An organization’s success depends on how effectively it utilizes its human resources. After all, companies spend a significant portion of their revenue on hiring, training, and payrolls. Therefore, every enterprise strives to maximize resource utilization levels to remain sustainable and profitable amid market volatilities.
However, the absence of visibility and forecasting capabilities results in sub-optimal resource utilization, impacting the overall productivity and profitability of the company. Hence, it is necessary to take appropriate course-corrective initiatives and optimize the utilization levels of every resource.
This article explains how underutilization of resources can negatively impact an organization. It further elaborates on the best practices to overcome it.
How resources’ underutilization can negatively impact an organization?
Underutilization of resources can have a detrimental impact on an organization’s health index and business profitability. It may have several ramifications, including revenue loss due to increased bench size, missed deadlines, reduced profit margins, lower employee morale, etc.
Underutilization is often caused due to skill gaps, lack of diligence from the manager’s end, and an absence of appropriate tools. Furthermore, ineffective tracking of utilization levels often results in some team members being underutilized, affecting the bottom line.
If resources’ skill sets are not leveraged at the maximum, it will lower their morale and engagement levels. As a result, they may feel undervalued and unproductive. This will even cause a surge in employee attrition or absences.
Now that it is clear how underutilization of resources can affect an organization, let’s look at some of the best practices to overcome it.
Effective ways to combat resource underutilization
Resource underutilization often goes unnoticed and unchecked until it drastically impacts the organization’s productivity. Therefore, companies can leverage a resource management tool and adopt the strategies mentioned below to combat underutilization issues.
1. Maintain enterprise-wide visibility of resource-related attributes
Maintaining 360-degree visibility of resource-related attributes, including cost rate, skills, competencies, etc., can help determine the right resources for each task and ensure competent allocation. Using Saviom’s resource management tool can help you achieve a bird’s eye view of resource profiles. It can also help keep track of the projects a resource is currently working on and their future engagements.
Managers can also view billable, non-billable, and strategic utilization rates using utilization heat maps. It helps them identify the underutilized resources and take appropriate actions to bring their utilization rates to optimal levels.
2. Periodically mobilize resources from non-billable to billable work
Periodic rotation of resources among different types of jobs not only helps diversify their portfolio but also helps in achieving optimal utilization levels.
For example, allocating a senior resource to a non-critical job will not only escalate costs but also demoralize them as their skills are not optimally utilized. Instead, mobilizing that resource to some billable or strategic work can enhance productivity and keep employee morale high.
A resource management tool can help achieve that. Managers can quickly identify the resources who have been working on non-billable work, mobilize them to a billable/strategic job, and enhance their billability and profitability.
3. Implement a shared-services model to distribute work uniformly
Implementing a shared-services model can help overcome the underutilization of several resources across departments. Using this model, the manager can identify the resources in each department whose utilization levels are below their capacities. Following that, they can identify the vacant positions across different departments.
Accordingly, managers can deploy the best-fit resources to fill those vacancies. This way, cross-departmental collaboration helps optimize utilization rates of resources. Furthermore, it helps break down the silos between several departments and saves unnecessary costs of hiring new resources.
4. Track and minimize bench time to maximize utilization
A lack of foresight and coordination between project and resource manager during ramp-down activities increases bench size. However, by leveraging the forecasting capabilities of a resource management tool, managers can effectively reduce the bench time of resources.
People on the bench report and project vacancy reports help resource managers be proactive and schedule them for appropriate future tasks. In addition, if any resource’s skill set partially matches the requirement, then on-the-job training can be given to enhance billability.
In cases of urgent requirements where hiring or upskilling is not feasible, the resource manager can look for projects that have passed their ramp-up stages. They can then negotiate with the respective project managers for an early release of the resources soon to be rolled off.
Following that, they can pre-book them on the other projects matching their skill requirements. It can help them reduce the idle time of resources between projects without hampering any ongoing project.
5. Provide training/upskilling to resources at the appropriate time
Multi-skill building is an essential aspect of every organization as it helps diversify the portfolios of resources. This, in turn, enables managers to utilize them more effectively for versatile roles. Using a resource management tool, the managers can identify the resources that are not appropriately utilized due to a mismatch or lack of skills.
They can then determine the upcoming project requirements and initiate appropriate training/upskilling programs to equip them with the requisite skills.
They should also make sure that these programs are properly planned and initiated only when the resources trained can be immediately deployed. It will not only make the resources billable and increase their productive utilization levels but also future-proof them.
Thus, in this way, an advanced resource management solution can play a pivotal role in combating the underutilization issues of an organization’s workforce.
In the words of Hilary Hinton “Zig” Ziglar, an American author and motivational speaker, “Success is the maximum utilization of the ability you have.”
This quote holds true for resources in an organization as well. It implies that leveraging the maximum potential of the resource pool is essential for every project’s success.
Underutilization of resources, if unchecked, can have a detrimental effect on one or more projects and add to the bottom line.
Hence, organizations must leverage the benefits of resource management software to foresee and optimize resource utilization and increase overall organizational efficiency and success.