TACE: what are the challenges of the activity rate excluding vacations?

What is billable utilization rate?

Definition and formula

TACE (billable utilization rate) stands for Taux d'Activité Congés Exclus.

✏️ Synonyms for TACE: utilization rate, resource planning rate.

This is a human resources management indicator which measures the rate of activity spent on billable activities on the basis of total availability (excluding periods of leave, sick leave, etc.). 

The billable utilization rate is generally expressed as a percentage, and is calculated by dividing the number of hours worked on billable activities by the number of theoretical hours available after deduction of time off.

It is used by companies, particularly consulting firms and IT Services , to assess the performance and profitability of employees or teams.

It is used to make resource management decisions.

What's the difference between billable utilization rate and TACI?

Unlike billable utilization rate, TACI ( Activity Rate with Leave Include ) takes absences into account. 

The formula for calculating TACI is as follows: 

Although the TACI can vary greatly from one month to the next due to vacations, it allows a closer reading of the invoice.

For companies working on a time-and-materials basis, it can be interesting to monitor this indicator to better understand the results in terms of sales for a given project.

However, this indicator is less widely used in practice than the utilization rate.

Why track billable hours rather than all activity?

This approach to billable utilization rate, which measures billable activity, is particularly important in IT Services, consulting firms and agencies. These companies pay their employees' salaries each month, which represent fixed costs.

For the business to be profitable, each employee needs to spend a certain percentage of his or her time on a billable activity, i.e. one that generates sales, otherwise the business will not be profitable. 

It is therefore a major standard indicator for all companies that sell consultancy work or projects to customers: consulting firms, IT Services, agencies, design offices, architectural firms, accountancy firms, etc.

Why is billable utilization rate so important in project management?

The billable utilization rate as a project performance indicator offers several advantages.

The benefits of billable utilization rate

• Enhancing real productivity

The  billable utilization rate measures an employee's activity by taking into account periods not worked. This provides greater reliability in terms of actual activity, and is a better indicator for comparing results.

An indicator that only looks at the number of days produced during a given period, for example, will penalize employees who have taken time off during the period in question. 

The utilization rate 's representation of production is therefore more objective.

• A sign of the unequal distribution of work 

The billable utilization rate also enables us to identify employees who are overloaded and those who are underloaded. In either case, an uneven workload penalizes productivity.

Overload can lead to a decline in the quality of work and employee well-being. Underloading, on the other hand, can lead to a drop in business profitability and dissatisfaction on the part of employees, who risk losing interest in their tasks.

• A benchmark indicator

The resource planning rate makes it possible to measure performance over time, since each period is comparable. It can then be used to monitor and analyze individual or team productivity according to project type or period.

This is a valuable source of data for planning future projects, or for improving operational efficiency.

Utilization rate : what are the limits?

However, billable utilization rate as a performance indicator also has its limitations. 

• The complexity of follow-up

Without the help of a tool that calculates the billable utilization rate automatically, it's not always possible to differentiate between sales-generating and non-sales-generating activities.

For example, employees may spend time explaining or training other employees, or they may be active in sales activities. We need to be able to measure the time spent on this type of activity, which nevertheless serves the company but should not penalize the billable utilization rate.

Only an appropriate time and resource planning tool will enable these calculations to be made automatically.

• An indicator that cannot stand alone

The billable utilization rate does not measure the quality of employees' work or their contribution to achieving the company's objectives.

Performance must be analyzed in conjunction with other indicators that complement the billable utilization rate.

Certain external events, beyond the control of employees, can disrupt the billable utilization rate results. These external factors are not necessarily taken into account when readjusting the results, and penalize the reading of employee performance.

• An indicator ill-suited to package sales

In the context of a project sold at a fixed price regardless of the work carried out, the billable utilization rate lacks relevance.

If an employee spends 100% of his time on a customer project, but makes little progress on his tasks, he will have a high billable utilization rate, even if the project is likely to fall behind schedule.

This is a situation that billable utilization rate is unable to read.

• A potentially burdensome performance race

The billable utilization rate can push employees to work harder to meet targets, even though they are overloaded.

As a result, they risk not only producing work of poorer quality, but also, in the worst case, putting their health and well-being at risk.

What factors can affect the staff activity rate?

There are many reasons why utilization rate fail to meet targets. 

