Every project team needs resources to complete tasks. They need tools, equipment, materials and more to get the job done. Managing resources throughout the project life cycle is critical for success, and measuring resource utilization is the first step in doing so.
Those who are tasked with managing a project and delivering it successfully must know how to keep their teams productive and make the most out of resource utilization. One of the most important aspects of this is proper planning and ensuring there’s enough time and capacity for project teams to do what’s asked of them.
In other words, project managers must hone the crucial skill of resource management. Your resources are more than just the team, and every resource plays a role in moving the project forward without obstruction. When you’re specifically talking about your team’s time, though, then you’re dealing with resource utilization.
What Is Resource Utilization?
In project management, resource utilization is a measurement of how many billable hours are assigned to a worker. Therefore, knowing your resource utilization is very important to understand your costs, and make decisions such as adjusting your project plan, budget or schedule.
Resource utilization is how project managers find out how much capacity their team has over a period of time, and ascertain which of their resources are under or over-utilized. It gives managers a window into how many hours their team is spending on the project. Resource utilization differs from resource allocation, and that difference is important to understand.
Resource utilization can be overwhelming without the right resource management tools. To measure resource utilization, project managers use software equipped with time tracking, task management and resource planning features such as timesheets and Gantt charts. ProjectManager has the ideal tools to measure, track and manage resource utilization. Get started for free.
Resource Utilization vs. Resource Allocation
Resource allocation is how 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.
However, resource utilization is more strategic in that it measures how effective your resources are. Ideally, you’ll organize your project with resource allocation and drive its success by measuring resource utilization and optimizing how you’re using your team’s time. Both processes work hand in hand, so it’s critical that you have a robust resource planning tool that can help you measure effectiveness.
Types of Resource Utilization
Even though there’s only one definition of resource utilization, there are different approaches to measure it that are used for different purposes in resource planning. Here are the most commonly used types of resource utilization.
When measuring overall resource utilization, project managers add the time a team member spends on all billable, non-billable and strategic activities that he or she is assigned and compares it against his/her total time available. This helps determine whether the team member’s time is being used entirely and how it could be better utilized.
Billable hours are labor hours that are charged to a client once the work is completed. Therefore, billable resource utilization is calculated when a client or project manager needs to determine the number of billable hours of a worker, excluding non-billable hours and strategic activities. This resource utilization method is very useful when gauging and comparing employee performance.
All of the activities that aren’t considered billable are categorized as non-billable. This method is used when project managers need to assess how efficient their resource utilization is. A high non-billable utilization might be a sign that the team is spending too much time on non-critical tasks.
Organizations have long-term goals which are part of their strategic plans. To achieve those plans, they need to execute strategic projects and programs. Strategic resource utilization measures the number of hours team members are spending on those strategic activities.
Now that we’ve learned about the different types of resource utilization, we can use resource utilization formulas to measure it.
Resource Utilization Formula
There are many formulas that calculate resource utilization. They’re used to get different insights and you can even create one to meet your resource management needs. The most commonly used resource utilization formula is the full-time equivalent formula (FTE):
Resource utilization = Worker’s Allocated Hours / Worker’s Total Available Hours * 100
This formula calculates the resource utilization percentage of each team member or the team as a whole based on the relation between their total available time and the hours they’ve worked. To measure the different types of resource utilization, simply change the worker’s allocated hours value to billable, non-billable and strategic hours.
How to Measure Resource Utilization
Today, most companies use project management software equipped with time tracking and resource management features to measure, track and manage their resource utilization at any point in time. Here are some general steps you can follow to measure resource utilization with the help of software such as ProjectManager.
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 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 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.
Why Is Resource Utilization Important?
It should be clear why resource utilization is critical to running a project, but it doesn’t hurt to dive deeper into the benefits of such a process. For one, utilizing your resources is key to staying productive in your project. If your team is overburdened, they’re not going to perform at their optimum level.
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.
Finally, the process of resource utilization gives project managers the tools to work more agilely. They have the flexibility to reschedule their resources fast, which means they can avoid problems or untangle themselves from issues quickly. It keeps the project on track.
Resource Management Templates
We have dozens of free project management templates to help you manage your projects. Here are three templates that are very helpful when measuring resource utilization and can help you with your resource management needs.
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.
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 cloud-based, 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, so you can assign them tasks, you need to map out their 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 Chart
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. 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 chart of every team member’s workload and whether they 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, just 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.
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. 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.