4 steps to make a workload planning and increase utilization rate
Establishing and monitoring workload plans for your teams is vital when working on projects. It's the sinews of war, because a well-executed workload plan has many advantages:
- Improving business profitability
- Optimized turnover and improved cash flow
- Increased employee satisfaction and employee retention
This is why the most advanced companies in project management, such as McKinsey, Cap Gemini, or Accenture, invest in having dedicated teams that establish and monitor team workloads.
However, it is possible to calculate a workload plan and drastically improve utilization rates by following these 4 steps:
Step 1: Set workload objectives
Before establishing workload plans:
a. Definition of utilization rate
The utilization rate is a key indicator of the company's performance, allowing for the calculation of the proportion of time spent on billable projects (projects invoiced to customers) compared to the available time of the employees.
It is calculated with this formula:
It indicates the percentage of time spent on sales-generating projects in relation to the time actually available, excluding absences during which there is obviously no capacity ( leaves, RTT, stoppages, etc.).
TACE rate has several regularly used synonyms:
TACE rate should not be confused with occupancy rates.
Occupancy rates include all workload, whether it generates revenue or not. For example, an employee may have an occupancy rate of 100%, but a staff activity rate of 50% if they spend 50% of their available time on an internal project, such as the preparation of a team-building event.
See our article on utilization rate vs. completion rate
b. Utilization rate objectives
For a company whose business is selling projects and services, it is crucial to monitor utilization rate to ensure that the workload on employees is optimized and that the business is profitable.
A service company needs to ensure that its production staff are assigned at the right level to sales-generating projects. This means setting utilization rate targets, or TACE. These vary according to the role of each employee. Generally speaking, the TACE targets of employees are decreasing: the most junior employees have very high TACE targets, in excess of 80%, while much more senior employees, who spend more time on sales and management issues, will have lower targets, in the order of 20% to 30%.
This objective is linked to profitability: the cost of an employee is fixed. In order for him to generate a profit for the company, he must work x days per month, depending on his average daily sales price. This is the analysis that needs to be done to achieve the perfect staff activity rate and balance employee activity to ensure satisfaction and retention.
Therefore, consider defining specific objectives for each employee's role or level to provide a more relevant analysis.
The next step is to create monitoring systems to be able to compare actual and forecasted workload against the target workload.
Create the monitoring to be able to compare the actual and the forecasted load against the target.
Step 2: Create the employee database
To analyze the workload plan, you must take into account all of the employees who work on a certain project, otherwise, you will have a biased analysis with missing parts of the picture. You must, therefore, list all the collaborators and assign them to a team if you want to do performance analyses for each team.
On the other hand, it is not necessary to include the support teams in the analysis, since they will not be working on billable projects. Their workload will have no impact on the staff activity rate.
a. Establish capacity
Next, you need to determine the capacity of each employee. How many hours are available per day and per person? The duration can vary according to the type of contract your employees have: some are at 35 hours, others are at 40 hours, etc... It is important that the calculation of capacity is aligned with reality to provide relevant results.
It is necessary to take into account the impact of vacations in your calculations. Therefore, your workload plan must include all vacations. The dates of the leaves are important because the analysis of the staff activity rate is generally done on defined periods (per week, per month, per quarter, etc...). Ideally, updated vacations in the workload plan are done automatically so that forecasted capacity calculations are up to date. A dedicated piece of software allows you to automate the management of vacations or to connect to your vacation tool to retrieve this data.
Part-time work and work stoppages
Part-time work and work stoppages must also be taken into account. Some employees do not work the entire week. Others are off for paternity leave. The workload plan must integrate these data points for calculations to be reliable. A check with HR to set up your calculation is, therefore, necessary at the start. In addition, information on new work stoppages or part-time work must be sent to you afterward to continue to maintain the workload plan correctly.
Capacity adjustment for internal projects
In order to be accurate in calculating staff activity rate, it is also necessary to take into account the time spent on internal projects. An employee's activity alternates between work on projects for clients, which generate revenue, and internal projects or other types of non-billable activities. Management, training, and internal project management are all activities that reduce the ability to work on billable projects. However, these are obviously essential activities, and they must be integrated to make the data reliable.
For example, you can determine the number of hours or the percentage of time spent on this type of activity according to the employee's position. The most senior employees will have more time for this type of activity.
Step 3: Allocate resources to projects
Once the capacity is adjusted as close to actual as possible by taking into account absences, stoppages, and internal projects, it is time to forecast the workload associated with billable projects.
Good project management involves creating a project workload plan (or production plan) at start-up.
This project workload plan includes:
- the different collaborators (or type of roles) working on the project
- the time each of them spend on project activities
- (optional) the associated sales rate for each of its activities, by assigning an Hourly Rate or a Day Rate to these different lines
Once the workload plan has been prepared, this budget must be organized over time: if an activity requires 2.5 days' work, these 2.5 days must be placed in the right period to reduce the capacity of the employee(s) who will be working on this activity.
It is usually the job of the project manager to handle workload management precisely for the various project collaborators.
The entire project budget should be allocated to the employees, and the workload should be spaced out over time. If it is impossible to determine exactly which employee will be assigned to which activity, the workload should be assigned at a positional level to allow for a more holistic analysis.
Step 4: Calculate the projected staff activity rate
If you have completed the previous steps, you now have the ability to analyze your projected utilization rate and analyze the amount of deviation from rate goals.
a. Different types of reading
In order to assess the workload plan and ensure that you are maximizing resources, you can interpret the staff activity rate from different angles:
Forecast by position in the coming months: the granularity of the analysis by role or by seniority makes it possible to assess the risks of underloading a group of employees. If the workload is too high, it also makes it possible to anticipate recruitment needs.
Forecast by team in the next few months: team leaders should also have utilization targets set so that they can work on optimizing the load of their teams. If the goals are not met, they can work on starting projects faster or rescheduling the load to achieve a better overall level.
Forecast per person: it is also interesting to analyze more specifically the situation per employee. This allows you to understand if one employee is pulling the rest of the team up or down. It is also crucial to make sure that the occupation of each employee is at the right level to guarantee satisfaction and retention.
What you must remember
In conclusion, it is imperative to draw up a workload plan that enables us to monitor a key indicator, the TACE or Activity Rate Leave Excluded.
This indicator ensures that the workload is well distributed and that the activity is profitable.
First of all, it is necessary to define the objectives to be reached. These objectives are those which ensure good profitability for the activity.
Then, you have to plan the workload of external projects, internal projects, absences, and part-timers so that the occupation is as reliable as possible.
Finally, the rate must be analyzed and compared to the objective in order to make decisions as soon as possible: accelerate the start of certain projects, hire or reduce the payroll, better distribute the load to increase efficiency, etc.
You can, of course, build this type of workload plan in Excel. However, don't be fooled. The financial savings will not necessarily be there, because reliable data requires the synchronization of a large number of data coming from different places (projects, vacations, HR, ...). Given the major impact workload management has on profitability, using dedicated software will ensure a very favorable and fast ROI.