• Inefficient processes: if employees waste time on non-productive tasks - such as administration, work reporting or project travel- their output will suffer, and their billable utilization rate will be lower than expected.
• Insufficient capacity: if the workforce is underloaded, production will also be below the total theoretical capacity available. The billable utilization rate is unlikely to meet its targets.
• Poor time management: if employees manage their time poorly and spend too much time on non-billable tasks, the billable utilization rate will be impacted.

What is the average billable utilization rate in a consulting firm?

The standard staff activity rate vary greatly depending on the industry and the profession carried out. It is therefore relevant to calculate the staff activity rate for each employee, but also to be able to consolidate them by type of profile or by type of activity.

The billable utilization rate of a full-time consultant working for one customer for one year will thus be much higher than that of a manager in charge of several projects.

The latter will spend time managing teams, perhaps selling other projects to the customer. His billable utilization rate target should therefore be lower, so as not to penalize him.

On average, successful consulting companies have the staff activity rates of around 70 to 75%. However, this figure varies, and the most junior profiles display the staff activity rates close to 75% to 85% while the most senior profiles are around 60 to 65%.

How do you interpret the billable utilization rate in the workplace?

The billable utilization rate results need to be read from different angles.

• Comparison of actual billable utilization rate with targets

To set a course, it is important to define an annual or monthly billable utilization rate target when the business cycle has a significant impact on this indicator.

We then need to monitor the deviation of actual billable utilization rate from target, and understand the reason for these deviations in order to improve future production.

• Comparing the billable utilization rate of one team to another

It's interesting to take the billable utilization rate analysis a step further by grouping utilization rate by profile type, or by team type.

This allows you to benchmark group performance and set objectives at team manager level.

• Monitor the forecast utilization rate

This exercise enables you to anticipate deviations, so that you can adjust your planning to meet your target.

When monitoring allows it, the billable utilization rate is not just an indicator looked at in the past. It can also be used to take the temperature of the load forecast for the coming months.

How can the billable utilization rate be improved in a service company?

The key toimproving the billable utilization rate lies in better mastery of the resource planning (or capacity planning) management process.

The more accurate the load forecast, the more managers will be able to optimize production and improve resource planning rates.

The importance of communicating around the staff activity rate

Once the billable utilization rate calculations have been put in place, the work doesn't stop with monitoring by management or management control. We need to make the billable utilization rate a performance indicator that is understood and monitored by all our employees, so that they can appreciate what's at stake.

You can train them to explain why and how to track this indicator.

It's important to educate people to understand that the aim is not to monitor the employee, but to improve the overall performance of the business.

Next, we need to make the tracking available to every employee and manager who has a billable utilization rate target. They need to be able to easily read the updated billable utilization rate, in real time, according to the activity that has been confirmed.

The more reliable and transparent the calculation, the more employees will follow this indicator and contribute to its improvement.

Using the right tools to monitor the billable utilization rate

Using a resource planning tool such as Stafiz to manage forecasted workloads, reduce inter-contracting and gain visibility over forecasted schedules is essential. This is by far the easiest way to improve a company's billable utilization rate.

Stafiz makes it possible to track the billable utilization rate of past projects, in real time, and to gain visibility over the forecast. This makes it easier to identify opportunities that correspond to different profiles, and avoid cross-contracting.

Finally, they provide the visibility needed to adjust recruitment policies, and always optimize capacity in relation to demand. Better anticipation of overloads and underloads means clearer recruitment policies, at the right time.

Discover Stafiz, the complete and predictive resource planning management tool for your teams. Gain in performance while satisfying your staff thanks to optimal management.

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Simplify processes

Work to simplify processes for employees working on billable projects.

We need to overhaul the organization to minimize the time spent on non-billable tasks, and enable employees to concentrate on billable activities.

For IT Services : shorten the inter-contract period

By systematically reducing the number of intercontracts, billable utilization rate can be improved.

This requires greater visibility on the risk of intercontracting and the options for relocating employees. 

To do this, set up intelligent alerts that warn you when a collaborator is about to go into inter-contract to try to place him or her on another billable project.

Ideally, your resource planning tool gives you the necessary visibility on upcoming availabilities and on projects that are close to being won. This makes it easier for you to know which opportunities correspond to employees on inter-contract, so that you can replace them.