Most VP’s of Services only find out what resources are required for services fulfillment after an order gets booked. Many organizations subsequently believe that managing billable utilization only starts after project Service delivery begins. And that’s where the guessing game begins.
This Services planning guessing game has led to projects being discussed upon completion in terms of “unexpected reduced Services margins” or “unanticipated Services profitability killers”.
Here’s where the Services fulfillment guessing and scrambling starts:
- The VP of services scrambles to hit whatever delivery date was promised to the customer in the Sales process.
- They empty their bench, pull resources off other projects, schedule overtime, sub-contract, or bring on a rushed new hire.
- This impacts things like customer satisfaction (for the job you pulled resources off to start the new project), employee satisfaction (not everyone likes working evenings and weekends) and project profitability (overtime and subcontracting impacts margins).
Now in fairness, most organizations have resource planning meetings, some even have Excel resource dollars forecasts and Sales Reps who usually check with Services before promising the customers delivery dates. But in practice, all of those feedback mechanisms are disconnected snapshots in time that are not adequate to provide the VP of Services with adequate planning runway to truly optimize billable Utilization rates.
In other words, despite people’s best efforts, they are still guessing.
Here’s how to stop the guessing game and start optimizing billable utilization for proper resource planning.
1. Improve the Visibility of Hours Required
To optimize utilization, instead of making them guess, your VP of Services needs visibility 30/60/90 days from now into how many hours of each specialized resource type (PM, Installation, Test, Training, WLAN, Cabling, etc.) are going to be required for Service delivery, based on current outstanding Quotes. (19 Design hours, 55 PM hours, 175 installation hours, 25 testing hours, etc.)
The project Services estimate that was ultimately quoted to the client was probably based on a pre-sales engineer spreadsheet that calculated how many PM hours, testing hours, UC & cabling hours were required for the potential project. That’s how they came up with the $75,000 services estimate that was quoted to the client. Why not use that spreadsheet (and the ones created for other project quotes) and roll-up all the hours estimates by specialized resource type, across all currently quoted projects? This would provide your VP of Services with visibility into how many hours they’re going to need by specialized resource type, and put a stop to the resource planning guessing.
2. Forecast in Hours not Dollars
The truth is, a forecast of $75,000 in Services dollars is almost completely useless for real world utilization planning purposes. The labor forecast needs to be in hours (not dollars) by specialized resource type. The 40 hour work week is in hours, the percent of billable time is measured in hours and time sheets are filled in in hours, so why on earth are you forecasting Services in dollars and making your VP of Services guess what that translates into in specialized resource hours?
3. Keep Learning with Every Project You Complete
The other advantage of forecasting in hours by specialized resource type, is instead of guessing where a $5,000 labor cost overage came from, if the project assignments are issued in the same detail as the estimated hours (19 Design hours, 55 PM hours, 175 installation hours, 25 testing hours) then you can accurately measure “expected hours vs. actual hours” and cycle specific project implementation lessons learned back into the quoting process. You’ll know exactly where your hours overage came from so that your PM’s don’t have to guess. Having one project utilization problem caused by misquoting is bad, but to keep repeating the same mistake is even worse.
Managing Labor Utilization for maximum Services profitability in a business should not be a guessing game.
Yes, it’s going to take some more rigid business processes and a little more time to update the information, but how much more time and money gets wasted in the fire drills, addressing customer satisfaction issues caused by project start or finish date miscues, employee satisfaction issues over all the overtime and project Services profitability reductions because you didn’t quote based on all the extra overtime or using a more expensive subcontractor?
Still need some guidance?
We have just completed a Labor Utilization Quick Start Guide for service managers who want to get labor utilization under control. Download it here and stop the leaks in your labor utilization resource planning.