How can businesses provide optimum utilization of resources?
What is the optimum utilization of resources?
Resource utilization measures the percentage of time that employees spend on revenue or generating activities, as well as if resources are over or underutilized. Resource utilization is the measure of how much of your available resources you are currently using. Resource utilization also helps you plan how to utilize your resources more effectively to ensure that your organization is as productive or selective as possible. Optimism utilization of resources is a concept in economics and business management and also can be applied in business. Management principles are helpful in the optimum utilization of resources.
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Calculating a resource utilization formula
The most common formula for project managers is FULL-TIME EQUIVALENT(FTE). This is used to calculate how optimally a resource is being used in terms of available workable hours. To calculate this, the device is allocated hours a resource will work during a project by the total number of workable days available in the project. Multiply the result by 100 to create a percentage, and the product will indicate the effectiveness of the resource. For example, if a worker has been allocated to a project for 45 work hours, then that resource has a utilization of 75 % as per the FTE resource utilization formula.
it’s best to aim for a rate of around 80%- anything above this risks employee burnout, and anything less will not utilize resourcefully. creating a resource utilization analysis report can show you all the resources you have available and how they’re currently performing. There’s no perfect formula to guarantee success since every project is different – this is something that can be difficult to manage in a DIY project management tool like Microsoft excel.
What are the benefits of resource utilization?
Resource utilization, ultimately, helps you make the most of your available resources:
- Proper utilization of resources is important for maintaining productivity because it prevents staff from underperforming or being overburdened by workloads and burning out.
- Projects can be managed with better visibility, reducing the risk of oversights.
- Maximum utilization of resources gives you a better ROI.
- It ensures that specific resources aren’t being over-or-under-utilized.
- It allows PMs to be agile and reschedule as quickly as possible to avoid problems surfacing or becoming worse.
Resource utilization tips
With an intelligent resource management platform, project managers have dedicated tools to approach and master resource utilization:
- leverage visibility – projects may be run separately, but they affect each other. Instead of viewing projects as separate entities, create a resource utilization plan that allows you to view all resources. This way, you’ll be able to assess capacity and performance more effectively.
- Beware of scope creep – projects will inevitably demand extra time and resources, and it’s a project manager’s job to keep them from going over time or budget. Resource management assortment software can put all active projects front and center, utilizing resources equally amongst them to put things in perspective.
- Compare booked hours with actual hours – it’s rare that a project ever runs according to plan, so make sure to examine the hours booked in preparation for the project and the actual hours worked in real-time. This will give you a chance to see if the project plan needs adjusting before anything goes wrong.
- always be prepared – visualize and run scenarios that will help you prepare for a change of circumstances. if your budget changes or if you lose a resource, you’ll be able to adapt more quickly.
Resource allocation vs. resource utilization
These processes might sound similar, but they have some slight and important differences:
Resource allocation sees a project manager choosing suitable staff for a project and then managing them as the project is completed, reassigning them, or altering their workload if necessary.
Resource utilization, however, is the process of strategically measuring how effective resources are. A resource utilization example is checking if a certain employee is being maximized in between projects. While allocation organizes your project, it’s utilization that makes your project successful.
Both processes are key to achieving project success, however, resource utilization is often undervalued. Creating a robust framework for assessing the conditions of existing resources might seem complicated, but with the right tools, it can be easy. Once you’ve decided on the budget and resources available, and the metrics you want to use to measure efficiency, you can implement resource management into your projects.
What are the different types of utilization?
The intent to subdivide utilization into various types is to understand how much time a resource is spending on each task, such as billable work, non-billable work, strategic projects, admin or BAU activities, etc.
Here is a rundown of each one of them:
- Overall resource utilization
- Billable resource utilization
- Non-billable resource utilization
- Strategic resource utilization
Overall resource utilization
The amount of time an employee spends on all the activities, namely billable, strategic, or non-billable, put together against his/her total availability is calculated as overall utilization. Managers get a brief overview of whether the resources are using their available time entirely.
Billable resource utilization
Billable projects are the ones where the costs to undertake the project are billed to the client. Billable resource utilization is a means to gauge the number of hours a resource is utilized for billable work. It plays a crucial role in determining the productivity of an employee.
The activities that cannot be billed to the client come under non-billable work, and the time spent on this is known as non-billable utilization. All the general meetings, BAU, admin work, training & workshop, etc., come under this category.
Ideally, non-billable utilization should not exceed billable utilization, or else it indicates lowered productivity.
Strategic Resource Utilization
Every firm has long-term goals, and the projects carried out to achieve them are strategic projects. Similar to other categories, the amount of time utilized on these projects is known as strategic utilization.
Billable and strategic utilization both are indicators of high productivity, performance, and profitability.
Conclusion- Do’s & Don’ts
- Invest in a modern resource management solution to get real-time accurate updates and foresight into resource utilization.
- Be aware to avoid over or under-allocation of any resources.
- Use the multidimensional submission tool to mobilize resources from non-billable to billable or strategic work.
- Ensure competent allocation of resources to the task to enhance resource productivity and maximize utilization.
- Implement the proper optimization technique to prevent employee burnout.
- Organize training programs to utilize the benched resources effectively.
- Don’t use siloed spreadsheets to gauge utilization or productivity. It will create discrepancies due to a lack of real-time information.
- Avoid booking 100% of a resource’s schedule as it will not leave room for BAU activities or daily mandates.
- Don’t allocate work without understanding the future availability of the resource. It may potentially overlap with existing schedules or cause overutilization.
- Don’t book a less-experienced resource to a critical task as it may delay the progress, and don’t book a highly-skilled employee to regular activity as it may escalate the costs.
Don’t utilize resources on billable projects without studying their profiles and cost rate, as it may decline profitability.
Reference: a case study from websites.