In today’s competitive landscape, professional services firms continuously seek ways to enhance their operational efficiency and financial performance. This is where maximizing billable utilization comes in handy, as it enables firms to optimize consultant productivity, boost cash flow, and minimize billing loss.
However, most service firms continue to use legacy tools that often lack real-time visibility into the project pipeline and the workforce. This lack of foresight makes it challenging for them to track the billable hours of the consultants. It becomes even more concerning when professionals work from the client’s site.
The absence of visibility into consultants’ schedules can lead to improper allocations, under/overutilization, skills mismatches, etc., impacting the firm’s operational efficiency. Moreover, it compromises service delivery and negatively impacts profitability. Therefore, PSOs must proactively implement effective strategies to track and maximize the consultants’ billable utilization levels.
This blog elucidates best practices that enable professional service organizations to enhance profitable utilization and how SAVIOM’s ERM tool can help.
Let’s begin!
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Importance of maximizing billable utilization in professional services firms
In professional services organizations, billable utilization is a key performance indicator (KPI) that shows the percentage of time a consultant spends on revenue-generating tasks. Hence, it is essential for service firms to maximize the billable utilization of consultants to maintain profitability.
Besides, maximizing billable utilization aids in better resource planning and allocation. It allows firms to understand the capacity and availability of their workforce, enabling them to assign resources effectively to various client projects.
Moreover, since PSOs invoice their clients based on the overall billable hours, enhancing profitable utilization enables them to generate more revenue and improve their cash flow. This, in turn, enhances the business’s financial health index.
Furthermore, when consultants are regularly allocated to billable tasks, their productivity and engagement increase as their work contributes to the firm’s financial success. This helps PSOs optimize resource efficiency and maintain a healthy bottom line.
Lastly, maximizing billable utilization ensures that projects are completed within the timelines, leading to greater client satisfaction and better competitive advantage in the market.
Now that we know the importance, let’s delve into the best ways to maximize billable utilization.
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5 ways to maximize billable utilization in PSOs
To enhance profitable utilization of the workforce, professional services organizations can implement the following methods:
2.1 Define utilization targets for consultants ahead of time
Most PSOs leverage internal and external professionals to meet client requirements. To effectively manage this blended workforce, managers must set and monitor utilization targets for all consultants. This will help them prevent rational inefficiencies, avoid performance evaluation challenges, and maximize billable utilization.
For instance, on-demand consultants are recruited hourly for short-term projects. Therefore, their billable utilization target can be set to 100%. Meanwhile, the target for a permanent consultant can be set between 80-85% to balance their time spent on billable and non-billable tasks. This way, PSOs can optimize the productive utilization of their workforce and ensure seamless project execution.
2.2 Allocate professionals to stretch assignments regularly
Stretch assignments are short-term projects or tasks beyond a consultant’s existing skills and knowledge. Managers can identify and allocate suitable consultants to these assignments periodically to help them build new skills and competencies. This will help firms to equip their workforce with in-demand skills and expertise.
For instance, a construction firm requires civil engineers skilled in MATLAB and Rhinoceros 3D for future projects. For this, managers can identify resources who can be trained for these skills and provide them with stretch assignments for a specific period. Based on the consultants’ performance, managers can consider them for pipeline projects. This will help the resources build secondary skills and diversify their portfolios.
2.3 Mobilize consultants from non-billable to billable tasks periodically
When consultants are frequently allocated to non-billable activities like BAU, training, etc., they don’t generate revenue for the service firms. Therefore, the resource managers must monitor and mobilize the professionals from non-billable to billable work periodically. It maximizes overall productive utilization and improves profitability.
For instance, an IT firm has a team of cybersecurity engineers whose primary job is to build secure systems, networks, and applications. After a performance evaluation, managers identified that these resources spend an average of 30-35% of their time on tasks like data entry, email management, internal meetings, etc. Therefore, managers can mobilize them to billable or strategic work to improve their billability.
2.4 Maintain a balanced mix of contingent and permanent professionals
Most PSOs experience seasonal demand fluctuations throughout the year. To address this evolving demand effectively, managers need complete visibility into future project requirements. They must foresee and assess if the pipeline skill requirements are one-time or recurring. Accordingly, they can create a balanced mix of contingent and permanent consultants to maintain a smooth operational workflow.
For instance, during the tax filing season, an audit and accounting firm receives a short-term project to review and verify tax papers. However, the existing professionals are already allocated to other critical assignments. Therefore, managers can leverage on-demand tax consultants for the project so that the permanent staff are not overwhelmed with work. This helps the firm maximize billable utilization while preventing the risk of burnout.
2.5 Promote multi-skill building opportunities for consultants
PSOs manage multi-faceted projects that require diverse skill sets. Since acquiring and maintaining a pool of niche-skilled resources is expensive, firms must ensure that generic consultants are well-equipped with multiple competencies to meet client demand. Thus, managers can facilitate training and development programs to help professionals learn new skills and enhance their existing ones.
For instance, an accounting firm needs financial analysts proficient in SQL for a pipeline client project. Since these skills are absent internally, the resource manager decides to conduct training for relevant professionals. This will help the organization meet the skill requirements and prepare the consultants to take up more dynamic projects in the future.
Thus, PSOs can maximize billable utilization by following these techniques. Now, let’s know the benefits a resource management software can offer.
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How does robust resource management software help?
Tracking and monitoring the billable utilization of the workforce in consulting firms can be challenging. However, by adopting modern ERM software like Saviom, managers can effectively maximize billable hours.
The tool provides 360-degree visibility into the consultant pool and their utilization levels. Multi-dimensional forecasting and capacity planning features help PSOs foresee demand gaps well in advance. Thus, it allows them to build and maintain a blended workforce. Moreover, the real-time competency matrix enables managers to identify suitable candidates for stretch assignments and training programs.
Furthermore, the color-coded heat maps and real-time BI reports, such as availability, utilization, forecast vs. actuals, etc., help identify and address sub-optimal utilization. Lastly, the open seat feature enables managers to publish open positions, and interested professionals can apply for the vacancies. Thus, it empowers consultants to pursue their interests and improves productive utilization.
Final thoughts
Improving the billable utilization of consultants is essential in professional service firms as it directly impacts their cash flow and revenue. By following the strategies mentioned above, along with a futuristic resource management tool, PSOs can utilize their workforce effectively and improve their overall financial health.
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