State of the Industry: The Critical Role of Resource Utilization
Improved resource utilization is a rising concern in project-focused businesses, resulting in increased focus on optimization through metrics, government and management. I had the privilege of attending the recent Resource Management Institute Global Symposium in Dallas and spoke with a number of resource management professionals to learn about their challenges and how they are meeting rising demand for this complicated practice. From experience, I can attest that many of the challenges they talked about were reflected in the recent Resource Utilization Trends Survey 2019, also conducted by the Resource Management Institute (RMI). A variety of trends related to resource utilization have emerged, including a new focus on standardization and improved governance. We’ve examined this data and combined it with our extensive experience, covering three different project domains, to bring you fresh perspective on what these top resource utilization trends mean to you and your organization.
Trend #1: The 2080 Standard Is Becoming the Benchmark for Resource Utilization
The 2080 utilization baseline (40 hours per week x 52 weeks in a year = 2080) has grown in popularity as the benchmark for utilization calculations. This emerging industry standard increased a remarkable 16 percent in professional/consulting services (PS/CS) and 7 percent in enterprise/information technology (E/IT) in the last year. This should not be surprising — if anything, it should be more surprising that so few organizations have not embraced it sooner given the value it offers. Fortunately, nearly two-thirds of respondents have adopted the 2080 standard and have begun to realize the benefits including more precise peer-to-peer benchmarking and better overall utilization performance.
Trend #2: Measurement of Utilization Data Remains in a Holding Pattern
Utilization data should be measured at frequent and regular intervals to accurately discover and address trends in management and delivery. Currently, at least half of all professional and consulting services surveyed measure monthly or more frequently. E/IT leans more toward monthly reporting, with more than half following that method and only a quarter focusing on weekly reporting. Product Delivery (PD) organizations operate with one-third reporting monthly and less than a quarter reporting weekly.
Those surveyed that are only reporting quarterly — or even annually — seem to be depriving their teams of important data. This is likely due to challenges with compliance, i.e. reporting is required but delivery of data is lax. Other challenges to timely reporting lie in a reliance on older methodologies that make it more difficult to spot trends, such as spreadsheets and manually generated reports. Those who experience the latter should consider migrating to tech-based tracking like real-time dashboards and other dynamic project management software.
Trend #3: C-Suite Ownership of Utilization Metric is Growing.…Slowly
With labor costs making up more than 75 percent of organizational budgets, it is surprising that data continues to show limited involvement on the part of higher-ups in professional and consulting services. Of PS/CS organizations surveyed, 62 percent of ownership falls to managers with 25 percent and 13 percent falling on VPs and CxOs, respectively. In E/IT, the disparity is even more daunting, with 86 percent of managers shouldering the responsibility and 14 percent of VPs.
PD organizations are the most balanced, with 56 percent of managers responsible and the remaining half divided evenly between VPs and CxOs. PS/CS numbers reflect a 6 percent increase in the last year. While this is certainly a good sign, more work needs to be done to involve these decision-makers in utilization performance if an organization wants to increase its overall gains and minimize lost productivity.
Trend #4: Linking Goals and Compensation to Utilization Performance Beats Averages
Incentives and goal setting are a key way to ensure positive utilization behavior across teams. Those that implemented such strategies — 62 percent of respondents — saw their organization exceed overall industry utilization averages by nearly double versus those that did not. Linking goals and compensation to utilization targets implies that those individuals held accountable are empowered to make changes that improve utilization performance.
Trend #5: Professional Services Automation and PPM Tools Are Growing — But Not Enough
The capabilities of a PSA or PPM tool are enormous, particularly when it comes to reporting data that drives decisions related to utilization (see Trend #2). However, spreadsheet usage still holds strong at 48 percent for PS/CS and 58 percent for E/IT. PD organizations post a 50/50 ratio between the two. The positive takeaway from these numbers is that spreadsheet use has declined in both, showing that progress is being made to advance how organizations track resource management. Other tools used include time tracking software and internally developed tools.
Trend #6: Utilization Performance Has Grown in Importance
PS/CS companies surveyed reported that more than 75 percent of their budget is invested in people and utilization is a “very important” factor. About 90% noted that utilization sits in the “somewhat to very important” range. However, getting from making it an important consideration to making it a key business differentiator continues to be a challenge. Conversely, only 42 percent of E/IT companies have reported similar investments. This reflects a 7 percent rise, but still reflects a pretty significant deficit. PD companies post the least concern with utilization performance, a concerning stat given the sheer amount of resources involved in product delivery. Gaps in metrics, reporting and accountability (see Trends 2 and 3) are contributing factors.
As the survey report indicates, resource utilization continues to grow as a principal concern in project-based businesses. For these organizations to truly exploit the benefits of this increased focus, more work needs to be done by companies and stakeholders to embrace the tools that provide the greatest visibility and data reporting. Consistent and frequent utilization reporting gives all levels of management the visibility they need to identify and correct negative trends or reinforce positive trends. The visibility and awareness provided by effective resource utilization reporting are key aspects of robust organizational governance.