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Of all the metrics you need to track as a resource or project manager, resource utilization may be the most difficult.
It is hard to determine without the right resource management tool (we are looking at you, spreadsheets) and the right data (your team might need several reminders to fill timesheets).
When you calculate it, you might find that you’re well below your ideal utilization rate and losing money. Or you might find out that utilization is very high, and you’re burning out team members and spending extra on overtime pay.
But measuring and keeping on top of your utilization rates doesn’t have to be this challenging: the good news is that finding a balance between two extremes is possible… if you know where to look.
In this article, we share what resource utilization is, its benefits, and how to measure it—and we’ll give you two options to do it: the traditional way of calculating resource utilization using a formula and the Float way (hi, that's us 👋🏾). Both are tried and tested methods, but our customers like ours better because it helps them confidently and accurately track project resources and utilization levels in less time.
Read on to find out how it works.
What is resource utilization?
Resource utilization is a measure of existing bandwidth on a team. People planners and managers use this metric to plan projects effectively by allocating their team’s time relative to existing workloads—which means that proper resource utilization often has a significant impact on productivity and profitability.
(💡 Editor’s note: resource utilization in this context is all about humans and projects, not computer memory or disk space. If you’re here for stuff like that, sorry, you've taken a wrong turn.)
Let’s say you lead a team of UX designers at a full-service agency and want to know if your team is prioritizing the right tasks or if you’re at risk of running a project at a loss. You can easily look at a resource management tool like this and get a quick answer 👇🏾:
6 benefits of effective resource utilization
From gauging team health to prioritizing the right tasks, measuring team utilization has at least 6 major benefits:
- Utilization rates tell you whether team members have too much or too little to do so you can make informed decisions when assigning projects and distributing workloads.
- Tracking utilization ensures you prioritize your most important projects so the right people work on the right tasks at the right time.
- By showing the time spent on billable versus non-billable work, utilization rates help your company manage budgets effectively and make strategic decisions about new hires or reallocations.
- Understanding individual and team utilization rates can help you identify growth areas where team members might need more support or need to upskill.
- You can make strategic business decisions about which projects to take on and when to recruit more staff based on your current and projected capacity by tracking utilization rates.
- Recording and analyzing team utilization helps you put together actionable reports for stakeholders about company operations and project progress.
What is the ideal resource utilization rate?
Resource utilization rates show the percentage of your team’s time spent on billable tasks and how productive each team member is. In agencies and professional service organizations, these figures help team leaders determine if they are pricing their projects correctly to cover their costs and make a profit.
With that in mind, the ideal resource utilization rate really depends on the context of a project. This might not be the answer you are expecting. But…
An ideal utilization rate is hard to determine because it depends on factors like your industry, the number of projects on your team’s plate, seasonality, your organization’s goals, and the type of work your team does, to mention a few.
For example, if you run a marketing agency that handles advertising for clients in the retail sector, your team’s utilization rate is tied to product launches and retail seasons. Leading up to Black Friday or major end-of-season sales, your team could work on multiple campaigns to meet client needs, thereby increasing utilization. Fewer campaigns might occur during slower periods, potentially leading to lower utilization rates.
If you strictly follow a fixed utilization rate, like deciding that your team needs to be 85% booked at all times, several things could go wrong:
- Your team could get burned out when things get busy or not have enough to do during slower times
- You could accidentally stifle the creative process of team members by forcing them to churn out project deliverables consistently
- It might make adjusting to your projects’ needs hard because there’s no flexibility
- Your team might fill their time tracking spreadsheets with false data when they do not hit the target utilization rate
So what should you do instead?
A better strategy is customizing your team’s utilization standards to your context instead of adopting a universal benchmark.
Closely observe how your team operates, take note of the impact of varying project volumes on work hours, and record data on utilization using a resource planning tool so you can establish a personalized and preferably flexible utilization range that aligns with your team's needs.
Get the insights you need to monitor & improve utilization rates
Use Float to track how your team’s time is used and get the insights you need to improve your team’s performance and achieve optimal utilization rates.
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How to calculate resource utilization rate
In this section, we’ll go over 2 ways to calculate resource utilization—the first is using a formula, and the second is an automated way using a resource management tool.
Resource utilization formula
You can calculate your team’s utilization rate by dividing the number of scheduled hours by the number of available hours and then multiplying by 100.
