Knowledge Exchange is a weekly series of educational articles that we encourage you to share and discuss with your colleagues and network. This month, we’re offering advice about improving your business efficiency.
Every resource matters, but the most vital one is your people. Without their talents and skills, your business wouldn’t be able to move forward at the rate that it does.
However, it’s probable that there is untapped potential in your pool of human capital. Employees are often underutilized, which can make them unproductive and frustrated. Efficiency — and, therefore, profitability and growth potential — will suffer when you’re not harnessing the capabilities of your team.
Utilization rate is an important measure of how much each employee contributes relative to their potential contribution. There are three common utilization rate calculations you should be familiar with, depending on whether you’re interested in looking at individual employees, the average across your team or a more billing-focused number.
Utilizing your employees fully doesn’t mean squeezing every drop of effort out of them. In fact, it’s important to remember that a good utilization rate is around 80%. This benchmark accounts for the need for your team to spend time on some non-billable tasks, which also contribute to your business’s success.
Before you make improvements to efficiency, establish your baseline and goal utilization rates. These can act as clear indicators of positive change or reasons to try a new efficiency strategy.
A high utilization rate directly correlates with high efficiency because when your team spends the majority of their time on revenue-generating activities, it means they aren’t wasting time on mundane administrative tasks. There is likely an effective distribution of work and no one is overburdened or underutilized.
If your utilization is lower than you’d like, you can identify and resolve the possible root causes:
Let’s think about how to address these causes of less-than-ideal utilization.
You can’t achieve improved employee utilization with a one-size-fits-all approach. You need to strategically consider your business model, client expectations and team culture.
First, develop an awareness of your operational nuances and how they impact your team’s ability to handle diverse tasks and projects. If they’re balancing one-off work with recurring work, for example, they may need more direction on how to prioritize. If they’re struggling with time management because of the demands of internal collaboration, make an effort to reduce meetings and bring on tech that’s built for service businesses. It’s helpful to have a task management solution that highlights overdue tasks and attaches tasks to projects and clients so individual work isn’t siloed from the bigger picture.
Client demands are also powerful in your industry and may place a larger downward pressure on utilization than you realize. Have you taught your team to drop everything for client requests? If so, they could be inefficiently applying billable hours. Reduce the non-billable work of triaging client requests with ticketing software and set up automated replies to ensure your clients know what to expect.
As a surprisingly influential element, a culture of open communication can do wonders for utilization. Employees need to feel comfortable expressing their concerns about workload and their confusion about tasks with managers. Quick answers lead to quick action.
To supplement these initial efforts, try five specific strategies for optimizing your employee utilization.
Fine-tuning business efficiency is a true balancing act — a continuous process that calls for regular monitoring and adjustment. When you pay close attention to utilization, you’re investing in a more engaged and productive team that’s likely to stay motivated and self-correct as necessary.
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