Keep Track of What’s Important: Utilization
During economically unstable times, certain metrics are focused on more than others. Agency owners get into survival mode and tend to keep a close eye on 5-10 financial reports that will give them a pulse on their business.
But financial reports aren’t the only thing to track closely when times are volatile.
One of the main assets of any agency is its people: their creativity and productivity.
One metric you’ll be laser-focused on is utilization. You’ll be looking into the amount of billable time you can get out of the total available time of an employee, because in crisis mode, it’s more crucial than ever to make the most out of each budget. Right?
Well, yes – and no.
Yes, because of course, you should always aim to run a profitable business.
No, because if you only focus on squeezing the most out of a teammate, chances are that dissatisfaction, decline in productivity, and potential burnout could be around the corner.
Here are a few important questions to answer when looking into utilization reports:
- What’s usually considered an ‘ideal’ utilization rate?
- What can certain utilization rates indicate?
Ideally, utilization rates are basically 70-80%. That’s an average that can be seen across many different types of agencies. It means that teammates are allocated to enough work, and are getting some time to work on themselves professionally, i.e. take time to explore and research.
If you’re noticing a constant 90%, that’s already alarming. Similarly, over 90% utilization often indicates that your teammates are already overworked.
Reaching 100% utilization can indicate that the teammate is even overbooked.
But here’s something that may come as a surprise. According to one of the most recent agency industry reports by Promethean Research, which included over 45,000 digital agencies since 2015, only around 35% of agencies track billable utilization.
According to the same report – only around 10% track forecasted utilization. That’s a very small number of agencies looking into their future.
So first things first. If your agency’s not tracking utilization – what’s stopping you?
Once that’s set, some solutions to keep your team’s workloads as balanced as possible are:
- Start looking into potentially hiring the roles that are at +90% utilization.
- Reallocate work to other employees with the same or similar skillsets.
- Speak with your BD team. Sell less of the services that are overutilized, and focus more on selling other types of services.
- Last, but not least – talk with your team and get to the core of what’s causing such high utilization rates.
To conclude, here are a few questions for you:
- Do you have utilization targets? What are they?
- Are you monitoring your utilization per business unit/department/skill?
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