What is Resource Utilization? An Easy Calculation Guide

Resource utilization is a buzzing topic these days. From corporations to budding startups, everyone wants to get it right! Get to know why through this article.

In plain English, resource utilization is all about making the most out of the available resources. Whether it’s time, money, people, or materials, effective resource utilization is critical for achieving business goals and maximizing efficiency. 

EmployPlan lets you automate resource utilization and prevents project waterfalls. Make sure to try it for free or book a demo.

Want to learn more about how resource utilization works? 

What is Resource Utilization?

Imagine juggling company assets, managing billable tasks, and putting all the effort into growing your business! It feels overwhelming, right? Resource utilization saves you from all that trouble while managing a growing team. It makes the allocation of available resources easy. Although resource utilization differs based on project plan and scope, it still plays a vital role in project management.

Whether a project manager or an entrepreneur, you ought to know the basics of resource utilization for overall resource allocation. You deal with many variables daily to ensure productivity for your current and future projects. Resource utilization helps you understand which projects your team members are working on, and your team’s utilization rates and helps you easily plan projects. 

Why is Resource Utilization Important?

Why is Resource Utilization Important

Resource utilization directly impacts the productivity and effectiveness of your project teams. Good resource utilization enables your teams to perform their tasks more efficiently. It leads to an increase in productivity and improvement in business outcomes.

Moreover, resource utilization also helps minimize waste, reduce costs, and increase employee job satisfaction. Additionally, organizations can better align their workforce with their strategic goals and objectives to achieve long-term success through resource utilization.

Why is Resource Utilization Important

Are you looking for easy-to-use resource utilization software? EmployPlan has got you covered. Project managers or team leads can rely on its powerful dashboard to generate insights on projects, resource allocation, and skills and automate resource utilization for better decision-making. EmployPlan helps you grow your teams, identify talent, and assign resources to suitable projects. It automates resource utilization for you – book its demo soon!

Now that you know all there is to know about resource utilization, let’s learn to calculate it. 

Resource Allocation vs. Resource Utilization

Resource Allocation vs Resource Utilization

Resource allocation means assigning and distributing resources. In many cases, it could mean available managing skills in your talent pool. Resource managers determine what resources are needed, when, and how they should be used.

On the other hand, resource utilization means making actual use of resources. It involves measuring and evaluating how effectively and efficiently resources are used to achieve specific goals or objectives.

Resource allocation is about planning and decision-making, while resource utilization is about execution and performance evaluation. They are both critical for effective resource management in workplaces.

How to Calculate Resource Utilization?

How to Calculate Resource Utilization

Measuring resource utilization is not rocket science! Project managers use a typical resource utilization formula known as full-time equivalent or FTE. This formula helps you calculate how a resource is used in line with the available working hours.

To calculate the overall resource utilization rate, simply divide how many hours the resource will work on a project by the total number of hours for the project. This way, you can easily track resource utilization.

You can get resource utilization percentage through this formula:

Resource Utilization = (Actual Usage / Total Available Capacity) x 100

Actual Usage means the workforce used for a particular task or project.

Total Available Capacity refers to the total hours allocated to the task or project. 

The utilization of resources is reflected in the percentage, with a higher score signifying optimal utilization and a lower score suggesting a lack of effectiveness in allocation and utilization.

For calculating resource utilization, it is essential to use a resource utilization formula powered by a trusted resource management tool such as EmployPlan. As available hours, multiple projects, billable time, and productivity data need to be analyzed. Resource management software comes in handy. It lets you track resource utilization rates, billable utilization, and more. Make sure to use it for tracking resource utilization!

Resource Utilization

You would have a fair idea of how to track resource utilization. Let’s understand it better through a day-to-day example.

Imagine a developer working in your team for 8 hours a day, five days a week. Basis this, you could calculate the following:

Determine the maximum number of available working hours

In this case, the developer would be available to work for a maximum of 40 hours. Now, let’s move ahead to measure the billability.

Determine the number of billable hours worked

35 hours are billable out of 40 hours for our developer. 

Divide the billable hour total by the available working hour total

We would divide 35 by 40 to arrive at the utilization rate. 

Multiply the result by 100

The result is 0.875 – this is billable resource utilization for the developer.

That’s how you can easily calculate resource utilization for your other team members.

Billable Utilization

When measuring the workload of our human resources, billable utilization can step in as a worthy alternative. 

While resource utilization considers all personnel’s working hours, billable utilization narrows in on the hours that remain after accounting for nonbillable hours.

Billable utilization for personnel can be 100%. However, resource utilization will never hit that mark! You can calculate billable utilization using this formula:

Billable utilization rate= Billable working hours/(Total working hours – nonbillable working hours) X 100

For example, track billable utilization for your business, find out:

  • The number of hours your employee is available to spend on billable tasks.
  • The number of hours your employee spends on billable tasks.
  • Divide the time of billable tasks by the total possible hours of billable tasks.
  • Finally, divide the result by 100.

How to Improve Resource Utilization?

Resource managers can quickly improve resource utilization using comprehensive resource management tools like EmployPlan. To improve it, follow these best practices, and you will soon make the utilization of resources more effective:

Leverage Visibility

Keep an eye on all your team members or resources in one place instead of keeping track individually. That way, you can monitor all the projects and make them work well for your part-time employees or dedicated project teams.

Avoid Scope Creep

Over timing and budgeting can eat away at your project revenue and derail project planning. Always use a resource utilization tool to save yourself from all the uncertainties. 

Analyze Book Hours vs. Actual Hours

Projects can often get delayed. Always examine the planned hours and the actual work hours in real time. By doing s would give yout a fair understanding of whether a course correction is needed.

Prepare for any possible scenario

Try to analyze multiple scenarios or circumstances to prepare for blockers or budget constraints. This would help me adapt and make swift progress.

Final Thoughts

Project managers can rely on resource utilization to know how a project has performed. 

It gives them more perspective and clarity for utilizing their resources. Although resource utilization formula utilization does not directly impact projects, it improves them, estimates, and streamlines resource assignments.

Considering its lasting impact, resource utilization is crucial to make your projects and resource allocation more efficient and streamlined.

Explore EmployPlan to create a practical resource utilization plan for your business and see how it makes your team members more productive!

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