Resource management is important for every company because it increases efficiency, employee satisfaction and saves time and money. In this article, we will introduce the topic of resource management and how to implement it in your organisation....
Companies usually put a lot of effort in resource allocation. You want to keep everyone busy while making sure their tasks are valuable (which often means billable) for the company. It gets really tricky as your team grows, especially when you have to assign people to multiple projects happening at the same time.
One of the easiest ways to check whether your allocation efforts are successful is tracking your team’s utilization. Before we introduce you to various resource utilization formulas, we’d like to define resource utilization in an understandable way.
Resource utilization definition
Resource utilization is a metric that shows whether your whole team or specific employees are fully booked. It refers to the process of planning the project and making the most of the available resources in the company. For example, when you know that somebody is already overutilized and simply have too much on their head, you can look for someone else with a similar skillset who would fit into your project. This metric also helps to identify people that are underutilized, so you can assign new projects to them.
How to measure resource utilization? The easiest formula is:
Resource utilization = Busy time / Available time
This value, expressed in percent, shows you how much of your team’s time is spent working.
Even though it sounds straightforward, there are several questions that arise when trying to measure resource utilization. Should you base your calculation on actual working time (timesheets) or rather planned working time? What about holidays and paid time off? How often should you track your team’s utilization?
The answer is: it depends. There are so many variables that it is virtually impossible to recommend a universally good solution. The only way to figure it out is to go through the options and pick the one that best fits your needs.
Looking for a tool that will help you calculate your team’s utilization? With Teamdeck’s reports you can quickly set up metrics you want, save them or share with your team. Try Teamdeck with a 14-day free trial.
Compare bookings with your team’s availability
One way to measure resource utilization is to compare their availability with planned working hours.
Resource utilization = Planned working hours (bookings) / Available hours
The main advantage of this method is that if the score is too low, you can still optimize your plans. Head to your schedule and see whether your projects are planned correctly. Perhaps some people have gaps in their bookings, or you have e.g. two developers working 4 hours/week on a project, when you could have 1 person working full time on it?
Figure out how you can fill in the gaps in your team’s schedule. Perhaps you should start an R&D project or introduce innovation time off? Not only will it help you avoid lost productivity but it is also a good way to keep people engaged. Underutilization is more frustrating for your employees than you might realize.
Watch out for people having too much on their plate. There’s a risk that their tasks will not be delivered on time (plus, you don’t want them to be exhausted). Their overbookings may suggest that you need to hire new team members.
Finally, calculating the estimated resource utilization is an easy way for your sales team to see how much space there’s left in your production pipeline. This way you’re less likely to miss out on business opportunities (or commit to projects that you’re basically unable to deliver on time).
All in all, analyzing your bookings-based resource utilization score helps you optimize resource allocation and forecast sales or recruitment needs.
Compare timesheets with your team’s availability
Another way to measure resource utilization is to compare your team’s recorded hours (timesheets) with their available hours.
Resource utilization = Recorded working hours / Available hours
Many people believe that this is the only way to precisely calculate resource utilization because you’re operating on actual working hours, not just the estimates.
Since this is a retrospective score, you usually cannot undone the damage even if your score is disappointing. It helps you, however, to make better decisions in the future.
Historical data regarding team utilization can be a good indicator whether you need to hire extra people (or find extra assignments for your existing team members). You can also check how productive your employees tend to be.
My recommendation would be to use both methods of calculating resource utilization. Compare the actual (recorded) utilization to the estimated one (based on the bookings) and analyze the differences. They could point out to issues with estimating workload or project management problems. Check whether there are people or projects that are repeatedly over or under their estimated utilization score. Such analysis allows you to spot improvement areas and take action.
How to define “availability”?
Now that you know different formulas for calculating resource utilization, it’s time to make things a little bit more complicated. Until now, we’ve used a term “available hours”. But what does it even mean? Should you think of availability as the time during which your employee was at work? Or should you include vacations and bank holidays as well?
At first you might think that including time off in the overall availability is counterintuitive, after all people were clearly not available then. Consider, however, that you might still need to compensate your employees for this period if you operate on fixed wages. As an employer you might want to see how much time your team members actually spend working in the great scheme of things. If you decide to include time off in your calculation, keep in mind that your team’s utilization can be significantly lower during peak vacation months (December, August).
Some companies use 2080 as a fixed number of hours (52 weeks * 40 hours). Others calculate the actual number of available working hours in a given year. If you want to perform more advanced filtering (e.g. include vacation hours, exclude bank holidays, take into account part-time availability of some employees), you should consider using resource management software.
Productive utilization and billable utilization
When your definition of “available hours” is ready, you should consider what is it that you call “working hours”. Are you talking about all of the hours your employees spend doing work-related activities e.g. creating an internal project? Or perhaps the hours they spend working on things you can charge your clients for.
You can calculate the so called “productive utilization”, which takes into consideration all of the busy hours, and “billable utilization”. The second one is especially valuable for agencies, consultancies or software houses: companies that work on projects for their clients. With billable utilization you can measure how much time your employees dedicate to work that actually pays.
Measure resource utilization in real time
You may have nailed down the formula you will use to measure resource utilization, but you have to account for the everchanging data. People’s future availability changes every time they ask for a day off or get sick, which also affects your bookings.
There is every reason to think that your data should be updated regularly and your team utilization score would have to be adjusted in real time as well. The easiest way to stay on top of this would be to use resource management software. We’ve built Teamdeck as a tool that can automate your efforts so that you can focus on your project management duties.
How can Teamdeck help?
Teamdeck uses three kinds of data points for your calculations:
- availability (as well as time off or bank holidays),
- bookings (planned work hours),
- timesheets (recorded work hours).
This way you can calculate the estimated as well as the actual team utilization and then compare them. This software comes with a reporting suite that allows you to visualize your data and share it with your team (or the client).