After 15 years in the engineering and construction industry working inside major firms and consulting to others, I’m still astonished by how we engineers pay little to no attention to the science, and art, of management in carrying out our work. It’s not unusual to see brilliant engineers start failing once they are promoted to managerial positions or decide to start their own businesses.

The main reason behind this is that we don’t study or receive a formal training on how to manage business and others. It causes me a lot of pain to see companies and people with great potential perform less than average because of lack of management knowledge that can be easily rectified.

I’ve decided to start a series of articles to shed some light on aspects that are often overlooked by people managing operations whether it’s a complete organization or a team inside an organization. In this article we will talk about one of the biggest pain points for anyone managing a team which is utilization management. This is one of the most important KPIs for maximizing the profitability of an organization and it’s also one of the biggest fears of managers.

“We are not brining enough work to keep our staff busy and we will need to let some of them go” or “I have a lot of staff members but I can’t decide how much extra work they can take” or “The workload is much more than we can handle and we need to hire people but we can’t guarantee we will have work for them in the future” or “If we get this project, shall we hire people and do it in-house or work with a partner on some of it?”. These are some of the sentences I hear from clients that immediately trigger the question “What’s your current and expected future utilization rates?”.

In a nutshell, the data we collect should help us build something to visualize like the image below. Of course this chart can, and should be, broken down by function, department, weeks or quarters. The possibilities are endless all according to your needs.  

Many organizations now use ERPs (Enterprise Resource Planning software) that can extract these data from employees logging in their timesheets. Nevertheless, several issues are regularly observed that are hindering organizations from making the most of the data they have. We can summarize them as following:

1. Smaller size organizations usually don’t have the budget, or it’s not feasible for them, to invest in an ERP solution.
2. Data entry isn’t credible, not updated or the organization lacks the coordination between different departments to have the input data linked to each other.
3. Managers don’t have the expertise to interpret the results they are getting and to take the proper decisions.

The first issue can be resolved by building a simple MS Excel system that can serve the data logging needs and produce a quick and easy-to-visualize dashboard. This system of linked spreadsheets is easy and cost effective to develop and it’s totally tailored to your needs. Moreover, it’s easy to update and reconfigure once the shape of your organization or needs change.

The second can be resolved by setting up workflow procedures to ensure each department and person understands the importance of their roles in the procedure and have the correct processes that can guarantee credible data are being entered, updated and refined in a timely manner. It’s crucial in this stage to make sure that data requirements are clear to all parties in the process. Amount and level of details of data, principles of calculations and frequency of update are all factors that must be defined in the procedure to have a strong foundation to base our decision making process.

Now coming to the third and last obstacle, data interpretation and decision making. The whole purpose of this exercise is to monitor the utilization of the resources and take decisions to keep it at optimal level.

A good manager doesn’t necessarily have answers to problems but he must be able to ask the correct questions. Once you have all the data you should be asking yourself and your team:

• What is our target utilization rate?
• How are we breaking down the time of our resources between working on running projects, looking for future ones and developing the staff?
• Do we have enough reserve capacity for unforeseen work?

Ideally, the whole organization and each resource should be working at 100% utilization but the question is how will this 100% be distributed between working on running projects, looking for future ones and self-development? As you can imagine, there is no one right answer to this question.

Take an example of a large well-known organization working in an environment with solid practices and clients who keep schedules under control. This organization could opt for having 90% of the staff time working on current projects, 5% for supporting business development and sales team in securing new work orders and 5% for self-development.

On the other hand, a smaller organization, less known in the market and working in an environment where clients have no specific schedules shall be more cautious and plan for turbulent utilization outlook. In this case, the organization should be looking at allocating 75-80% of the time for working on running projects, 10-15% for getting new work and the rest for self-development. Moreover, this organization needs to work on developing a strong network of potential partners to be ready to support in case of an unforeseen increase in the workload.

Needless to say, these numbers are averages across the operations department and shall differ according to the specialty and seniority of each staff member.

Another factor to consider is the changes in internal resources such as leaves, resignations, new hires, etc … You need to be aware of what changes could happen to your internal resources and decide your mitigation plans for each case. Scenarios and back up plans are a necessity to have in place so you can activate them once your indicators start giving signals you are going in a certain direction.

If you need help in setting up a system to monitor and control your utilization, help you develop your scenarios and plan in the future reach out to me for a free consultation session and I’ll be happy to support you achieve your objectives.

Stay tuned for future articles giving insights on what engineers need to develop to better at management.