Resource Utilization - Why Is It Crucial? How to Calculate it?

What is Resource Utilization

Projects have a lot of components and require meticulous planning particularly when you are working on many of them simultaneously. For this, the project managers need to do some smart management. They should know what their team is working on, how productive they are, and if they're using their time efficiently. Expanding the business is the highest priority for every company. But just hiring more people doesn't help.

The key is to effectively utilize each resource on billable work to get optimum efficiency. Yes, optimal resource utilization is the keyword for success. One of the simplest ways to check if you have successfully allocated resources is by tracking your employee utilization rates. Before we move ahead, let's first see what resource utilization means.

Why is Calculating Resource Utilization a Game Changer and How can a Resource Utilization Tool Help?

Resource utilization is an important metric in resource management as it shows if your team or employees are fully booked or not. It explains how to plan projects while ensuring that the available resources are used to their maximum potential. It also enables project managers to find if any of the employees is over-or underutilized and accordingly tweak the resource allocation. That would help them in re-allocating the responsibilities to someone else or find people who are under-utilized so that they could be assigned new projects.

The Difference Between Resource Allocation and Resource Utilization

Though both resource allocation and utilization have the same purpose, there are some key differences.

Resource allocation:

Resource allocation refers to selecting the right employees for a project, managing them during the project execution, and re-allocating or altering the workload, if required.

Resource utilization:

This is the process of measuring how efficient your resources are. By allocating you organize a project, but utilization makes it successful.

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Why is Resource Utilization Important?

Let's now understand the significance of resource utilization.

  • Provides an overview of the people and other resources involved in your project

  • Supports utilization planning

  • Streamlines the resource allocation process

  • Makes project and resource planning and management more transparent

  • Allows you to identify challenges before they actually appear

  • Ensures seamless resource management and control over projects

How to Calculate Resource Utilization?

Let's see what are some of the most important terms for calculating employee productivity, efficiency, and utilization.

Utilization Rate Formula

Talking of the resource utilization formula, you should first calculate the utilization rate for achieving effective resource utilization. Let's take a look at the utilization rate formula you can use here.

Utilization Rate or Percentage = Actual Number of Hours Worked (by a particular resource) divided by the Total Available Hours.

If you select a range of time (for example, weekly, monthly, or quarterly), it gives you an insight into the projects that your resources are spending their time on. This data on utilization rates helps project managers to understand which projects are profitable for the organization. This information can drive the direction of your business in future.

Utilization Rate

For example, as per the typical resource utilization formula: 1500 Hours Worked / 1600 Available Hours = .93 = 93.75% utilization rate

Realization Rate

Realization is different from utilization rate as it is directly tied to revenue and billable time. To calculate the realization percentage, you need to take the Total Billed Hours and divide it by the Total Billable Hours. The result shows what percentage of time the resource takes to bring revenue into the business.

Realization Rate

For Example: Of 1500 hours worked, 1400 were total number of billable hours. Of the 1400, 1320 were actually billed to the customer resulting in project revenue. 1320 Billed Hours / 1400 Billable Hours = .942 = 94.28% Realized.

How to Improve Resource Utilization?

Improve Resource Utilization

With a resource utilization tool, calculating staff utilization rates and productive utilization becomes easy for the project managers. Let's see how you can improve your resource utilization by creating a resource utilization plan.

Leverage visibility:

There are multiple projects that a project manager handles, and they do impact each other. Imagine if your did not have clarity into total number of resources in a project, resource availability and schedules of other project, you could plan some team members who is completely booked on another.

Create Feasible Resource Utilization Plan

Rather than viewing projects as different entities, you should create a utilization plan that enables you to view all the resources, and their allocated tasks for a specific period. That way, you can evaluate the capacity and performance of your team more effectively.

Be careful of the scope creep:

Various projects demand different times and resources to complete. The team leads or a project manager is responsible to keep everything on track with regards to the timelines and the budget. A good resource utilization tool helps in putting all the active projects upfront and also enables to allocate the resources equally amongst them.

Analyze booked hours vs. actual hours:

At times, projects don't run as planned and there are bound to be some challenges and roadblocks. It's always good to assess the resource utilization metrics. You should also check the hours booked in the preparation stage and compare them with the actual hours worked in real-time. This will provide you an opportunity to review the utilization rates and assess if the project plan needs any tweaking before any variation or problem comes up. To aim at organizational growth, it's important to utilize your efficiently resources while minimizing waste and maximizing productivity.

Be prepared for any scenario:

Imagine and run situations that will enable you to ready for any change or deviation. For example, if your project over-shoots the budget or if you lose a resource, you will be able to adapt to the change quickly. Especially for consulting firms, it's important to utilize valuable time of people in an optimal manner to deliver projects profitably.

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How to Maximize Productive Utilization of Employees?

Having a 100% utilization does not essentially mean that the resources are productive. Therefore, it is important to evaluate if they are engaged in productive or mundane activities and strive for optimal resource utilization. It's always the responsibility of the project and resource managers to make sure that their team's average utilization rate is as desired and their competencies are being used to the fullest.

So, how do you maximize resource utilization rates without overburdening your resources? Well, the right resource management software and resource utilization tool can be a game-changer. It keeps a tab on the utilization rates and offers valuable insights on resource capacity. Read on to see how it helps.

