Improved staff allocation can boost utilization rates and a firm’s overall financial performance.

Numerous factors ultimately determine the profitability of professional services firms, such as civil engineering firms. While changing market conditions, client decisions, and other external factors are out of a firm’s control, project and resource management are not. Every firm should strive for continual improvements to these two crucial areas for success.

As firm managers take an introspective view of how they manage the integrated and iterative nature of projects and resources, chances are they have more internal processes focused on project management than resource management—meaning how professional staff’s time is allocated to billable work. If this is true at your firm, it might be valuable to ask yourself why. Is there less to be gained from a profitability perspective through resource management? Is there not a good software solution to support resource management processes?

Perhaps one reason for less focus on resource management is the commonly used metric of resource utilization. For the purpose of this article, consider it the ratio of a resource’s billable work to total work. Project management metrics, such as budget overruns or AR, are measured in dollars, which can easily be linked to an impact on profitability. Utilization is measured as a percentage, which is more difficult to translate to dollars and thereby impact on profitability. To emphasize this point, off the top of your head can you answer the question "What would a firm-wide 2 percent increase in utilization mean to your firm’s end-of-year bottom line?"

The answer may surprise you. Consider this: If a 200-person civil engineering firm has an overall utilization of 65 percent and an average billing rate of $70 per hour, it would have revenue from labor of $18.9 million. If it increased utilization to 67 percent and kept constant everything else, such as costs and overhead, it would have revenue of $19.5 million. That’s a $600,000 positive impact to profitability. Regardless of whether 65 percent utilization is above or below this firm’s break-even utilization rate, an increase of 2 percent utilization leaves them $600,000 better off than before.

Factors such as employee overtime and success in selling new work will certainly result in utilization increases, but there are also likely associated costs. Driving a utilization increase through more focus on the resource management process can result in significant positive impacts to profitability without associated costs.

Manage the future
In today’s service-based economy, a worldwide market that is expected to reach $25 billion by 2010 according to industry analysts, managing projects and resources has become increasingly complex and dynamic. Enterprises continue to seek solutions that consolidate and streamline processes in the interest of improving overall performance.

From a resource management process perspective, it’s worth asking the question: Could we cope better with these variables through more focus on the resource management process? Too often, the utilization metric is looked at from more of an historical rather than future-looking perspective. The value of the metric is greatly diminished if only used to tell us where we’ve been, rather than where we are going. A clear picture of future workload demand and capacity is needed to enable the right decisions today about future resource demands. Potential problems with over/under utilized resources three months out can be solved before they occur and in a manner that maximizes firm-wide utilization.

Software solutions combined with internal processes that capture future work assignments at the resource level are now helping firms stay forward-thinking and yield both project and resource management benefits. On the project side, "estimate at completion" budgets are updated as resource assignments change and can be evaluated against baseline budgets to project potential project overruns. From a resource management perspective, software solutions are bringing more focus toward what resources will be working on and when. This increased focus and visibility is what can lead to the percentage point utilization gains mentioned earlier.

Benefits beyond utilization gains
But beyond just increasing the utilization metric, a well-tuned resource management process lends insight into the art of balancing work demand and resource capacity. Firms can identify upcoming bottlenecks that can impact a project deliverable or, worse, the completion of the overall project.

Key to enabling a more successful process is an aligned software tool that allows for easy recognition of which resources are over- or under-utilized. The software should also drive actions required to resolve the utilization problem. Managers across all levels of the company need a clear and graphical view of all resource allocations, including problem spots that require attention.

Within all firms, to some degree, there are meetings and conversations about people and projects. Imagine how powerful it would be if these conversations were being driven by a real-time view of your projects and the availability of specific resources for the coming week or month. Imagine having the ability to shift resource allocations and seeing the impact to an employee’s future utilization and project estimate at completion budgets change on the fly. Software tools support this powerful functionality.

Better visibility into future resource demand and capacity goes beyond just making project and staffing decisions. It can bring more confidence to your hiring decisions. It is much easier to take on the risk of more staff if you have clear, reliable information supporting your increased demand, and have the ability to run multiple scenarios based on anticipated future work.

Choosing the right solutions
Ideally the software you choose should be an integrated solution with your firm’s enterprise software that would cover how you enter time and expense, employee skill sets, employee billing rates, and other variables, all in one real-time display.

Some software solutions for project-focused firms can offer stability, scalability, and compatibility with outside applications and third-party tools. Previously, complex coding was needed for new system installation and additional software or ActiveX controls, plug-ins, and applets were required for systems to function properly. However, when no software is required for end-user workstations, access is simple and upgrades are easily installed.

Some systems are easily configured to meet the unique requirements of project-based organizations. Firms with regional offices operating in different time zones seek web-based accessibility to financial and project data from anywhere in the world as a key component to staying updated. This can all be supported.

If your current resource management processes do not include a web-based software solution integrated with your business management system, consider deleting your Excel files, relegating your whiteboards for motivational messages, and not sorting your resources in your head. Instead, focus your attention on what resource management software could offer your bottom line.

Jeff Eckerle, P.E., MBA, is a product director with Deltek. He can be reached via e-mail at jeffeckerle@deltek.com.