Intentionality
Above all else, the leadership at Modern Tribe aims to be intentional in our work. From how we approach our client work, to the development and management of our products, to how we treat and manage our team, to how we run the business end of our business.
We’ve seen growth in the size of our team over the last year. When we were smaller, it was easier to keep a solid grasp on who was doing what, and how much work they could put. As we’ve grown, and the volume of work that we output has grown, it’s necessitated a heightened dedication and systemization of how we approach utilization.
As we’ve defined these new systems for tracking and managing utilization, I now wonder how we survived with out them. No matter what size your organization is 100, 20, 5, or 1 – I’d encourage to entertain this exercise.
There’s a couple concepts that are core to how we look at this.
Capacity
How much work can each team member do? Simple right? Kyle works 40 hours a week so his capacity is 40 hours. Not so fast. He takes a couple breaks every day. He answers email. He jokes with his coworkers and catches up on the latest funny cat videos, not to mention vacations and sick days. You can choose to ignore these kinds of things and be happy with a lower level of utilization. We chose to spend some more time thinking through the details. Capacity is the time a team member is available to do billable work.
Utilization
We define utilization as the amount of work that we have scheduled for a team member at any given time. This includes any number of different ‘kinds’ of work. If it’s essential that a team member execute, or participate in it – it goes into our resourcing tool and is considered part of their utilization.
While you’ll have the desire to hit 100% scheduled utilization, it’s important to leave some space in your teams time to address any potential unforeseen things that might come up. If you don’t plan for the unplanned, you’ll find yourself constantly battling project management challenges to ensure your projects move forward at the pace you require. We generally find a utilization rate around 80-90% to be ideal. The % you target is directly related to how comprehensive your definition of capacity is. So our 90% may be the same as another company’s 70%. If you find yourself constantly resetting expectations, consider lowering your target utilization. Inversely, if your team is often twiddling their thumbs, it’s time to up the utilization.
Billable Utilization
This is the real magic. It’s not enough that your team is just busy. It’s essential that you manage how much time is spent on billable work in relation to capacity. Time spent on internal projects, research, personal development, and system building is all important, and they all show up as a type of utilization. If not tracked properly, it’s easy for an organization to let billable utilization drop dangerously low to focus on internal projects.
It’s worth noting that if you have projects that are running over budget, you need to acknowledge that working on them ceases to be billable utilization. This isn’t to say you can quit at that point – but if you want to monitor the health of your business you need to start tracking time on those projects as non-billable utilization.
We don’t do performance reviews based on billable utilization for individual team members. So people aren’t ‘punished’ for working on internal projects or for working on projects that are over budget (certainly there are other performance indicators tied to project success and budget that we do use to evaluate team member performance, but we don’t critique the front end developer if the strategist screwed the overall budget).
Target Billable Utilization Rate
At Modern Tribe, we call this “The Tuber” (or the Spud if you’re cheeky, or TBUR if you like lame acronyms). Your Target Billable Utilization Rate is how much billable productive time, relative to capacity, you need out of each team member to hit your goals.
If Kyle’s Target Billable Utilization Rate is 50%, I know that half of his utilization needs to be on revenue driving work. Or in plainer words, if he works 40 hours, and has an adjusted capacity of 30 hours (to account for whatever comes up during the week), he needs to spend at least 15 hours on revenue driving work.
Calculating your organization’s TBUR is complicated, and specific to the mechanics and finances of how your business functions. You’ll have to account for your overall cost of operation, your billable rate (or billable value relative to time), and for your revenue and profit goals. If you have calculated your TUBR correctly, accounting for your goals – you can monitor how profitable your team is at any given point. This enables you to make strategic decisions about what your team is doing, what kinds of projects to take, and how much internal strategic development you can execute on – without sinking the ship.
We’ve started tracking target billable utilization for everyone in the company. Each member of our team is valuable, regardless of where we have their target billable utilization rate set. In general, the more senior team members tend to have lower target billable utilization rates. The senior team often provides value to our company outside of directly billable or revenue driving work. Defining new systems and workflows is extremely valuable and makes our company more profitable overall, but reflects on our balance sheet as non-revenue driving work.
They say, what gets measured gets managed.
Hopefully, it’s clear how effective tracking and monitoring of billable utilization can ensure a healthy company. Once you’ve determined the ideal Target Billable Utilization Rate for your team, the next challenge is to track and report it. But that’s another story for another time.
Potato pic courtesy of 16:9Clue