Identify the under- and over-utilized resources:

If your team has been allotted more or less work than the capacity, it leads to under or over utilization of resources. At times, even skill shortage leads to over-burdening or over-utilization as one skilled resource may be assigned to various projects simultaneously. It also becomes very difficult to find which resources are over or under-utilized. However, the right resource management software can easily help find the over or under-utilized team members, offer real-time visibility into utilization rates, and enable distributing workload in a balanced manner.

Enhance the resource visibility:

Overwork can also contribute to double booking which causes over-allocation. The right resource utilization tool can help project managers identify specific resources who are under or over-utilized, track utilization rates, check number of billable tasks, and accordingly solve the problem of double booking. How does this happen? Such a tool offers enhanced resource visibility and details such as their availability, utilization percentage, capacity utilization, bookings, task status, skill set, and a lot more. This in turn helps with precise resource planning and allocating the right people on client projects resulting in client satisfaction.

Managing the bench effectively:

Bench management is an ongoing activity and should be conducted strategically. Reducing bench time involves decreasing non-billable hours that ensure that the resources are assignedonly to billable or strategic work. This becomes an easy task with the right resource management software. How? Keeping a check on resource availability and utilization rates enables accurate allocation and resource management. It also helps to utilize valuable time of limited resources efficiently leading to higher profit margins.

Forecast the demands in the future:

Having the right resource utilization tool helps the team lead forecast the exact demands of the projects in the pipeline and the billable client work. With comprehensive reports that such a tool provides, they can easily fill the vacancies with the capable benched resources. Project managers can also create accurate resource utilization plans using historical utilization data while forecasting future demand, and aiming to achieve optimal utilization rates. They can clearly communicate the utilization targets for team's utilization.

Reduce non-billable activities:

Human capital is the most important asset in a team. Therefore, it is important for project managers to gauge resource performance and track the overall billable utilization rate of their team's highly skilful resources with optimum resource utilization. The resources are gainful only when they are working on billable tasks and are fully utilized in terms of capacity. Hence, reducing non-billable work and mundane or administrative tasks that are not part of strategic or billable work is very crucial as you may find availability in your existing team rather than adding more resources. It's also important to accurately calculate billable hours worked so that resource optimization can be achieved.

Avoid Employee Burnout:

A resource management tool offers real time insights into available hours of resources and guides you to efficiently distribute workload and improve productivity. This data helps to create feasible resource utilization plan while keeping in mind potential bottlenecks. When employee burnout is avoided by tracking available hours and planning accordingly, work life balance can be achieved. Additionally, the overall performance increases leading to optimal utilization of full capacity.

Regular check on resources:

Project managers should also keep track of resources so that they spend the least or no time on non-value add tasks like meetings and discussions. They should encourage their resources to improve billability, avoid below-par performance, and enhance their productivity and profitability. With the right resource management tool, project managers can also check what various team members are working on, monitor resource performance, productivity, status of task completion, leave plan, and resource requirements for projects in the entire organization.

Measuring Resource Utilization by Tracking Real-Time Using eResource Scheduler (eRS)

Measuring Resource Utilization by Tracking Real-Time Using eResource Scheduler

So, you enhanced your resource utilization formula to adapt to the needs of your business, but your team's data is dynamic, and your resource management strategy should be ready for that. Availability of people and unforeseen circumstances may impact your metrics in a big way. So, what's the solution? Investing in a good resource utilization tool that can handle everything on its own can work wonders and help distribute balanced workload.

Be it calculating utilization rates or track if your team is utilized efficiently, such a tool becomes your centralized platform with all resource-related and project data. It also helps to monitor status of projects, resource allocations, find underutilized resources, and calculate resource utilization rate in just a few easy steps, which leads to significant impact on profit margins.

How can eResource Scheduler Help in Project Management?

eRS Cloud offers comprehensive resource utilization in project management and availability reports that are also configurable to suit your business. The end-users can configure the reporting views easily to gain a better understanding of the data. Colour coding enables the identification of over- and under-utilized resources. Other powerful features like the ability to view data in two units at one go and configurable filters enable utilization rate and availability reporting at all levels. Besides that, configurable graphs provide simple visual data representation which helps in quick and well-informed decision-making.

By gathering reliable insights, project managers can optimize their resource pool while assigning tasks and maximize their resource utilization. The real-time tracking data provided by this leading resource utilization tool helps managers to understand the real challenges and adopt tactics and solutions in advance. The tool's time-tracking feature helps you track the billable tasks, non billable hours, and who are the available resources.

This information is then used to generate various reports that show the productivity of your team. Other brilliant features of eResource Scheduler help in automating the process of calculating your resource utilization rate. This enables you to stay focused on your key metrics and project management tasks.

So, are you achieving your ideal resource utilization rate? Be the best project manager by having a transparent project and resource management plan with the help of the best-in-class resource utilization tool. Try eResource Scheduler to up your game in terms of productive utilization rate and employee utilization. What's more? Book a free trial along with custom-made support to configure this tool as per your specific business requirements. The robust architecture and swift performance of eRS make it the first choice for streamlining business operations and augmenting organizational efficiencies.

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CEO & Founder
Rudraksh Vyas
Rudraksh Vyas, an accomplished CEO at ENBRAUN since 2011, has a proven track record in leading and growing technology-driven businesses. His expertise lies in product development, client management, and implementing effective business strategies, ensuring robust financial and resource management. Prior to his current role, Rudraksh honed his skills in business development, where he excelled in account management and export marketing. He holds a PMP certification from the Project Management Institute and an MBA in International Business from the University of Technology Sydney. Rudraksh's journey reflects a deep commitment to excellence and innovation in the tech industry, making him a respected leader and visionary in his field.

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