Updated November 2024,
Your employees' billable hours are the lifeblood of your firm. As a professional services business Architects and Engineers are based on the value they create from the expertise of their team - meaning the time that people spend on projects derives value for the client. This is why it is important to balance the percentage of time your team spends on billable vs non-billable activities while at work.
Employee utilization rates are defined as the percentage of billable hours out of total hours worked. When employee utilization rates go down then you risk not being able to invoice your clients enough to remain profitable. Each person on your team should know what their target utilization rate is, and this should be tracked and discussed in management meeting.
Based on the data published in the 2024 BQE Architectural Benchmarking Report and Engineering Benchmarking Report, most firms should be looking to hit a Utilization Rate of around 63% across your entire team. This includes both your billable employees and your non-billable, overhead, employees. On an individual basis you often have your more junior production staff with higher Utilization Rate targets and then UR dropping for more senior positions. Billable employees will probably range from around 85% billable down to about 50% billable depending on the role and responsibilities. Some principals and firm owners may even drop as low as 20-30% billable as they are focused on things like Business Development, Firm Management, Financial Management, etc.
One other point of emphasis. We typically include all hours when calculating Utilization Rate. Meaning a full time employee has about 40 hours per week and 52 weeks a year, which calculated out to 2080 available working hours. If someone has an 80% utilization rate that means they worked 1664 hours. This means that the utilization rate calculation includes time spent on paid holidays, vacation and sick time and other PTO. You can estimate that about 8-9% of each person's time is already committed to these sorts of non-billable time off work.
It is important to point out that non-billable activities are an important part of each person's contribution to the company and for their career development. It is both unrealistic, and undesirable for people to be close to 100% billable. You should have a plan for how people spend their non-billable time to make sure that is productive even when it isn't billed to your clients.
There are some approaches to boosting your employee utilization rate that will help increase productivity and revenue, and also provide your employees with a supportive workplace environment.
Tips to Boost Employee Utilization Rate
1. Manage stakeholder expectations.
Managing your client's expectations is a given, although scope creep can (and usually does) happen. However, are you also managing the expectations of your internal stakeholders - your employees?
For example, your business development team or marketing manager needs a clear understanding of what your team can provide outside of their project responsibilities. Business development should regularly communicate with project managers to clarify expectations and needs. Your billable employees should understand time as a valuable corporate resource and expect to use it carefully.
Expectations should be transparent across your entire firm. Every individual should know their utilization rate targets, and work with their manager to balance project work with non-billable activities and things like holidays and PTO. If you don't have UR targets documented and shared with your team, that would be a great thing to do today.
Finally, manage your own expectations. Employees are human. They will need time to think about solving problems, address business-related issues that are not billable, and discuss projects with co-workers. You need to understand when this is necessary, and how much time each person needs outside of direct project related work. Work with your leadership team and project managers to set realistic expectations for each employee, and make sure these are documented and shared with everyone so you are all on the same page and can plan accordingly.
2. Track time effectively.
All employees should be monitoring and recording their activities throughout the day. This is true for billable and non-billable employees as well as principals and owners. Too often firm leaders don't track their time at all, or sometimes just occasionally. It is important for you to set an example for your team.
Training the team in how to track time is also important as you want everyone to document their activities in the same way, putting tasks in the right categories. Everyone should know what time is considered billable vs non-billable, and what categories they should enter certain tasks or activities.
Ideally time tracking is done daily before employees leave the office or signing off to the day. We know this is hard to implement, but it is worth having conversations with your whole firm to discuss the importance of this data, and getting buy-in across the team to be diligent about time tracking.
Time tracking software can help this process by eliminating the need for workers to manually enter all their times and activities. It can also help prevent that dreaded "What did I do?" look that comes at the end of a busy workday after putting out fires on multiple projects. By making it easier to track activities daily, you also can avoid people making up their time reports at the end of the week or month, when they haven't been doing their time sheets daily.
3. Collect and analyze your data.
The data you gather from your billing activities, time sheets, and projects will help establish clear benchmarks and goals for increasing the utilization of your teams and individual employees. Create reports that get sent out on a regular basis that show data trends over time that your team can use in management meetings and project scheduling.
