Improving your company's bottom line
Improving the bottom line is very important. So what can be done by professional service firms to improve their bottom line? Over the next few weeks, we are going to explore the why and the how to improving your processes and efficiency which will in turn improve your bottom line.
Companies often look to their chargeability – the extent to which hours worked can be allocated to projects of paying clients. However, very few firms can be 100% chargeable, so the tracking and measuring of your utilization is likely to be far more impactful and meaningful. But what even is utilization, what makes it important and how can it be improved?
Utilization is a measure of the extent to which fee earners are actually chargeable. It is the measure of how many of those chargeable fee earner hours are charged to those clients and for what. So it is the ability to manage your single most important asset - time.
The key to improved utilization is not just about maximizing the number of chargeable hours worked. Improving utilization starts with knowing what the most appropriate level of utilization is – which as we shall see could be lower than current rates.
In my experience, few organizations claim to have utilization pegged at precisely the optimum rate. So a key driver for PSOs at a pan-organization level is to make small improvements in utilization that will make a positive impact on overall levels of chargeability – and in turn profitability.
It’s also about having systems and process in place to record and input chargeable hours accurately to the correct clients and projects, giving project owners the ability to track project performance and plan resource allocation – as well as monitoring and reviewing in real time so that adjustments can be made quickly.
As well as monitoring resource utilization on current projects, we need to anticipate utilization on future projects. We also need to know when chargeable resources are likely to be on the bench (i.e. not deployed to chargeable projects). Armed with this intelligence we can plan to redeploy those resources at the right time to other chargeable work.
So, we need to look at the path to optimal utilization. And the way to get to this path is to have a central, current and details view of which resources are deployed on which projects and tasks, for which clients – and most importantly, for when and how long.
What’s needed is a high level of confidence that resources are deployed effectively and utilized efficiently and to do that you need to know what you are doing currently. We’ve highlighted a number of categories to help you determine how you are utilizing your resources.