One of the main responsibilities of any project manager is to track project resources so they’re available whenever they’re needed. To do so, they must measure resource utilization. By calculating resource utilization, project managers and employers have a better idea of how to schedule resources such as labor or equipment to minimize costs, increase productivity and meet customer demand.
What Is Resource Utilization?
Resource utilization is a resource planning metric that measures the utilization rate of resources over a period of time, which allows project managers to identify under or over-allocated project resources.
There are different methods to measure resource utilization, but most project managers use project management software like ProjectManager to facilitate this process. ProjectManager has Gantt charts, timesheets, workload charts, dashboards and other resource management tools. Get started today for free.
Resource utilization is often confused with resource allocation, but they’re two very different resource planning concepts. Here’s how they differ.
Resource Utilization vs. Resource Allocation
While resource utilization is a measurement of how resources are being used, resource allocation refers to the process by which a project manager picks his or her team and assigns resources for tasks throughout the project life cycle. This includes any reassignments and changes to their team’s workload as needs arise.
How to Calculate Resource Utilization
Even though there’s only one definition of resource utilization, there are different utilization rates to measure which can be used for different resource planning purposes. Here are the main resource utilization formulas.
Utilization Rate Formula
Utilization rate = Total Billable Hours / Total Available Hours
The utilization rate formula is used when project managers need to assess how profitable their resource utilization is which is done by comparing billable hours against the total available hours of a worker.
Billable hours are labor hours that are charged to a client once the work is completed. Usually, project managers should aim for a utilization rate of 0.8 or 80 percent. This is done to guarantee a high billable resource utilization while leaving some room for employees for a healthy life-work balance. On the other hand, a high non-billable utilization indicates that the team is spending too much time on non-critical tasks.
Capacity Utilization Rate Formula
Capacity Utilization Rate = Total of all employees utilization rates / Total number of employees
Once you’ve identified the utilization rate for individual team members, you can calculate the resource utilization rate for your whole team. This is done by using the capacity utilization rate formula, which is an average of your employee’s current utilization rate.
Optimal Utilization Rate Formula
Optimal Utilization Rate = Resource costs + Overhead costs + Profit margin / Capacity utilization rate
The optimal utilization rate formula balances your resource costs, overhead cost and profit margin with your capacity utilization rate.
Ideal Utilization Rate Formula
Ideal Utilization Rate= Resource costs + Overhead costs + Profit margin / Total available hours * Ideal billable rate
The ideal utilization rate formula balances your resource costs, overhead cost and profit margin with your total available hours and ideal billable rate, which is the price you charge customers.
Why Is It Important to Calculate Resource Utilization?
Knowing your resource utilization is very important for resource scheduling, costs and making decisions such as adjusting your project plan, budget or schedule. Resource utilization also provides visibility into your project. The more transparency and the better you monitor your project, the less likely it is that you’ll miss important steps. This allows you to catch risks before they develop into problems that could sidetrack you.
All of this means that you’re going to get more bang for your buck—or in business terms, ROI. If you’re making sure your resources are not overtaxed or overused, then you’re going to work more efficiently and add money to your bottom line.
Also, measuring resource utilization is important for the resource management process at large, as it’s needed for resource leveling, resource scheduling, resource planning and resource smoothing.
How to Improve Resource Utilization to Be More Productive
Here are some tips to help you streamline your resource utilization process so your project team can achieve more while avoiding burnout.
1. Define Billable and Non-Billable Hours
The first step to measuring resource utilization accurately is to define the billable and non-billable activities that your project team will execute. Once you define that, you can calculate overall utilization, billable utilization and non-billable utilization.
2. Determine the Available Hours of Each Team Member
Now you’ll need to determine the available hours for each team member based on their contracts, which can be either full-time, part-time or unit pricing, among others. Now you have the information you need to assign work and use timesheets to keep track of resource utilization.
3. Use Timesheets to Measure Resource Utilization
Timesheets are an essential tool to measure resource utilization because they let you document your team’s time, use resource utilization formulas and measure your overall resource utilization.
4. Use the Resource Utilization Formula
Based on your needs, you can choose to measure billable, non-billable or strategic resource utilization. Simply use the resource utilization formulas above to measure your resource utilization.
5. Determine the Employee’s Productivity
Based on your resource utilization analysis, you can determine which workers are overallocated, under-allocated and which of them have a low performance based on a peer comparative analysis and the work they’ve done in terms of deliverables.
Benefits of Managing Resource Utilization
As we’ve discussed above, tracking and managing resource utilization is important for both businesses and projects. Here are some of the main benefits you can get from effective resource utilization control.
- Have a clear picture of your resource availability and resource capacity
- Determine who’s over and under-allocated and distribute tasks more evenly
- Identify bottlenecks and remove them to improve your team’s productivity
- Avoid burnout by properly dividing the work among team members
- Increase profitability by focusing on billable tasks
- Optimize your resource utilization percentage for a better return on investment (ROI)
- Allocate resources strategically so you can complete tasks faster and increase production output
Resource Management Templates
We have dozens of free project management templates to help you manage your projects. Here are three templates that are helpful when measuring resource utilization and can help you with your resource management needs.
Resource Management Plan Template
Our free resource management plan template is a great tool to document your team’s work hours and keep track of them on a timeline. You can customize it as needed and then use it as a downloadable Excel file or import it to ProjectManager so that you and your team can access it anywhere, anytime.
RACI Matrix Template
A RACI matrix is an ideal tool to get an overview of your team member’s responsibilities, defining their responsibilities, accountability and roles in the project. Our free RACI matrix template is a great place to start with your resource utilization analysis process.
Dashboards are a great way of monitoring your project’s health from a high-level perspective. With our project management dashboard template, you can monitor costs, workload and tasks, making it a great tool to keep track of resource utilization
How ProjectManager Calculates Resource Utilization for You
Using different equations to calculate your resource utilization takes time. Wouldn’t it be great if there was a tool that automatically made those calculations so you don’t have to? ProjectManager is an award-winning project management software that does just that.
We have a full suite of project management tools that are integrated together, allowing you to share data and stay within the same program to manage your project. One essential feature is our resource management software that allocates resources and lets you track their costs while giving visibility to the availability of your team. You can even balance their workload, all from one tool.
Here’s how it works. Because our software is online, all of your data is up to date, helping you make decisions with real-time information. You can always see who’s working on what with our team management page. There, you get a list of team members with details on their tasks, due dates and their progress.
Before you can know who’s doing what and start assigning tasks, you need to map team member availability. You can set this up on the team management page, which allows you to determine your team’s working days, holidays and paid time off. This can be done if your team is on-site or distributed anywhere in the world with our global holidays feature.
Online Gantt Charts
Once you’ve blocked out your team’s availability, you can allocate the resources on the online Gantt chart. From this project view, you can also assign team members tasks by seeing how many hours they have to do their job. Note whether they’re over or under-allocated and even get estimates on resource costs.
Robust Resource Management Features
The bread and butter of our resource utilization software is the workload page. Here, you get a color-coded workload chart to check if your team members have too many or too few tasks assigned to them. No resource utilization equations are necessary. Best of all, if you want to balance their workload to add productivity and avoid burnout, simply reallocate right from the workload page. Don’t worry if you’re managing many teams, you can filter the page by project, team or date.
Related Resource Management Content
There’s so much more that ProjectManager can do to add efficiencies to your project. We have timesheets that automatically update as teams work on tasks so you can track their hours. There’s also a real-time dashboard for high-level views of progress and one-click reporting to get deeper into the data. Plan, monitor and report with one tool. See how it can help you become more productive by taking this free 30-day trial today.