Resource utilization is a key metric in project and resource management. Specifically, resource utilization shows you how much time your team has planned to spend, and actually spends, on a piece of work. Compared to resource allocation—the process of staffing a project and managing the resources allocated to that project—resource utilization drills down into the effectiveness of each resource.
So how does knowing your utilization rate lead to better planning and more efficient allocation? How do you put it into practice and, more importantly, how do you calculate it? Let’s take a look.
Why is resource utilization important?
By understanding what this metric is and how it is calculated, organizations can more accurately gauge the progress of their projects. When you have this data point, you can make educated decisions regarding a project’s progress and the team’s workload. This enables organizations to determine whether or not the portfolio will be executed successfully based on the current timeline and available resources. In other words, understanding your resource utilization rate is the key to strategy execution.
How do you calculate resource utilization rates?
First, you want to look at an individual person or overall team’s capacity. Next, look at the planned hours they are expected to work on the project or task. Once you have this information, the formula is Planned Hours divided by Capacity Hours. “Planned Hours” may also be referred to as “Working Time” or “Billable Hours.”
For example, if a person is planned to work 152 hours and has 184 hours of capacity in the month, their resource utilization rate for that month is 152 hours divided by 184 hours. That gives you a utilization rate of .826 or 82.6%.
You can use this formula to calculate the utilization rate for both individuals and teams. Also, based on the time parameters, you can calculate daily, weekly, monthly, or even annual utilization. Finally, and probably most importantly, you can compare planned utilization against actual utilization as long as your team is both planning and tracking hours spent.
Best practices for utilization rates
Everyone wants their team to be as productive as possible. However, it’s important to note that maximizing productivity does NOT mean achieving a utilization rate of 100%. In fact, any resource or team with a utilization rate of 80% or higher is actually considered overutilized.
Why? Because a key component of optimizing productivity is avoiding burnout. If a resource is expected to spend every minute of an 8-hour workday working, that doesn’t leave any time for task preparation, necessary transitioning between tasks, or the unplanned tasks or obstacles that inevitably pop up throughout the day.
In the Harvard Business Review’s “6 Causes of Burnout and How to Avoid Them,” Elizabeth Grace Saunders explains, “When you have a workload that matches your capacity, you can effectively get your work done, have opportunities for rest and recovery, and find time for professional growth and development. When you chronically feel overloaded, these opportunities to restore balance don’t exist.” Target utilization rates will vary by organization, but the most important takeaway is that you should never set the target rate higher than 80%.
If you’re ready to get started with resource utilization, Tempus Resource can help you leverage this critical data to maximize efficiency and productivity. With powerful what-if scenario building and planning tools, organizations can see in real-time where they need to adapt and pivot in response to internal and external changes. A clear understanding of individual and team utilization rates will allow you to make the most informed, strategic decisions for executing the portfolio.
To learn more about Tempus Resource’s resource utilization capabilities, contact us today or schedule a demo.