Planned And Actual Utilization in Projects

Things rarely go according to plan – even in consulting and professional services. You make an initial sketch of a project timeline, sign it off and start to work just to notice that what was agreed upon preliminarily is not quite what’s needed to finish the project. You’re crunching to get the work done no matter the cost working “for free” as the budget is long gone.

There’s no way to remove all uncertainty, but the good news is that it’s possible to minimise the losses with a dash of operational excellence. Easier with great tooling, of course.

Everything starts from a great handover from sales to delivery

Last-minute project assignments are a recipe for chaotic days and weeks. Someone sold something to a client who didn’t know what they’re buying, and consultants were finally brought in for the kickoff. The scope needs double the time to be completed, not to mention the delays at the client’s end.

The best consulting companies don’t have just one handover meeting where the knowledge is magically transferred from sales to delivery. Consultants and project team members join the proposal work as early as possible to make sure the a “handoff” actually happens over time, and not abruptly, perhaps 30 minutes before the project kickoff commences with the client. One of the key ingredients of a successful agency sales process.

Selling projects in isolation, and not giving delivery the transparency to the sales pipeline and workload estimates causes low utilization. Consultants can’t influence the projects they’ll end up working on with low motivation, workload estimates are not scrutinised by the whole team (think of selling your apartment in a closed sale instead of testing for the market price), and there’s no visibility over potential availability of resources. You’ll end up with delays, overrun budgets, and grumpy consultants and clients even before the project has begun!

Introducing the concept of planned and actual utilization on project level

We have a whole article on planned and actual utilization, which is one of the key agency metrics to monitor. This article focuses on the topic from a project perspective. Planned utilization is the time that’s allocated on a project to deliver it. It’s everyone’s work efforts summarised. Multiply it with your hourly rate and you’ll have a project budget. The actual hours spent – well they’re the hours that were spent on the project. You should follow the deviation of these two curves.

You want to see this per project, on the screen, the planned hours and the actual hours, side by side. If the whole team has worked over or under, you must be able to look at the numbers per person.

If actual hours start increasing too fast compared to the plan you’ll end up spending your budget too fast.

The effect of hours accumulating too fast per project type

Time & materials project: If your client asks for more work than what was planned and you’re on a T&M budget, that’s good news for your team as you’ll end up with more invoicing. Keep an open dialogue with your client–you’re their trusted advisor, not trying to suck them dry.

Retainer: If you’re working with a longer retainer with a fixed amount of hours per month on average, your team might have availability next month to be spent on other projects. Remember to update allocations accordingly.

Fixed price project: You’re eating the project budget faster than anticipated. You should course-correct as quick as possible or to get ready to negotiate more budget with your client.

The effect of hours accumulating slower than anticipated

Depending on your project, this can be a neutral, good, or a bad thing.

Time & materials project: You’re leaving money on the table. If you’ve allocated your team to work on client for 100 hours, and you end up invoicing 90, it means 10 hours of time was lost. Try to make sure you’re able to fill the reserved allocations with meaningful work, and if there’s simply no work left to be done, try to spot that early on, so you’re able to re-allocate resources to another project.

Retainer: Not spending all the time that was reserved on a retainer project means that you’ll have reserve hours to be used the next month. Note that having many reserved hours in multiple projects might make estimating future allocations tough. Try to notice systemic deviations and re-allocate resources accordingly. Pay close attention here to improve your retainer service packaging: this is a key input for pricing and expectation management.

Fixed price project: If you’re spending less hours than planned and you’re still on time to finish the project, that’s great news for you. The risk paid off, and now you’ll reap the benefits.

Who should monitor planned and actual utilization in projects

The best professional services companies are operated bottom-up, not top-down. Everyone in the project teams should have visibility over the planned and actual utilisation of the projects they’re working in. In fact, it’s one of the most critical tools for project teams to plan their work. If you have a weekly meeting with your internal project team, you should always check if the spent time is according to plans, and act accordingly. Tooling helps here. If your charts are in a centralised place like Operating instead of scattered spreadsheets, it’s easy for everyone to look at a shared truth.

Let’s take a real life example from a time & materials project:
“John has to fill in for Mary in an internal event hosted for the agency’s clients, so he’ll miss a full week of client work in a couple of weeks. John updates his own allocation accordingly. In the project weekly meeting, the team goes over the next weeks’ workloads and notices that  that John misses a full week of work. A lot of budget will be left unused, and in fact, the project can’t be delivered. Martina and Garry are allocated less than 100% so they agree to split John’s workload for the week and work more intensively on the project.”

Summary‍

As in everything we preach, it’s everyone’s job to make sure projects are run efficiently. There’s smart and ambitious professionals in your company that want to deliver great work and succeed. If they’re able to plan their work together, the outcome will be the best.

Account managers, P&L heads, and the C-level need to be aware of what’s happening on the macro level, but if you’re able to create a culture where running projects is everyone's responsibility, that’s where magic starts to happen. Also, the evident end result of well executed project budget scrutiny leads to higher margins and a healthier business. Only then it’s possible to build a people-first culture and a thriving environment for the best people.