regardless of what the data shows, you may need help to get your employees to take time off from work.
But when they do, they become more efficient at completing tedious tasks. They start spending more time on billable client work. Tracking your usage before and after a change in culture around breaks can help you see the importance.
Multiskilling for resources as required:
New technologies and fierce competition have increased the demand for skilled workers. As a result, companies must offer multi-skilling programs to ensure efficient use of resources. Managers can take measures such as job shadowing opportunities and mentoring. It reduces the idle time of resources. It is because they can prepare for future initiatives. It increases creditable effort and career advancement.
Conclusion:
Companies need to understand how successfully they are using their human resources. They need to engage in billable and strategic initiatives. It will also ensure that you make the best use of your resources. You can combine the above best practices with future resource management solutions. As a result, these resources help organizations increase productivity, efficiency, and ROI.