Review the data regularly so you can make decisions about team activities. Are billable employees performing non-billable activities that other members of your office staff can handle, such as managing social media or generating marketing images? Is there a certain client who is monopolizing your team's time but providing little benefit to your business? Is there a specific type of project area where your whole team may need training to get work done faster?
Data analysis provides you with actionable metrics for approaching employee utilization at your company. It also helps you identify important financial aspects of your work, such as your earned value for the project, allowing you to better plan costs and resources for future work.
4. Set reasonable goals for Utilization Rate.
Every employee and position is different, but over time, you will have a stronger sense of time commitment for several types of roles and responsibilities. You will also have a cadence of office related meetings and activities that you would expect people to participate in outside of their project work.
Setting reasonable utilization goals for each person provides a benchmark for individual workers and departments. It also supports better planning and distribution of corporate resources. These goals should be set for both individuals or roles, and across the company .An example of a reasonable goal for your company might be 65 percent billable hours per month, depending on your company's current situation. Where an individual project manager may have a personal goal of 75% and a production person may be aiming for 85% billable time.
As we mentioned earlier, it is important to set these goals, document them, and share them with the whole team. Everyone should know what their targets are so they can better manage their time.
Another thing to consider as you track utilization is to start planning out future workloads. When looking at this data on a smaller time frame - like one month - you will see that things like vacation, sick leave, or even a big marketing effort will drastically affect Utilization Rate calculations on an individual basis. Although looking at performance over time is important to track trends, make sure that you are taking anomalies into consideration when looking at small sample sizes of data.
This is also where you should educate your team about how Utilization Rate is calculated and how they can hit their goals over the course of a quarter or a year. If they are targeting an 80% UR for the year, they should know that about 10% of their time will already be non-billable after holidays, PTO and some management meetings. That means on a weekly basis they should be aiming for around 90% billable to accommodate the days or weeks when they are out of the office.
5. Incentivize.
Making employees feel like they are a part of the entire company's success is essential to increasing productivity, improving morale, and building team cohesion. This starts with transparency and extends into incentivizing performance. First people need to know the targets. Second, they need to understand how these targets were set and how they impact the success of the firm. Third, you need to create an incentive program that rewards people for achieving their goals and which aligns with successful firm performance.
When goals are reached by individuals and teams, consider providing bonuses or extra privileges to highlight their success. This can be extra time off, a team-wide party or event, or even cash bonuses. Tying these to trackable data makes these sorts of incentives objective and aligned with actual performance rather than subjective bonuses. It is something that individuals can control themselves.
There are some things to consider though. When you incentivize something people will work towards those goals, often at the expense of other things. So make sure they are causing the right sort of behavior. For example, if you set a high Utilization Rate target, then people will spend more time on billable work. Sounds great? Well what that might do is cause people to not work on marketing activities or business development tasks. They may put extra time on a project when there isn't enough fee to pay for that time. Or some people may not pursue new training or professional development opportunities because that time isn't billable. All of these non-billable things are vital to the long term success of your firm and for individuals. Make sure that any incentive structure is set up that aligns with both short and long term goals for your business.
Boost Employee Utilization with BQE CORE
Developing effective employee utilization rate targets is a process that will take some time but will result in a stronger bottom line for your business. By managing expectations, tracking time, analyzing your employees' data, setting reasonable goals, and incentivizing your teams' billable hours, you can capture lost productivity, identify gaps and potential areas of growth, and realize greater profitability.
To get the most out of your employees’ utilization, an all-in-one software like BQE CORE will help you see your projects and time data in real-time so you always know how your team is performing and how you can make adjustments to improve. Features include time and expense tracking, project management, accounting, billing, and more. By integrating these into one platform you have seamless data flow between various parts of your business. This enables less manual entry, more accurate reports, and better insights needed to make smart business decisions.
Try a free demo today to see how BQE CORE can help you analyze and maximize employee utilization rates and run a more efficient and profitable business.
