Beating the Utilization challenge
If you are a business leader in a service industry such as engineering, accounting or legal then utilization is a constant challenge. Whether it is called utilization, billable ratio, or some other term, the amount of time your staff spends working on client work versus time spent on overhead activities is a major factor in the success of your firm.
Using the Consulting Engineering industry as an example, there are many ways to measure utilization varying from total hours worked to hours paid, to even basing utilization not purely on hours but factored for the salaries of the individuals working. However, regardless of how you measure it typical firms have a utilization usually between 60 to 64%. That means that most firms have well over one third of all worked hours on overhead, not generating any revenue for the firm!!
The impact on a firm’s finances is the most obvious result of this phenomena. Analysis conducted by Colergo staff using standard industry parameters shows that as little as one percent higher utilization could mean 11% more profit for the typical firm, while increasing utilization three percent delivers a whopping 33% increase in profit.
It’s not just profit that is impacted by poor utilization. Much has been made of the desire by millennials to be challenged, to learn, and to advance their career. How can that happen when there isn’t enough work to fully utilize their time? In addition, regardless of your generation you want to have the comfort of being fully utilized, knowing you are adding value to the team and company and securing your future with the firm.
So what can a manager do? There are many tried and true methods that can help including:
- Clear communication of expectations. Make sure staff know what their goals are, and help them position themselves to meet them.
- Staffing coordination. In firms with multiple project/team leaders, make sure that these individuals are regularly communicating and sharing team staff efficiently. Reduce any barriers to staff sharing and even consider internal incentives to share staff.
- Staff to the work. Painful to make changes in some cases, but make sure that you have the right staff for the workload.
- Keep overhead down. It is just as easy to increase utilization by trimming overhead as it is to get more billable work done by production staff. Make sure you are running a smart and frugal business.
Add to these ideas the revolutionary new concept of Colergo! Colergo is the first online marketplace for peer firms to share staff to increase utilization and profits. Using an easy to use interface, and standard terms and conditions, firms can quickly and easily make staff available to be used by peer firms on a temporary basis.
Using Colergo, employee overhead/downtime can be converted to productive/billable time. Every hour changed from overhead to billable time improves utilization! And every hour sold on Colergo increases the profit of your firm.
Click here to go to Colergo and see how easy it is to improve the profits of your firm.