When you have a flat tire, it’s either a slow leak or a blow-out. Just knowing you have leaks in your billable utilization is only half the battle; if it’s not a gaping hole you can see, you need to identify the slow leaks before they become a gaping hole in your revenue.
Many Service Managers will tell you, “I know our billable utilization numbers could be higher”, but when asked specifically where the leaks are, they offer anecdotal answers and struggle to provide specific details.
And that’s the real challenge. You need to know specifically where the billable utilization problem is coming from or you can’t easily stop the leak.
Most IT Services organizations don’t have universal billable utilization problems. It’s not like the equivalent of a golf ball sized hole in the car tire. Instead it’s a slow, hard to see, persistent leak. It would be a straight forward process to plug the leak(s), if they were just visible.
Start by looking for your billable utilization leaks!
1) Do I have a billable utilization problem across the company, or just with certain customers?
2) Do I have a billable utilization problem with certain Project Managers, or just when they work on particular types of projects?
3) Do I have a billable utilization problem with certain resources, or only when they do certain tasks?
Identifying billable utilization leaks by customer, project manager or resource provides the foundation for corrective actions.
Take Corrective Action and Pump up the Billable Utilization Process
Start with the Sales and Quoting Process
Some customers are better than others at getting the sales person to drive down the labor estimate before the order is even placed. So even if it’s a T&M job, there’s pressure on the implementation team to at least come close to the original estimate. That pressure often causes the implementation team to “throw things in” that would otherwise be billable change orders. Fixed fee projects just compound this issue. Performing a detailed comparison of Services estimates to Services actuals and grouping projects together by customer, will allow you to determine if you need to “have a little talk” with some of your Sales Reps about some of their customers.
Project implementation teams often get blamed for low margin projects, or low billable utilization rates, but sometimes the cause is an upstream quoting problem. That problem is seldom universal. It’s frequently tied to a specific rep and to a particular customer.
Look at Project Management
Some customers are not universal billable utilization problems; they may just pick on certain Project Managers or certain implementation resources. In order to uncover that fact, as per above, you need to be able to filter projects by customer, and then group them by PM. If you see large variations between Services project margins within the same customer, when managed by different PM’s, then you can determine if you need to provide more support for certain PM’s when having change of scope discussions with certain customers, or just keep them away from projects for that customer.
Address Resource Issues at the Source
Implementation resources are almost always better at some tasks and struggle with others. But, in order to identify the tasks that they’re struggling with, you need to have a standard for how long a task should take and measure and compare the actuals (by resource) for those tasks. This will allow you to provide targeted training for resources who struggle with particular tasks, or to stop assigning them those types of tasks.
If you have a consistently unprofitable customer, a bad PM, or an incompetent implementation resource, then go your separate ways. But, like the golf ball sized hole in your car tire, billable utilization leaks are hardly ever that visible. Getting to the source of those leaks so you can plug them, means taking the time to drill a little more into the details.