Utilization rate= (Total amount of billable hours / Total amount of available hours) x 100
For example, if a designer on your team works eight hours a day for five days a week, the resource availability is 5 x 8 = 40 hours per week.
If 34 of those hours are considered billable time while 6 are left for other tasks (like administrative work), your calculation is 34 / 40 x 100 = 85.
The designer's utilization rate is 85%.
While this formula works, we can all agree that it is time-consuming to solve a formula each time you want to know the utilization rates of individual members, especially in a large team. Imagine repeating the same calculation for 100, 500 or 1000 team members 😨
Automated resource utilization calculation
A simpler way our customers use—and love because it saves them hours—is to look into Float.
If you’ve been tracking time or booking hours for project work, data about your team’s utilization is displayed in two places in Float:
1) The Report dashboard under the People Report, which shows the percentage values of your team’s utilization rates:
2) The Schedule view displays data about the team's scheduled hours, which you can compare with their available time:
Hot take: you can track resource utilization without timesheets
You don’t need to use timesheets before you can track team utilization. We’ve spoken to many customers who don’t track their team’s time but still use Float to ensure their teams are not over- or underutilized.
Take Emily Feliciano, a creative resource manager at Atlassian who increased on-time delivery from 40% to 90% using Float, for example. She relies on Float’s visual schedule to provide a clear picture of her team’s utilization.
“Unlike rigid timesheet tracking, Float allows for a more intuitive approach to managing tasks. It lets you work on both detailed and high-level tasks, providing a comprehensive overview. This is important for understanding team capacity and ensuring it stays balanced, avoiding both overwhelm and underutilization,” she says.
Using the schedule and capacity indicators like overtime alert, she can easily spot when utilization is too low or excessively high.
Emily also looks at assigned tasks to assess the actual workload of team members. This allows her to identify if someone with ten tasks is underutilized while another with just one task might be at risk of overutilization.
A real-life resource utilization example
At this point, you might be wondering what resource utilization looks like in the wild.
Enough theory; here’s a real-life example of how the capacity planners at Scholz and Friends, a Germany-based advertising agency, track utilization rates using Float.
Every week, they have a resource planning meeting in which they look at the Schedule in Float to see who is doing what. They use capacity indicators in Float to spot when a team member has too much work and needs support, such as freelance assistance. They check for underutilization by looking for team members whose time is not fully planned for the next week. They also check to see if a skill gap might have caused team members not to be assigned tasks and note the need for upskilling.
With this one weekly meeting and the use of a dedicated tool, the team can stay on top of utilization for 200+ creatives across several languages and countries. That’s a pretty solid improvement from their initial Excel spreadsheet!
Resource utilization goes hand in hand with capacity planning
You might try every trick in the book, but if you don’t plan your team’s capacity, there will be imbalances in resource utilization.
Capacity planning ensures the organization has the right resources available, and resource utilization tracks how effectively they are used in day-to-day operations. These processes go hand in hand.
Luckily, you can plan your team’s capacity and also keep tabs on utilization rates in Float. Give it a try by starting your free trial.
If you need to learn more about different options before making a choice, read our guide on capacity software tools.
Calculate your resource utilization rate, automatically
Reports in Float give you a single view of your team’s available hours (their capacity), compared to their hours scheduled (assigned tasks), to make data-driven resource decisions.
Get a free trial →Some FAQs about resource utilization
Despite sounding similar, resource allocation and resource utilization are two different areas of project management.
• Resource allocation is the process of assigning team members to specific activities to get a project completed. As the project progresses, managers monitor these tasks and shuffle the workload to other team members as needed.
• Resource utilization refers to the measurement of these efforts. A project manager can get a feel for their team ’s overall productivity and manage workloads, by tracking a team member's billable and non-billable hours.
Since resource utilization is all about optimizing a team’s productivity, it is crucial that projects and goals are scoped in a manageable way with a bandwidth buffer in mind. If a project is too ambitious, optimizing resource utilization can inadvertently lead to burnout and stress on the team. That’s why it is key to use resource utilization at the planning stage, maintain open communication with your team about their workload, and adjust where necessary.
You can improve resource utilization by:
• Conducting regular assessments to identify bottlenecks and inefficiencies
• Implementing robust resource management systems and tools
• Streamlining processes and workflows to optimize resource allocation
• Providing training and development opportunities to enhance workforce skills
• Encouraging collaboration and communication among teams to improve project coordination
• Continuously monitoring and adjusting resource allocation based on changing demands
