June 11, 2022
General
Masooma Memon

What is Underutilization & How to Stop It in Its Tracks 

What is underutilization, and why do we seek to avoid it? Well, we have some answers for you - and some key tips on how to stop underutilization in your organization.

Want to grow your profit? Start controlling underutilization in your agency.

Chances are, some of your staff members complain about their heavy workload. Others, however, simply don’t have their heart in the work that they’re doing.

If you’re noticing such an imbalanced resource utilization, you’re likely not making the most of some of your employees’ work capacity while adding too much work on others’ plates.

And if you leave this unaddressed, client work will eventually start suffering, some of the staff will burn out, and the rest will become demotivated.

Don’t know how to catch the culprit and start controlling underutilization and its negative effects? We’ve got you covered with this guide as we discuss signs of underutilization and ways you can reduce it.

What is underutilization in a service business?

As the word suggests, underutilization is the inefficient use of resources in a service business resulting in reduced profits.

Essentially, these resources include both human resources and the tools you use to run the business. Mainly, however, the focus is on human resources.

Put simply, when employees experience increased bench time (free time), they aren’t used to their full capacity. For service businesses, this is problematic since people are their most valuable asset and leveraging them to their max potential is key for driving ROI.

New to utilization? Start here: The What, Why, and How of Resource Utilization

The problem with underutilization

In the case of underutilization, employees’ unique skills and working hours aren’t fully leveraged to meet business goals. As a result, underutilization negatively impacts revenue. 

To add, you can’t meet business goals without staff that doesn’t work at its maximum potential.

But that’s not all. Underutilization also impacts the workforce itself. An employee spending more time on the bench, for example, ends up demotivated and bored. Productivity levels also eventually take a hit.  

If this underutilization of capacity prolongs, your chances of retaining employees also go down.

Tip: Overutilization of resources is not the answer to underutilization

3 signs of underutilization

Now that you know the definition of underutilization and its impact on business and employees, let’s look at how you can identify it in your agency with the following signs:

  • Missed deadlines

One of the biggest perks of using resources to their maximum capacity is that you can meet deadlines consistently and in a predictable manner.

But when you don’t, missed deadlines (one after the other) are often among the early signs of underutilization that you’ll start seeing — risking your agency’s reputation and reducing client satisfaction.

Keep in mind: missed deadlines aren’t only a result of not assigning work to all team members involved. Instead, the problem stems from incorrect task allocation. 

That is, employees aren’t assigned work based on their competence. Not only does this lead to missed project deadlines but it also lowers productivity levels and results in budget overruns. 

  • Reduced employee morale

As discussed earlier, underutilization often surfaces when a handful of team members are assigned work constantly while others remain underutilized.

As a result, you’ll start seeing burnout among specific employees, teams, or departments. On the flip side, underutilized employees and teams will show dissatisfaction with their daily workload. Lack of focus and enthusiasm is also common. 

All this breeds lower levels of employee satisfaction, which, if left unattended, can have ripple effects on your business. 

It’s also important to mention here that the same issues arise when work isn’t allocated based on competence. Or, when team members are assigned similar projects that do little to engage them — ultimately impacting work quality.

  • Reduced profit margins

Underutilized resources have more bench time. This free time is the time taken from the time that could easily go into projects. Over time, this starts eating away at project margins.

On the other hand, when each employee is correctly utilized (with enough healthy bench time and non-project work), more time goes into completing projects.

Moreover, employees are also more engaged. Meaning: they deliver better quality work — and often in less time. This, in turn, helps the business increase client satisfaction and attract more similar projects, which helps grow profit.

How to stop underutilization in its tracks

From effective resource management to understanding workers’ capacity and filling gaps in skill sets, there’s a lot that can save you from underutilizing.

Let’s break down these tactics: 

1. Track time to understand how your employees spend time

Optimal resource utilization is nearly impossible without a clear idea of how your team spends their time.

Manually tracking time can be arduous though. Including time tracking software in your workflow, however, can give you accurate insights. In fact, automating time tracking will save you and your team time from manually logging hours.

Most of all, it’ll give you real-time updates on available hours. You’ll learn not only what tasks members are working on but also how long it takes them to complete them. 

For example, Runn helps you easily monitor billable and non-billable work. Use it to organize your team’s workload into billable and non-billable hours to understand how much time is going into the latter and, therefore, causing potential losses.

 

Billable utilization report in Runn

 With its Chrome extension, you can also simply ask team members to record their time as they work.

Runn time tracking extension for Google Chrome

2. Use time reports to track resources’ utilization rate

Advanced time tracking software comes with reporting capabilities. These reports give an overview of how every resource’s utilization rate compares to their expenses and revenue generated.

Use these reports to recognize resources that are driving the most value to your agency and resources that you need to use more strategically to increase their utilization.

With Runn’s people utilization reports, you can also forecast your staff’s utilization rate, which can help you reduce gaps in optimal resource allocation.

Plus, you can use the report to make predictions of when individual team members will have free time and how to best employ it. Use the insight to take new clients, plan sessions for training workers, and understand who is overutilized. 

3. Thoroughly plan and manage resources

Effective project planning is also critical for reducing underutilization. You need to determine the exact work that goes into individual projects, the skills needed to complete those tasks, and which resources will best accomplish the work.

At the same time, track what tasks team members are working on and for how long they’re engaged in said projects.

Having these insights assists in allocating work based on resource competence and availability — reducing the allocation of under or over-qualified workers to projects. It also helps better plan project workload and book more clients accordingly.

Thankfully, using Runn for capacity management gives you a high-level overview of your resource pool. With it, you can both peep at the projects in your pipeline as well as available resources.

What’s more, by making notes of each worker’s skillsets and adding relevant tags to the software, you can easily assign projects based on skills and competencies.

Runn gives you the ability to tag resource skills

In fact, Runn can easily give you deep insights into each employee — from their workload to their utilization, to help you allocate work (or healthy bench time) accordingly. 

Employee insights in Runn

Additionally, the group utilization chart gives you an overview of everyone’s schedule. This way you can see who is working on what and for how long on various tasks. 

Group utilization chart in Runn

The best part? This resource schedule is editable.

Meaning: you can use the real-time chart to create new assignments and edit workers’ schedules with the latest in your project pipeline. All this helps you make sure there is no timeline or resource clash — facilitating timely project delivery and optimal resource utilization.

4. Get employee feedback to improve engagement

Use employee satisfaction and engagement surveys and one-on-ones to get employees’ feedback on their workload and responsibilities. From there, identify areas for improvement. Use what you learn to redistribute responsibilities.

Also, use your resource management tool’s forecasting capabilities to block time for employees’ upskilling and reskilling sessions. Not only will this assist in engaging workers, but it’ll help you fill in skillset gaps, reducing utilization rate of a selected few high-performing employees.

Again, your resource management software can help with this. 

It serves as a single source of truth, containing all the information on your staff’s work experience, qualifications, skills, charges, and more. Add what you learn from your employee surveys to further identify where there are gaps in skillsets and which employees need training.

At the end of the day, all of this will help you reduce overloading a few critical resources, use underutilized resources, boost employee morale, and assign work based on employees’ interests and skills. 

Ready to reduce underutilization throughout your agency?

To recap, optimal resource utilization is critical for your agency’s success and client satisfaction. It also plays a key role in helping you grow profit and building a strong reputation for your agency.

To control underutilization, begin with tracking time so you can create a utilization report to identify areas that need improvement. We’ll leave you with a complete guide on how to create a utilization report.

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