In the world of professional service firms and project-based businesses, managing utilization is key to running a profitable business. In an earlier blog post we discussed that “utilization” is really three separate metrics that need to be tracked in order to analyze how to improve utilization: the utilization rate (productive hours/total available work hours), the realization rate (billed hours/total billable hours), and chargeable utilization (billable hours/chargeable hours).
Why are utilization metrics so important?
The impact of utilization metrics on profitability is pretty straightforward — if you aren’t fully utilizing your resources and/or aren’t billing for their work, you’re leaving profits on the table. But there is so much more to learn from these metrics and how they relate to one another! Digging into these metrics can provide visibility and clarity into many areas of the business, including:
- How are your billable resources spending their time?
- Are your people overworked?
- What skills are most in demand?
- What types of employees should you be hiring?
- Which of your business’ services are most in demand?
- Which of your customers are most profitable?
- What parts of your business should you invest in?
Gaining insights into utilization metrics
We can all agree that these are important insights that will help keep your business on track, but what happens if you can’t actually gain these insights because the various systems of your business that collect the relevant data aren’t connected?
Unfortunately, this occurs all too often in the business world. When each department is operating independently with their own processes and systems, the lack of integration makes it impossible to track and measure what’s happening across the organization. Disparate systems collect different data in different ways, resulting in different business functions managing to multiple versions of the truth – even when calculating the same metric.
How to improve utilization and profitability
The solution to fixing a disconnected, siloed system? Connect it! When your business systems of people, process, and technology are integrated, you’ll have the ability to make operational, tactical, and strategic decisions that allow you to maximize utilization and ultimately, increase profitability.
Learn more about how to improve utilization and how you can integrate your systems so that you have the information you need to make the right decisions and drive your business to success.