Best Practices to Measure Resource Utilization

Introduction to Resource Utilization

When discussing a program manager skill or a project manager skill, it is important to understand the outcomes of practicing such key skills. This will not only benefit the manager, but will also benefit the organization that employs them.

The role of a program manager is to bridge gaps between projects, and the role of a project manager is to entirely take care of the project. To take care of a project, managers must be capable of handling complex tasks and also handle the resources, like budget, time, team members per project, tools, and many more. One such concept of skill required for a project manager is to know how to cleverly optimize resource utilization.

It all falls on the project manager’s responsibility to optimize and track the utilization of the resources so that they are always available whenever they are needed. By clearly calculating the resource utilization, project managers not only make sure to stay within budget but can also help employees have an idea of the resources available, which can keep them productive.

What is Resource Utilization in Project Management?

As the term itself suggests, "Resource Utilization," is the method of measuring the metric of resources being used for a project for a certain amount of time. By doing this, project managers can ensure the proper allocation of resources by overlooking an over-allocation of resources. These resources may also include the time spent, amount of money consumed, tools allocated, and other such elements.

Despite focusing on every project resource, resource utilization instead focuses on the amount of time spent on a project by the team members. Though there are many methods to measure resource utilization, there is a simple and common method that uses a simple formula to measure it. The number of hours worked divided by the total number of hours allocated to the team results in the resource utilization metric. For a percentage, just multiply the result by 100.

Calculating and Measuring Resource Utilization

Though there is just one simple formula to calculate and measure the resources utilized, there are also different rates that one can measure out of the utilized resources to determine a brief and described metric result. To describe a single team’s metric, the simple formula would be more than sufficient, but to measure the metrics for the entire organization, there are a handful of formulas that you have to notice.

The following are some of the different utilization rates that you can measure for your organization:

– Team Utilization Rate Formula

As discussed, the formula for measuring team utilization rate is a simple formula that helps calculate the basic utilization.

Team Utilization rate = Total Billable Hours
                                        Total Available Hours

This metric helps project managers determine the profitability of the resource utilization that is being done with a project team by comparing the numbers of total billable hours with total available hours for a project.

The billable hours refer to the labor hours the project basically consumes, while the available hours refer to the time assigned to successfully complete the project.

– Capacity Utilization Rate Formula

Capacity utilization can be measured once you determine the utilization rate of each team member. The capacity utilization rate determined the number of team members being used for a project. This helps to ensure that the organization's capacity is not underutilized.

Capacity Utilization Rate = Team Utilization Rate
                                                Team Availability Rate

In simple terms, to measure the company capacity utilization rate, divide the total team capacity availability rate by the total team capacity utilization rate.

– Optimal Utilization Rate Formula

Now, making use of the obtained matrix values, we will be determining more utilization rates. This helps balance your project resources more efficiently by analyzing the overhead cost, resource cost, and profile margin for a project within the available resources of the organization.

Optimal Utilization Rate = Resource Cost + Overhead Cost = Profile Margin
                                 Capacity Utilization rate

Since there is no way to increase the daily working hours just to finish the project, project managers or the project management team achieve this very cleverly by measuring the optimal utilization in project management.

– Ideal Utilization Rate Formula

Ideal utilization rate is the best way to describe the ideal relationship by comparing the obtained metric amount and the companies’ costs.

Ideal Utilization rate = (Resource cost + Overhead cost + Profile Margin)
                                  (Total available hours * Optimal Utilization rate)

These utilization rates are the key metrics that provide access to quality performance for every team member. When clearly optimized with high utilization rates, it can help customize operating costs to increase profits. This indicates that low metric rates indicate the possibility of problems in the process.

Practices for Resource Utilization in project management

After all these discussions, it might now be clear that resource utilization is all about optimizing the time spent by the team and team members on various project tasks and activities. Making use of certain formulas will make things easier to analyze and more efficiently optimize resources to increase team productivity and company potential.

Instead of frequently trying to correct and adjust resources depending on the circumstance, resource utilization rather focuses on designing more strategic approaches that help minimize the frequency of resource imbalances.

Here are the five best Resource Utilization Practices every project manager must look into:

– Begin by designing a resource reserve.

It is best recommended to first design and assemble all the resources into a global inventory of available resources just to make sure that the scale is manageable. This will help you see what resources are available and what resources would be needed for the project to continue. Doing so also helps you determine impactful resources within the resource inventory.

– Allocate Resource with Control and Flexibility

Since the requirements keep changing for every type of project, it is important for project managers to understand the necessity for control and flexibility over resources. In accordance with the availability and the need, resources must be allocated, making sure to maintain control over the resources and keep them flexible.

This helps in determining overall capacity, which helps foresee and compare the project demand with the current workload.

– Design a Detailed Project Plan

Though, in the majority of cases, the project phase begins with planning, it is not necessarily recommended to do so. By clearly understanding the availability of the resource, project planning becomes easier to build and customize since there is a chance for flexible resource control.

The most effective and successful approach to designing a realistic, working project plan is to create an inventory to assign resources to individual projects and to individual team members after creating a work breakdown structure.

– Schedule Resources

It is always nice to schedule resources when there is a requirement to deliver a project. Be it an early or on-time delivery, it is always good to keep things scheduled in advance, only to make sure that all the resources are utilized properly and to deliver the project with good quality.

Time-consuming tasks like these can be more efficiently done and save time when done using software tools. Cloud-based project management software can also be used to keep all the tasks and resources updated.

– Tracking

To understand the flow of resources for the project tasks and activities better, it is important for project managers and project leaders to keep track of and constantly monitor the availability of resources. This is to balance resources according to the situations, help reschedule resources when required, and update the availability automatically.

Conclusion

To conclude with this article, it is clear that resource utilization is again one of the most needed project management skills that every project manager must practice.

Project managers are responsible for overseeing a project thoroughly, whereas program managers are responsible for bridging gaps between projects. Project managers need to be able to manage complicated tasks as well as resources, including budget, time, team members per project, tools, and many more.

"Resource Utilization" is a technique for gauging how well resources are being used for a project over a specific period of time. By avoiding any over-allocation of resources, project managers can guarantee the appropriate distribution of resources. These resources may also include the time invested, money spent, tools allocated, and other similar components.

To learn more about project management skills and the role of project managers, enroll now in the CAPM (Certified Associate Project Management) Certification Training Course and get certified by PMI.

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