Definition
Resource utilization refers to the amount of time or effort that a resource, such as people, equipment, or materials, is being used to complete work on a project.
It is a measure of how effectively and efficiently resources are being utilized in a project to achieve specific goals. High resource utilization means that resources are being used to their maximum capacity, while low resource utilization indicates that resources may be underutilized or that there is room for improvement in resource allocation. Effective resource utilization is critical to project success, as it can help to minimize costs, reduce delays, and improve overall project performance.
The resource utilization rate is a very valuable metric in project management resource analysis; it can be calculated for every team member individually or for an entire team.
How is resource utilization calculated?
Resource utilization rate can be calculated by comparing the time your team spent working on projects or tasks with the overall time available to the team:
If the percentage is low, it means that your team members don’t have enough work. On the other hand, if the percentage is too high or over 100, someone is overloaded and you need to make adjustments asap.
Though this looks pretty easy to compute, the question of “time” arises. What kind of ‘time’ should we be calculating? Planned time or recorded time? It all depends on what your goal is.
For planning purposes, when you need to assess your team’s future workload you can use the formula with planned hours:
Planned resource utilization = Planned working hours / Available hours
If you’re looking at the historical data to understand what was the actual resource utilization of your team, use the formula that incorporates actual time recorded by each team member:
Resource utilization = Recorded hours / Available hours
Billable Resource Utilization is another metric that allows you to understand what percentage of available time you are billing your clients.
Essentially, it is a ratio between the total billable hours spent by each resource to their available hours and is calculated as a percentage.
Utilization Rate= Billable Hours / Available Hours
Tracking utilization metrics for your team can be tricky business. It tends to put people on edge because it makes them feel like they are being micromanaged. Make sure that you have a team meeting to discuss understanding resource utilization is so crucial for the overall business success. It’s vital to be clear about this from the beginning so that there are no misunderstandings and you get the best possible data.
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